Metro, partners set up UK student accommodation fund

Singapore

METRO Holdings has set up a new student accommodation fund named Paideia Capital UK Trust with property player Lee Kim Tah Holdings and construction and engineering group Woh Hup Holdings to acquire properties in the United Kingdom.

The establishment of the fund marks Metro's entry into the purpose-built student accommodation (PBSA) sector, the property group with retail operations said in a bourse filing on Monday.

The fund, which has a first close of £60 million (S$108 million), will acquire its first PBSA seed property known as Red Queen, Warwick for £21.5 million, Metro said.

The Red Queen, Warwick has a committed occupancy rate of about 90 per cent. It is 1.6 kilometres north from the main campus of the University of Warwick, which has around 22,000 full-time students.

The property, completed in September 2020, has about 210 en-suite beds over five floors and around 26 car-parking spaces, secured bike storage and laundry facilities. It also has several communal spaces, including a study area, gym, cinema and lounge.

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Metro's wholly-owned subsidiary, Sun Capital Assets, entered into a joint venture with Lee Kim Tah and Woh Hup's wholly-owned subsidiary Aurum Investments to set up Paideia Capital UK Trust, which has a potential asset portfolio size of £150 million.

The three partners each contributed £18 million to the initial aggregate committed capital of £60 million for the fund, while third-party investors contributed the remaining £6 million.

Sun Capital, Lee Kim Tah and Aurum will each hold a 33.33 per cent stake in Paideia Capital UK Trust's fund manager and trustee. The trustee has incorporated Paideia Capital, which will acquire PBSA properties in the UK via special-purpose vehicles.

Metro said the the fund will provide a platform to pursue growth opportunities in the PBSA sector across England, Scotland, Wales and Northern Ireland.

It added that the PBSA sector has a long-term advantage over commercial office and retail and is a resilient sector in terms of demand for quality higher education.

"Higher education enrolment has proven countercyclical as when job prospects are weaker, people are generally more inclined to upskill and hence enter higher education," Metro said.

With low correlation to traditional real estate asset classes, the PBSA asset class is ideal for portfolio diversification where it is less susceptible to economic volatility, Metro said.

Metro chairman Winston Choo said the investment will further enhance the quality, diversity and income profile of Metro's investment portfolio and at the same time generate a stable and recurring income stream for the group immediately.

In 2014, Metro acquired a 25 per cent interest in two residential development land sites in Manchester. Two years later, it bought a half stake in an office development land site in Sheffield. In 2018, it acquired a 50 per cent stake in a freehold office property at 5 Chancery Lane, London.

Metro said Lee Kim Tah has been a long-term partner in various projects including 5 Chancery Lane and two Indonesia residential projects. Together with Lee Kim Tah, Won Hup has investments in development projects in the UK and construction projects in India.

Shares of mainboard-listed Metro closed flat at S$0.71 on Monday.