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Mapletree eyeing slice of the lucrative student housing market

Temasek-linked Mapletree Investments and GIC acquiring the assets with stable yields in the West
Saturday, June 3, 2017 - 05:50

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Student accommodation 4th Street Commons in Miami, Florida (above) and WaHu in Minneapolis, Minnesota. Beyond the favourable supply and demand dynamics, the relatively stable flow of income from student housing is also an attraction for investors such as Temasek Holdings and GIC

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WaHu in Minneapolis, Minnesota.

Singapore

SINGAPORE'S sovereign wealth capital has of late been showing interest in student housing and its promise of stable earnings.

The latest deal was announced on Friday, with Temasek Holdings-linked Mapletree Investments buying another portfolio of student housing and multi-family properties in the United States and Canada from Kayne Anderson Real Estate Advisors. Temasek is a Singapore government-owned investment company.

The dollar value of the latest transaction was not disclosed, but Mapletree has so far spent US$1.6 billion to acquire from Kayne 22 assets comprising 12,000 student housing beds and 1,388 multi-family units. That includes the latest deal, which consists of eight student housing assets with 3,611 beds in the United States and 140 beds in Canada, and the four multi-family assets in the United States that account for all the multi-family units that have been acquired so far.

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With the latest purchase, Mapletree now has 43 student housing assets in North America and the United Kingdom with 18,024 beds. That includes assets held under its sponsored Mapletree Global Student Accommodation Private Trust.

As private investors look for anti-cyclical returns amid volatile markets, the move has allowed Mapletree to widen its earnings base, a company spokesperson said.

Mapletree chief executive Hiew Yoon Khong said that the property developer and investor intends to keep growing its student housing portfolio globally.

"Growing university enrolment rates continue to drive demand for student housing," he said. "This sector is still underserved, and we see opportunities as there is a gap between enrolment and total supply of purpose-built student housing. We intend to scale up in this sector globally including in Australia and continental Europe, aside from the UK and the US."

Beyond the favourable supply and demand dynamics, the relatively stable flow of income from student housing is also an attraction.

"Since 2016, Mapletree has expanded into the student housing asset class on a global scale as it generates stable and consistent earnings," Mr Hiew said. "We have been able to grow our portfolio through a number of sizeable acquisitions in the UK and the US."

Earnings that are not so volatile are also something that GIC appreciates.

In May, GIC Real Estate chief investment officer Lee Kok Sun shared that the investor of Singapore's reserves has been trying to raise its allocation to property while also divesting "high volatility" assets like hotels and industrial properties.

In March, GIC was part of a group that included Canada Pension Plan Investment Board and The Scion Group that bought 1.49 billion euros (S$2.32 billion) of US student housing assets.

OCBC Investment Research analyst Eli Lee said student housing assets are "compelling investments" with sufficient scale to attract large investors.

"Student housing assets are generally compelling investments, given stable yields, consistent demand and highly visible cash flow profiles," Mr Lee said. "The size of the asset class universe also allows portfolio acquirers to build operational scale and explore synergies for asset enhancements and improved yield generation. In addition, the meaningful scope for monetising stabilised student housing assets into a real estate investment trust is attractive for asset managers, in our view, and can provide a potential kicker in terms of long-term return on equity."

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