This article is from the Australian Property Journal archive
THE Albanese government’s plans to cap international student numbers have not held back a cluster of traditional lenders who have helped student accommodation provider Scape raise $3 billion in debt capital.
Scape ran a process to refinance $1.5 billion of debt and netted the attention of 20 banks who offered commitments totalling $4.2 billion – meaning Scape’s debt offer was 2.8 times oversubscribed. The refinancing will save Scape $8 million per year in interest, and extends the maturity date for its debt to three and five years away, rather than the current 15 months away.
Scape then used the oversubscription capacity to secure a committed facility of circa $1 billion to fund the anticipated, future acquisition by the Scape Core Program of six newly completed development assets from its development joint venture (JV).
Given the still-unmet bank demand, Scape also took the opportunity to structure a new portfolio-wide development JV facility and refinance six individual construction finance loans. Scape sought $570 million in this transaction and received offers for $1.14 billion of committed debt capital – making for the largest green loan in Australia’s living sector and has allowing Scape to move away from credit funds to core banks who provided cheaper credit terms.
In total, $5.3 billion of funding commitments have been offered over the past few months.
“It represents the coming of age of purpose-built student accommodation (PBSA) as a mainstream asset class for bank lending, reinforcing confidence and signalling high growth potential,” Scape CFO Tim Peel said.
Lenders, investors still keen on Australian PBSA
The Albanese government promised in May to limit international students with a cap on each university, and boost student accommodation to ease pressure on the private rental market.
Education is Australia’s fourth biggest export and is worth nearly $50 billion to the economy, and the country is home to the third-highest number of enrolled international students globally. The number of international students in Australia surged by 15% to a record-high 671,000 in the year to the end of March.
University Australia chief Luke Sheehy told a senate committee hearing yesterday that the organisation believes the Bill drafted by the federal government is “more a political smokescreen than an instrument of good policy as the government seeks to gain an upper hand in the battle of migration ahead of the next election”.
It warned the bill would punch a $4.3 billion hole in the economy and cost the education sector more than 14,000 jobs.
Despite the government’s plans, lenders and investors continue to show their faith in the PBSA sector.
New lenders to the sector via the Scape raising include Westpac, Macquarie, and Dutch bank ING.
“It also demonstrates the strength of demand for the growth sectors in real estate – beds (living) and sheds (distribution),” said Peel.
“Global investors are focussing on these sectors rather than traditional real estate asset classes such as office and retail which are facing headwinds. Office in particular is struggling with lower occupancy due to increased working from home.
“Banks have struggled to lend in these traditional sectors and this deal illustrates their desire to lend to the largest players in growth sectors,” he added.
Banks involved in the development JV include CBA, Japan’s SMBC, Bank of China, and Singapore’s DBS .
Core Program backers include CBA, SMBC, ANZ, Bank of China, DBS, Singaporean pair UOB and OCBC, French bank Credit Agricole, and several other banks from Taiwan, Korea, and China, as well as Westpac, Macquarie and ING.
This, Canadian giant Brookfield acquired a 50% stake in a student accommodation operating platform Journal Student Living, with Citiplan retaining the balance.
The acquisition builds on the joint venture Brookfield and Citiplan formed at the end of 2021 with the purchase of a PBSA development site across from the University of Melbourne. The joint venture has since added two further sites in Melbourne and Brisbane.
