BlackRock-Linked Entity Sells UK Student Digs to Far East Orchard for £66.5M

A BlackRock-linked entity has agreed to sell a pair of student dorms in the UK to Singapore-listed property developer Far East Orchard for £66.5 million ($85 million).

The subsidiary of Far East Organization purchased the assets from a company that lists BlackRock’s London-based managing director Paul Winters as a director prior to 8 November.

The addition of the two freehold properties in Leeds and Sheffield, which have a combined 974 beds, brings Far East Orchard’s UK student housing portfolio to 3,260 beds across 11 dorms in six cities, according to a company filing.

The deal comes just eight months after Far East Orchard purchased a trio of student housing properties in Bristol and Liverpool for £55 million.

Building a Stabilised Portfolio

“We have been on the journey to build our recurring income base,” said Far East Orchard’s group CEO and managing director, Lui Chong Chee. “We are pleased that our strategic efforts are translating into results, with the continued growth of our student accommodation portfolio to 3,260 beds, ahead of our target to achieve 3,000 student beds by 2023.”

Lui added that the company will capitalise on the “favourable demand-supply dynamics” in the cities the company has student housing properties in as well as exploring “accretive development and acquisition opportunities” as part of the company’s long-term strategy.

The company paid ten percent less than the £71.8 million aggregate market value of the properties as per a valuation by JLL on 23 October 2019.

BlackRock had not replied to an enquiry from Mingtiandi by the time of publication.

Operating at Full Occupancy

The 239-bed purpose-built property in Leeds – known as The Foundry – is located on Cavendish Street, a 15 minute walk from the Leeds University campus, and around 700 metres away from the city centre.

The property has operated at full occupancy since opening in 2017, with room prices ranging from £143 per week for a standard room to £252 per week for a self-contained studio flat with a bathroom.

The 735-bed The Elements at 90 Bramall Lane, which comprises two freehold buildings, is located 15 minutes’ walk from Sheffield Hallam University and 25 minutes walking distance from the University of Sheffield.

Weekly rent at The Elements ranges from £124 per week for a single en-suite room to £135 for a self-contained flat, with the property having run at full occupancy since opening last year.

Both properties will be managed by the facility manager of Far East Orchard’s existing UK student accommodation portfolio in Brighton, Bristol, Liverpool and Newcastle.

Demand Boosted by Growing Student Numbers

“The PBSA asset class in the UK has demonstrated counter-cyclical qualities with continued rental growth,” Far East Orchard said in its statement, referring to the properties as part of the purpose built student accommodation asset class.

The company added that it expects demand for student housing to remain strong due to the well-established reputation of the UK education sector and a healthy student-to-bed ratio, despite the political uncertainty caused by Brexit.

With UK student numbers already boosted by increasing interest from overseas applicants, the country’s government has put in place plans to increase international student enrollment by 30 percent by 2030. The boost from the current 460,000 students to 600,000 in just over 10 years time is supported by a policy of allowing one-year post-study visa extensions.

Singaporeans Continued Appetite for UK Student Beds

Far East Orchard’s Leeds deal is the latest in a series of acquisitions of UK student accommodation by Singapore investors, as the city-state’s institutions bet on the prospects of the asset class.

Just last month, Mapletree Investments acquired a pair of purpose built student housing properties in Coventry, just 121 miles (198 kilometres) down the M1 motorway from Leeds.

The Temasek-backed company paid student housing developer Unite Students £96 million for the assets, which brought Mapletree’s UK portfolio in the asset class to 30 properties across 15 cities.

In May, Singapore Press Holdings acquired £134 million worth of student housing assets in Great Britain, increasing its portfolio of UK university accommodation by 1,243 beds to 5,059.

SPH’s acquisition of the three properties – one each in Southampton, Sheffield and Leeds – came eight months after it had bought a portfolio of 14 university halls in the UK for S$321 million from Unite Students.