New joint venture to target German student accommodation

British project developer and fund manager Crosslane has teamed up with German asset management group Bauer Capital for the former’s first foray into the rapidly-developing German student accommodation sector, with plans to buy or develop housing for up to 5,000 students in a number of large German university towns.

The partners have established an open-ended retail fund, the “Victus European Student Accomodation Fund”, which is targeting the top 20 university towns for the medium term, but will likely see initial focus on Munich, Hamburg and Oldenburg to kick off activities with accommodation for 800 students planned.

Property adviser Savills, which has plenty of experience in the sector in the UK, and which advised the Crosslane/Bauer joint venture, says the German student population has been rising by 5.5% annually since 2008 to now number about 2.5 million undergraduates. Officially-designated German student housing caters for only about 11% of this number, as against a comparable rate in the UK of 23.7%. Thanks to the abolition of German military service and a shorter secondary school education programme introduced nationwide, Student numbers in Germany are expected to rise still further into the medium term.

Savills say that annual yields in the sector have been stable in recent years, delivering about 5.5% at the upper end and 6.75% for more average-quality assets. Marcus Roberts, responsible at Savills for student investment, commented, “Despite the challenges in the wider economy, student registration figures across Europe and particularly in Germany have remained robust. However, there is a significant imbalance between supply and demand, so we’re going to see many more new projects such as those by Crosslane and Bauer.”

Crosslane was founded in the UK by Michael Sharples and James Metcalf in 2007, and runs a fund, the Crosslane Student Accomodation Fund Nr. 1 in the UK, which owns and lets more than 1,000 student beds across the country. Bauer Group is headed up by Felix Bauer, who has most recently been gaining a foothold in the student accommodation sector with his IQ Campus company, after a previous similar venture, IQ International Quarters, failed to get off the ground.

Bauer’s erstwhile partner in that venture, Horst Lieder, went his own separate way and founded International Campus, based on an operator-driven business model that he hoped would help to challenge market leader YOUNIQ for market share. Bauer’s concept is based upon a funds model targeted at international investors – although, if we remember rightly, the very ambitious plans announced with considerable fanfare a couple of years ago have been slower to materialise than envisaged. This new venture with Crosslane may prove more durable.

At a recent meeting at the MIPIM in Cannes, the chairman of fund manager Bouwfonds REIM, Martin Eberhardt, mentioned that Bouwfonds expected to close late on this summer on its own new Spezialfonds for student accommodation in Europe, with the focus on France, the Netherlands, the UK and Germany. It looks like several new players are girding their loins to enter the market. REFIRE intends to have a closer look at the leading players in this student accommodation sector over the coming months.

Meanwhile, a new study published by web portal Immowelt examines the cost of student accommodation across university cities in Germany. The highest rents are currently being paid by students in Munich (€16.30 per sqm per month) and Frankfurt (€14.80) for single accommodation – a far cry from the €6.20 to €7.00 being paid per sqm by students in Leipzig, Dortmund, Bochum, and Halle at the other end of the scale. Smaller university towns like Heidelberg and Freiburg come in at about €12.60 per sqm, according to the study, which was carried out between September 2012 and February this year. Sharing is obviously a cheaper option – but even then, suitable apartments for students are still the most expensive in Frankfurt (€12.20) and Munich (€13.60).