US groups on course to nab Opal student housing assets

US rivals Avenue Capital and Greystar set to carve up £1bn of student accommodation assets previously run by collapsed UK operator Opal

Avenue Capital and Greystar Student Living are understood to be the frontrunners to buy most of the £1bn student housing portfolio of Opal Group, which was placed in administration in March.

The US groups are vying on a series of break-up bids for the 20,000-room portfolio as a way into a sector that has outperformed mainstream UK asset classes over the past few years.

Manchester-based Opal collapsed under the burden of nearly £1bn of debt but operationally was regarded as well run. The assets – split into four portfolios because of Opal’s complex debt structure – have generated widespread interest.

New York-based private equity firm Avenue Capital is expected to be the first successful bidder, paying about £100m for a 2,239-bed portfolio. An announcement from administrator KPMG, acting for Lloyds Banking Group, is imminent.

Leading US operator Greystar Student Living is competing with Avenue Capital for a portfolio of eight Opal assets on the market via administrator PwC for an asking price of £245m. Confirmation of a preferred bidder is expected soon.

PwC originally acted for Santander, Bank of Ireland, Barclays and National Australia Bank, but sources say NAB traded its debt to US hedge fund manager Davidson Kempner in the summer.

Avenue Capital and Greystar are also understood to be frontrunners for 19 Opal assets brought to the market by administrator Ernst & Young for Royal Bank of Scotland, which should fetch around £350m in a sale expected to be closed this year.

The fourth portfolio includes eight student accommodation buildings, two hotels and two private rental properties. Administrator KPMG, acting for Irish Bank Resolution Corporation, is yet to put the portfolio on the market but it is also expected to command strong interest from the US.

Greystar founder Bob Faith said the group is considering “the opportunity to expand our UK presence”. Its student housing arm is part of a residential investment business with 215,000 US units; it also manages $5bn of assets globally.

Faith told Real Estate Capital: “Although we bring a lot of institutional knowledge to the residential sector, real estate is a very local business and we look forward to partnering with the best operators and developers in the market and building our team with local talent as we grow. There is an opportunity to become a significant player in UK professional let and student accommodation. We can’t comment on specific bidding opportunities, but hope to make announcements soon.”

Opal has attracted strong interest despite concerns over occupancy rates following last year’s hike in tuition fees. Many UK operators seeking individual Opal properties have been outgunned by US investors willing to buy entire portfolios.

Nick Porter, chairman of Capital Values International, which runs the Urbanest brand, said: “These global players see strong demand and relatively limited supply in our market. They see a good opportunity to buy at sensibly priced yields in good cities with strong universities and growth potential, and are probably predicting that yields will come in over the next few years.”

Avenue Capital and the administrators declined to comment. See Analysis, pp10-12

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