This article is from the Australian Property Journal archive
DESPITE uncertainty in the international student industry due to politics, global asset manager Nuveen has backed Dexus and Marquette Properties’ Brisbane purpose-built student accommodation project.
Nuveen will provide a $275 million senior loan to support the acquisition and repurposing of the B Grade office building into a modern PBSA facility.
The $500 million 1,200 beds project is Dexus’ first PBSA project, as Australia’s largest office landlord pivots to student housing to diversify and reduce its exposure in the office sector, which has seen vacancies remain elevated in the wake of structural changes to the sector and the continued flight to quality from secondary assets to Premium or A Grade buildings.
Dugald Marr, managing director and head of debt for Australia & New Zealand at Nuveen said the loan is aligned to Nuveen’s real estate debt strategy, which makes Core loans and Core Plus loan investments to institutional borrowers with security over prime assets in preferred sectors. Proper debt sizing and loan covenants also ensure principal security for investors whilst targeting attractive loan investment returns.
“With solid population growth, record low vacancy and limited supply in prime locations, we believe the Australian living sector offers increasingly attractive investment opportunities,”
“This transaction, supported by a prime site and like-minded partners Dexus and Marquette, is another example of our commitment to providing competitive funding solutions to markets with strong underlying fundamentals,”
“Nuveen made its first commercial real estate debt investment over 90 years ago and has since built a real estate debt platform with over US$44bn AUM. Our teams understand the need to provide borrowers with competitive funding solutions and have the ability to move quickly to provide execution certainty,” he added.
Jason Howes, fund manager Dexus Real Estate Partnership 1 and 2 (DREP1 and DREP2) funds, said Nuveen’s commerciality and structuring expertise has delivered an efficient and competitive debt structure, very much a key element in making this project possible.
“Significantly, the project leverages the platform capabilities of Dexus across our acquisition, development, office, infrastructure and ESG teams to deliver PBSA beds into an underserved market.”
Toby Lewis, founder & managing director, Marquette Properties said, this was a complex transaction that involved Marquette bringing together multiple counterparties to deliver what will be a marquee PBSA asset in the Brisbane market.
“The Nuveen team is well known to us and had the expertise to structure a debt solution that supported this project and will ultimately drive value for our investors and partners. Our business is based around adding value and delivering on a strategy and we can only achieve this with trusted partners. We look forward to executing many more transactions alongside the Nuveen Debt team.” Lewis said.
The investment comes despite international student sector becoming a political football with both sides of politics trying to score populists points.
This is despite the education sector ranking as Australia’s fourth largest export behind coal, iron ore and natural gas, and is more valuable than gold, according to the Australian Bureau of Statistics released for the 2022-23 financial year.
The Albanese government recently failed to pass legislation in Parliament to cap international students at 270,000.
Opposition Leader Peter Dutton wants deeper cuts to international student numbers as part of its policy to fix the housing crisis.
However our political leaders continue to ignore the fact that supply is the issue due to poor planning for decades. For comparison, Australia has only 132,700 beds in operation in a sector with 1.6 million students, whereas the UK market which has 1.3 million students, and there are over 700,000 PBSA beds.
As a result, the private sector has responded by lifting the supply of PBSA rapidly over the last decade, almost doubling in scale.
The Urbis Student Accommodation Benchmarks created in partnership with the Student Accommodation Council shows there are currently 132,700 student accommodation beds in Australia, over half (53%) of which are owned or managed by the private PBSA sector. This is a 90% growth on the number of beds a decade ago.
The Student Accommodation Council’s report, Beyond the Visa Cap: Why Restricting International Students Won’t Solve Australia’s Housing Crisis, show the country’s 725,000 international students make up 5.4% of the rental market – and that capping their numbers will only reduce this figure by 0.6% by 2026, and have little impact on rental availability.
Weekly mean metropolitan rents would only be marginally impacted because of the cap – by 0.8% on average, or just $5 a week.
