Global private equity firm The Carlyle Group today announces that it has entered the UK student housing market following the formation of a joint venture agreement with Generation Estates Limited. Carlyle and Generation is progressing schemes on four sites in London which are to be acquired providing the Group with an initial portfolio with capacity for circa 1,750 beds. Carlyle/GEL also hopes to work closely with London Universities and other private sector or overseas educational providers to fulfil their specific requirements.
Carlyle is a strong believer in student housing as a long term institutional asset class and the move into the London market follows is its announcement of a student accommodation joint venture with City Living in the Netherlands in October 2009. Carlyle will invest through its third European real estate fund CEREP III, which raised 2.2 billion euros in June 2008.
Carlyle intends to build a business with Generation of at least 4000 beds in London, including the initial pipeline of schemes. Each site will comprise a mix of studio rooms (en suite plus kitchenette) and smaller en-suite study bedrooms, which will be in the three to four star end bracket which Carlyle believes offers the most sustainable and attractive business proposition. Carlyle will place a particular emphasis on design and quality where it believes it can leverage the hospitality sector experience of other parts of its business in order to provide a more appealing offering than its competitors.
GEL, which is an experienced developer and operator of student accommodation, will be responsible for the ongoing operation of the completed developments.
The Carlyle Group believes there is a strong supply/demand imbalance in the student living sector and in London particularly, where there are over 260,000 students, with only enough purpose built accommodation for around 16% of these. London also has the highest number of overseas students, at over 90,000 full-time, a demographic which highly favours purpose built secure accommodation. This demand has resulted in solid growth rental growth, which was 10% in 2009 and around 7% as a longer term average. Growth in student numbers for post graduates and overseas students is projected to be 14% and 15% respectively while delivery of new accommodation is substantially below that with only 4,000 beds due for delivery between 2010 and 2012. Carlyle also believes there is strong demand from the non-university education sector which includes students studying professional and language courses. The asset class therefore offers good growth potential and security of income.
Commenting on the joint venture, Robert Hodges, Managing Director Carlyle European Real Estate, said: We have been aware of the attraction of student accommodation for some time, given the strong fundaments of the market, particularly the ongoing supply/demand imbalance in the UK and the new joint venture follows our entry into the student accommodation market in the Benelux region in October last year. One of the crucial factors with regard to any student accommodation investment is to ensure that the management of the end product can be undertaken by an experienced operator. We are therefore delighted to be working in partnership with GEL, which is well established in the sector, having already developed over 3,000 beds in London to date.
Alan Artus, Director of GEL, added: “Through our joint venture with Carlyle can work from a well financed position to provide high quality new product that will meet some of the significant demand in London for purpose built student accommodation. We will continue to work closely with the relevant local authorities through the planning process and hope work together with local universities to meet their individual requirements. We are now actively seeking to grow our business with Carlyle by identifying and acquiring well located sites in Central London in order to create a sizeable operational platform”.
Real Estate Living Specialists