German student housing sector coming into focus

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Markets

It’s been a lively month in the student housing sector, an asset category that seems finally to be coming of age in the highly fragmented German market. Traditionally a market for joint ventures, several overseas investors have clearly decided the time is right to enter the German market.

Firstly, Dutch group Bouwfonds Investment Management said it had raised €110m for its Bouwfonds European Student Housing Fund in its second closing, a more than doubling of the amount raised after its first funding round. After launching last year, the fund has so far bought four assets in Germany, the Netherlands and the UK.

The fund has a target volume of €200m-€300m and a ‘core’ risk profile, will use a maximum of 40% leverage, and is offering investors and an IRR of between 5.5% and 6.5%.

According to Xavier Jongen, the fund’s director, the current portfolio of about 4,000 individual units is performing very well, “highlighting that student housing investments offer stable and secured cash flows.” He added, “We can fulfil demand from institutional clients with our European-wide investment strategy and thus participate in growing the asset class further.”

In a fresh market move, UK privately-owned multi-family office LJ Group said earlier this month that it has committed a total of €100m of equity to Cresco Capital Group’s German student housing venture, Cresco Urban Yurt.

The partnership has made its first acquisition with the purchase of the landmark Frankfurter Tor building in Berlin and will invest over €60m to redevelop the asset into around 552 apartments, including ground floor and basement retail units.

The landmark six-storey building has about 24,000 sqm of lettable space. Cresco purchased the building several months ago after a bidding process against 21 other bidders, and won with a bid of €15.75 million. The seller was the Institute for Federal Real Estate (the Bundesanstalt für Immobilienaufgaben or BImA), a German government agency that provides federal government entities with real estate services. The BImA minimum valuation on the building was €10.3 million

The new student housing venture is led by Alexander Bürk, founder of the Cresco Capital Group and Daniel Schuldig, a former senior private equity executive.

“The acquisition of the Frankfurter Tor property exemplifies our focus on large redevelopment projects in prime locations,” said Bürk. “We secured planning for the property in a short space of time by working closely with the local planning authorities, providing a strong concept which will revitalise the property by integrating it into the local community.”

Cresco Capital Group has acquired and developed properties valued at over €500m since its foundation in 2006, including Soho House Berlin.

According to Schuldig, "We are building a best-in-class student housing platform delivering attractive dividend yields and strong downside protection for our investors. We have an attractive deal pipeline in place and aim for market leadership."

LJ Group provides private office, investment advisory, alternative investment, trust and fiduciary services to individuals, family offices and foundations from offices around the world. The Group's alternative investment business makes direct investments in alternative assets classes, primarily in real estate and private equity connected to the real estate sector. LJ also backs Queensgate Investments, Osprey Equity Partners and Hadley Property Group.

Another new market entrant also announced its presence in the student housing sector. The Hamburg-based investment and asset manager MPC Capital has teamed up with Danish investor Sparinvest in a new German joint venture to develop student housing, both as project developer and subsequent manager. All it’s saying at the moment is that the JV is looking at “various attractive university locations in Germany”.