UK purpose-built student accommodation has received almost €1 billion in debt capital in recent days, following two sizeable loans issued against assets in the sector.
German specialist property lender Aareal Bank said on 1 August it provided £380 million (€442 million) of refinancing capital to a student housing portfolio, owned jointly by US residential developer Greystar, asset manager PIMCO Prime Real Estate and Canada’s Public Sector Pension Investment Board.
The Wiesbaden-headquartered lender said it previously part-financed the three central London assets – located in Spitalfields, South Bank and Aldgate – but was been sole arranger, lender and security agent for the refinancing.
Michelle Weiss, head of hotel properties at Aareal, said: “The counter-cyclical nature and resilience of the PBSA market throughout the last year has been a testament to its robust fundamentals and is reflected in the growing investor appetite,” adding the bank had been “keenly expanding” its PBSA loan portfolio.
Last week, Legal & General Investment Management said its UK and European debt division issued a £400 million loan to PBSA operator Unite. The funding will be used to refinance 23 PBSA assets across the UK owned by the company’s Unite UK Student Accommodation Fund.
Libby Thelwall, senior investment associate at LGIM, told Real Estate Capital Europe the lender had been part of a “competitive process” to fund the assets. She said: “We understand there were multiple offers to take down the full £400 million, which is a great signal of strength of this financing.”
In Unite’s financial results for the six months to June 2023, released on 25 July, the chief executive of the company, Richard Smith, said the need for new student homes was the “greatest” the company had seen for several years.
He explained: “The private rental sector is in retreat and a supply crunch is building amid growing student numbers,” adding that these market conditions would support the business for a number of years.
The listed company also reported like-for-like net operating income growth of 10 percent during the period, and rental growth of 3.5 percent. But added it was “confident” of around 7 percent rental growth across 2023 and 2024.
Rents are predicted to grow by 7 percent growth during 2023 and 2024 due to supply shortages, as well as an increase in the student population in the UK, according to research from property consultant Savills.
The firm forecasts total numbers of undergraduates will hit 1.75 million in 2023, increasing from 1.5 million in 2018. Savills has found acute shortages in units in UK cities such as Bristol, Durham and Manchester, as well as Bath and Canterbury.