Australia’s Scape Raises $2B in Debt as Student Housing Market Surges

Australia’s largest owner and operator of student housing Scape has closed on A$3 billion ($2 billion) in fresh debt financing, with part of the offering nearly three times oversubscribed amid growing appetite for purpose-built student accommodation (PBSA) in the country.

The largest chunk of the two-part offering involved Sydney-based Scape tapping 18 banks to refinance A$1.5 billion of debt under its Scape Core Program flagship fund, which owns a A$4 billion portfolio of student accommodation assets across Australia. The group of lenders offered total commitments of A$4.2 billion, oversubscribing the offering by 2.8 times, according to company representatives.

The student housing provider also secured an additional facility of roughly A$1 billion to fund the Core Program’s planned acquisition of six completed assets from the company’s development joint ventures. In addition to those tranches, Scape raised an A$570 million facility to refinance debt under one of its development joint ventures.

Scape representatives attributed the financial support to strong demand for student accommodation and the company’s rebound from pandemic challenges.

“The pricing (of the previous Scape Core Program facility) reflected a business that was still recovering from Covid,” Scape CFO Tim Peel told Mingtiandi. “In the time since then, we’ve really gone from strength to strength. In particular, the occupancy in our buildings has been very strong, and we’ve experienced high rental growth…the metrics of our fund have improved substantially, so we thought it would be a good time to refinance the debt…and capitalise on banks’ appetite to lend to new asset classes that they have some faith in.”

Strong Lending Appetite

The A$1.5 billion tranche enables Scape’s Core Program to lower its cost of borrowing by over 50 basis points, which works out to roughly A$8 million in annual interest expense savings, according to the company. The refinancing also extended the maturity of the debt, which was originally due in 15 months, to three to five years.

The transaction comprised a A$800 million syndicated facility, with the remainder coming from nine bilateral facilities. The lender roster includes Aussie majors CBA, ANZ, Westpac and Macquarie; Asia-based banks including SMBC, Bank of China, DBS, UOB, OCBC; as well as European players Credit Agricole and ING.

Scape’s Core Program holds 27 assets totaling 13,000 beds across Sydney, Melbourne, Brisbane and Adelaide, and counts the Netherlands’ APG Asset Management and Bouwinvest, Pimco Prime Real Estate, AXA and Canada’s Ivanhoe Cambridge among its investors.

Scape will use the A$1 billion acquisition tranche to acquire six completed and stabilised assets totaling 2,500 beds in Sydney and Melbourne on behalf of the Core Program, including three properties from its first development joint venture and another trio from its second development JV. The facility can be drawn down as soon as investors in the Core Program approve the acquisitions, which is expected to take place within the next six months, Peel said.

Development Fund Facility

Scape is using the A$570 million facility to reduce borrowing costs for its second development JV, with the new funds replacing six individual construction loans, some of which were borrowed from credit funds at higher interest rates. The lenders offered commitments totaling A$1.14 billion for this tranche, representing an oversubscription of two times the target amount.

The two-year, sustainability-linked facility, which features a one-year extension option at the end of the first year, was provided by CBA, SMBC, Bank of China and DBS, and is the largest green loan in Australia’s living sector to date. The loan covers the second development JV’s six completed assets, three of which are expected to be acquired by the Core Program within the next six months, while the remaining trio of properties are expected to be acquired by the flagship vehicle later next year.

Investors in the second development JV include Pimco Prime, the Oman Investment Authority, Bouwinvest, German pension fund WPV, and Scape’s founders.

“In total, A$5.3 billion of funding commitments have been offered over the past few months,” Scape said. “This demonstrates the incredibly strong lender support in the market for the Scape PBSA model. It cements Scape’s position as the largest and most dominant player in the living sector and reflects the growing acceptance among banks of PBSA as a mainstream asset class.”

In addition to its first two development joint ventures, Scape in April teamed up with APG Asset Management and Ivanhoe Cambridge to form a third development venture, which was seeded with a 1,000-unit project near the University of Melbourne. Overall, Scape has around A$9 billion of assets under management funded roughly evenly between debt and investor equity.

Growing Investor Interest

Scape’s debt raise comes as independent advisory firm Oxford Economics expects PBSA room rents to grow by over 20 percent from 2024 through 2028, with the population of tertiary-aged students in Australia projected to rise by 15 percent over the next 10 years, outpacing other major student housing markets including the US and Britain. The number of international students studying in Australia last year exceeded the previous peak in 2019 by 4 percent, fuelled mainly by China and India.

Home to nine of the 100 top-ranked universities globally, Australia is estimated to have a shortfall of 7,000 student beds each year over the next five years as the pipeline of projects fails to keep pace with student arrivals, according to a JLL report published in March.

In response to rising demand in the sector, Blackstone acquired the 2,300-bed Student One portfolio from Valparaiso Capital last year for A$530 million, giving it three projects in central Brisbane.

Earlier this week, Canada’s Brookfield Asset Management acquired a half stake in Journal Student Living, the student accommodation operating unit of Melbourne-based developer and investor Citiplan.

In January, Singapore’s SLB Development lodged a planning application to develop 420 units of student housing in central Melbourne after acquiring the project site in 2022.