This article is from the Australian Property Journal archive
US giant Greystar is expanding beyond build-to-rent, backed by the Australia’s Future Fund to enter the purpose-built student accommodation (PBSA) sector by snapping up a seven-strong national portfolio of assets for $1.6 billion.
The acquisition comes despite pressures on international student numbers coming from both sides of politics heading into a federal election year. The Albanese had recently attempted to put a cap on numbers and bring the number of new international student commencements back to pre-pandemic levels, while Opposition Leader Peter Dutton has pushed for deeper cuts, pitching it and migration harder as a housing issue amid a crunched rental market.
However, the PBSA sector in Australia remains relatively new and undersupplied, and will continue to experience strong demand driven by robust rental growth and a positive macroeconomic environment.
The Future Fund is backing Greystar in the acquisition to the tune of $350 million in the acquisition of assets Sydney, Melbourne, Brisbane, Adelaide, and Canberra, which are strategically located close to universities and tally 5,662 beds. It comes three weeks after the Albanese government gave the $230 billion sovereign wealth fund a new mandate that included boost housing supply.
Greystar executive director, investment management, Asia-Pacific Adam Pillay said, “Australia’s student housing sector is experiencing strong demand, driven by its world-class education institutions, a growing international student population, and an undersupply of institutional-quality housing,”
Wes Fuller, Greystar’s chief investment officer, said. “This acquisition is a pivotal step in Greystar’s Australian journey”.
“We are committed to delivering exceptional housing solutions that meet the needs of students while enhancing the quality and functionality of these properties.”
The six PBSA Wee Hur has completed are Y Suites on Moore located at 7-9 Moore Street in north-west of Canberra’s CBD; UniLodge City Gardens at 105 Gray Street in north-west Adelaide’s CBD; UniLodge Park Central at 8 Gillingham Street in the Brisbane suburb of Woolloongabba; Y Suites on Waymouth at 128 Waymouth Street in the north-west of Adelaide’s city centre beside Light Square; Y Suites on A’Beckett located at 183-189 A’Beckett Street in Melbourne’s north-central city area, beside Flagstaff Gardens and Queen Victoria Market; and Y Suites on Gibbons located at 13 & 15 Gibbons Street in Sydney’s inner-city suburb of Redfern.
Greystar’s early involvements in Australia’s housing market have been in the build-to-rent space. It has just received the green light from the Victorian government to transform an old Honda dealership in Collingwood into 400 build-to-rent and affordable homes, while it has this year put the finishing touches on its $500 million build-to-rent development in the Fishermans Bend precinct – the largest build-to-rent project to date in Victoria, which will be home to 1,500 residents – and it has another $500 million build-to-rent project in South Yarra on the way.
On the sell side of the PBSA deal is Singaporean group Wee Hur, which will pocket net proceeds of $350 million whilst retaining a 13% stake in the portfolio through a subsidiary. Wee Hur had backing in the portfolio from Singapore’s sovereign wealth fund GIC.
“This divestment is the culmination of a decade of strategic growth and development,” it said.
Wee Hur entered Australia’s PBSA market in 2015 with its first asset in Brisbane, and launched the Wee Hur PBSA Master Trust in 2016 with the goal of creating a portfolio of 5,000 beds across key Australian cities.
“This divestment highlights Wee Hur Capital’s exceptional ability to execute its strategic vision and deliver superior returns for its investors, regardless of market conditions,” said Wee Hur Capital’s chief executive officer, Goh Wee Ping.
“In 2021/2022, amidst global uncertainty, we acted decisively to secure liquidity and certainty through our successful recap with RECO (a unit of GIC). Two years later, as the PBSA market rebounded and our portfolio approached full stabilisation, we capitalised on yet another opportunity to unlock maximum value for our stakeholders through this landmark transaction.”
Despite political uncertainty, global players are betting on the long-term potential of Australia’s student accommodation sector. Recently, US investment firm Nuveen committed to a $275 million loan for a Brisbane PBSA project by Dexus and Marquette Properties, which will see an office building repurposed into a 1,200-bed student accommodation facility, while earlier this year Canadian giant Brookfield acquired a 50% stake in a PBSA operating platform, Journal Student Living.
Meanwhile, Australia’s largest owner and operator of PBSA, Scape closed on $3 billion in fresh debt financing in August.
Australia currently has 132,700 beds in operation to cater to an international student population of 1.6 million students. In the more mature UK market, there are 700,000 beds in operation and 1.3 million students.
