Singapore firm launches S$52m fund for student accommodation in the UK

DESPITE Covid-19 showing no signs of abating in the UK - with the country experiencing a second wave of infections and several cities plunging back into lockdowns - a Singapore-based private equity firm has set its sights on the student accommodation sector there.

Q Investment Partners (QIP) on Thursday launched a £30 million (S$52.13 million) UK purpose-built student accommodation investment fund, the firm's largest fund to date.

Through a strategic joint venture with local partners, QIP plans to develop a portfolio of such accommodation assets under the fund. It has identified five assets in the cities of London, Edinburgh and Bath.

Despite the current climate, the fund has already attracted strong investor interest, said QIP, which expects to wrap up its fund-raising within six months. It has drawn strong expressions of interest from clients in Singapore and Hong Kong, which makes up half and 40 per cent, respectively, of the firm's client base. It is targeting a net return of 13 to 15 per cent per annum over a four-year investment period.

Eighty per cent of the capital raised will go towards developing the investment pipeline for the five assets.

"Created for income and positioned for growth, the portfolio approach offers investors an opportunity for scale, diversification and value uplift upon exit," said QIP in a statement on Thursday.

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"Through our land and deal access, we expect our properties to deliver inflation-beating rental income and year-on-year increments of our net operating income over the long term," said the company's chief executive officer Peter Young. "This is due to the property location and value creation from the best use of the land we purchase and the robust student products created."

Up to 20 per cent of the capital raised will be used to "take advantage of market dislocations" in the sector resulting from the pandemic. Among the "market dislocations" the firm is looking to seize are attractive land purchases and opportunities to repurpose buildings intended for other uses, such as for retail and offices, into student accommodation.

Although the real estate industry on the whole has been hard hit by the pandemic, QIP believes student accommodation to be relatively resilient, compared to other real estate classes.

Mr Young told The Business Times in an interview ahead of the announcement that he holds a "very positive" outlook on the sector and expects pent-up demand for the 2022/23 academic year. He expects the housing assets for this fund to be completed by September 2022.

The fund launch comes at a time when "practical certainty" is starting to emerge, he added.

QIP cited in its statement a poll by Universities UK, a registered charity representing UK's universities, which said that 97 per cent of the 92 institutions surveyed will offer in-person teaching at the start of term this year.

Britain has also surpassed the US for the first time this year as the preferred overseas study destination for Chinese students, said QIP, citing a report by Beijing-based private education provider New Oriental Education & Technology Group.

Mr Young added that interest in hard assets has risen in recent times. "Investors are increasingly looking at assets for which the value increment is clear and there is a clear timeline as to how value is created. Resilience is particularly important here," he said.