Luxury student digs prove a lucrative investment

From The Times December 3, 2009
Kaya Burgess

It will loom like a razor blade above the City, but when the 33-storey tower block opens next year, it will be tapping into a very different — and very profitable — market to the banks that it will overlook.

Student accommodation is booming. Rentals have proved to be one of the few recession-proof areas of the property market, rising despite the general economic downturn, and Blackstone, the world’s largest private equity company, is among those aiming for a slice of the pie.

Next summer it will open Nido Spitalfields, the second in its portfolio of large-scale, high-end student digs in the capital. The building near Liverpool Street, in the City of London, will open its doors to 1,200 students in time for the 2010-11 academic year.

“The credit crunch really hasn’t hit the student accommodation market,” Maureen McDermott, manager of European student accommodation for Blackstone, said. “We’ve had great success with keeping our building in King’s Cross occupied, and are even planning to open the Spitalfields building a month or so earlier than planned.”

Stuart Grant, a managing director at Blackstone who is overseeing the £250 million project, said: “There are a growing number of students in London and a limitation on the number of beds provided by the private sector or universities. There are more than 260,000 students in London, but only about 45,000 beds. When there is that chronic supplydemand imbalance, it means that as a sector it’s an interesting investment opportunity.”

The students’ pockets will have to be deep enough to afford the £260 per week being asked for the ensuite rooms set in spacious apartments over 33 floors.

“The Nido offer is focused mainly on foreign students, Mr Grant said. “So our customer, in my mind, is not only the student, but also the parent in America or China who is willing to pay up for our product, offering safety, security and good amenities in a central location.”

The New York-based Blackstone knows the development’s area well: the 105-metre skyscraper will overlook Broadgate, the office complex that is half-owned by the private equity fund. On site yesterday, construction workers teetered amid the wind and rain to keep the downpour from seeping into the unfinished building, where a number of showrooms stand ready as an example of the clean-cut luxury that will be awaiting students. Designed by TP Bennett, the building will offer its residents catering areas, a gym, WiFi internet and state-of-the-art mod-cons in all rooms. Where lorries and vans rolled in yesterday will be a lobby with underfloor heating, a games area and a café, paid for with keycards that alert staff if a student has not been in (or out) of their room for a long period.

On Pentonville Road near King’s Cross, Blackstone’s first Nido building — nido means nest in Spanish — is already home to about 900 students from 85 nationalities, 40 per cent of whom are from the United States.

Three years ago Blackstone moved from snapping up traditional real estate and began buying operating real estate such as shopping malls and residences.

Planning permission has been granted for Blackstone to begin work on a third student site in Notting Hill, West London, which would open to 272 students in early 2011.

Corporates squeeze market for private student landlords - UK

Posted on December 1st, 2009 by steve

Institutional investors are deserting the commercial property sector to pump hundreds of millions in to student housing investments.

Fund managers see student letting as more stable than commercial letting as the double risk of offering incentives to tenants and the chance a tenant may go out of business do not apply to students.

HMO landlords under pressure

Private student landlords are coming under pressure from two sides now – councils stepping up regulatory requirements and licensing costs on HMOs (houses in multiple occupation) and big corporate landlords with the financial clout to house hundreds of students in university towns and cities.

The move by institutional investors is confirmed by the UK’s largest student room provider UNITE, a public listed company that has £325 million to invest in the sector – with £133 million already raised by institutions with another £23 million pledged.

The company also said like-for-like rental growth increased to 9.7% between July 1 and November 18 2009.

Students pay corporates millions in rent

UNITE has a portfolio of student accommodation valued at £877 million at the end of September, and this is expected to grow to more than £1 billion. The company houses 39,000 students in 126 properties in 33 towns and cities across the UK.

Another large student housing investor, University Partnerships Programme (UPP) has signed off a £115 million student housing deal with the University of Nottingham.

UPP has committed to refurbishing 850 rooms, providing students with affordable, high quality accommodation.

This major deal follows UPP’s recent £133m transaction with the University of Exeter.

Through these two transactions, UPP has put £250 million of new private investment, including institutional funds, into the higher education sector in less than six weeks.

UPP expects to provide accommodation for 35,000 students by 2012. Currently, UPP has 18,000 rooms for students paying £85 million a year in rent.