M&G Real Estate Enters Australia Student Housing Market With $62M Melbourne Buy

M&G Real Estate has acquired a purpose-built student accommodation asset in Melbourne for $61.8 million, marking the fund manager’s first investment in Australia’s booming PBSA market.

The property unit of London-listed M&G picked up Park Avenue in the inner suburb of Parkville under the firm’s Asia Pacific living strategy led by portfolio manager David Askham, according to a Monday announcement. The property comprises 369 beds across 328 units and serves nearby campuses of the University of Melbourne, Monash University and RMIT University.

After almost doubling to more than 132,000 beds in the past decade, the PBSA market still serves just 6.5 percent of Australia’s full-time on-campus student population, M&G said, citing data from the Property Council of Australia and consultancy Urbis.

“Our entry into Australia’s PBSA market reflects our confidence in the region’s long-term fundamentals and the significant investment opportunities it offers our clients,” said M&G Real Estate Asia CEO JD Lai. “Constrained housing supply continues to drive the need for high-quality rental housing, particularly in developed markets like Australia, and institutional investors have the long-term capital to invest in these assets that meet a societal need alongside providing investment returns.”

Beds in Demand

The seller of Park Avenue is understood to be US asset manager Invesco, which teamed with student housing specialist GSA Group in 2016 to acquire the then 130-bed facility for A$20 million (now $12.6 million). The partners added three storeys and 239 beds to the property, which operates under Aussie student housing manager UniLodge.

Park Avenue enjoys proximity to the Parkville metro station scheduled to open this year and is targeting a 4-star rating under Australia’s Green Star certification, indicating best practice in sustainability performance, after a power upgrade that included installation of solar panels.

The transaction comes after US multi-family giant Greystar agreed late last year to buy seven Australian student housing properties from a joint venture of Singaporean developer Wee Hur Holding and sovereign fund GIC for A$1.6 billion ($1.01 billion).

The acquisition of the 5,662-bed portfolio marked Greystar’s entry into Australia’s PBSA market and its largest acquisition in Asia Pacific to date, with the company pointing to the strength of the student housing market Down Under as sparking the deal.

Earlier this month, Singapore’s SC Capital Partners sold a 233-bed Sydney student housing complex to the University of New South Wales for what the fund manager said was a significant premium to the acquisition price and a 19 percent mark-up to book value.

Australia saw a 19.3 percent rise in student enrolments from January to May 2024 compared with the same period in 2023, according to research by the Amber booking platform. The supply of PBSA in Australia expanded from 3,000 rooms in 2010 to more than 100,000 in 2024, but the amount was insufficient to meet student demand, the report said.

“The student accommodation sector in Australia is underpinned by strong fundamentals and increasing international student demand, demonstrating an ability to deliver attractive risk-adjusted returns,” M&G’s Askham said. “Park Avenue is a well-located, high-quality asset that aligns with our disciplined investment approach, with the potential to provide excellent investment returns to our investors.”

Living Proof

M&G Real Estate manages more than $40.9 billion in assets worldwide. Last year the firm won a $250 million commitment from its parent group for the Asia Pacific living sector, expanding on M&G’s residential investments in Europe.

In October, M&G announced its acquisition of a $68 million prime residential portfolio in Osaka under the APAC living strategy, boosting the firm’s total exposure to the global residential sector to $7 billion.

Elsewhere in Australia, M&G last month joined with Sydney-based industrial builder Stockland to invest in Stockland M&G Asia Property Trust, a 50:50 open-ended partnership seeded with a logistics park in New South Wales at an initial gross asset value of A$415 million.