Student Housing Fund Backed by Singapore’s Metro Buys UK Asset for $41M

Singaporean property group Metro Holdings has added a second asset to its student housing fund with the purchase of a 181-bed accommodation near the University of Bristol in southwest England.

The fund, Paideia Capital UK Trust, bought the six-storey Dean Street Works for a total consideration of £30.1 million ($41.2 million), including the purchase consideration for the property of £29.4 million and related taxes, fees and expenses of £700,000.

The acquisition in the largest city in England’s southwest is the latest in a series of overseas student housing investments by Singaporean firms including Singapore Press Holdings and Mapletree Investments as institutions seek high yielding opportunities in a time of compressing yields.

Bricks and Mortarboards

While Metro’s announcement of the acquisition did not name a seller, Dean Street Works was completed by Bristol developer Atlas Land in August of 2020 and is managed by UK student housing specialist Prestige Living

The acquisition is being funded by a combination of proceeds from the subscription of units in the fund and external borrowings, Metro said last week in a filing with the Singapore Exchange.

Dean Street Works is located at the junction of Dean Street and Wilder Street in the St Paul’s area of Bristol, 1.4 kilometres (0.9 miles) from the main campus of the university, which has an enrolment of 27,000 students. The property is a five-minute drive from Bristol’s city centre and Broadmead, the main shopping district centred on the Cabot Circus mall complex.

The 225-bed facility includes 44 studios with 181 en suite beds, a cinema room, laundry facilities and 1,025 square feet (95 square metres) of communal space. Dean Street Works has a committed occupancy rate of 100 percent, Metro said.

The acquisition is the second seed asset for Paideia Capital UK Trust after the fund had been launched with the acquisition of the 210-bed Red Queen near the University of Warwick in late 2020.

Metro holds 30 percent of Paideia Capital UK Trust through a wholly-owned subsidiary, Sun Capital Assets, while the remaining 70 percent stake is held by developer Lee Kim Tah Holdings, and investment manager Aurum and a third party. For the Bristol acquisition, Metro’s equity commitment for the total consideration amounts to £4 million.

The fund acquired the five-storey Red Queen building for a total consideration of £21.5 million, including the purchase consideration for the property of £20.75 million and related taxes, fees and expenses of £750,000. Metro’s equity commitment for the total consideration was £2.7 million.

Located on the outskirts of the city of Coventry in the West Midlands region, Red Queen was completed in September 2020 and features a study area, gym, cinema and lounge. The building has a committed occupancy rate of 90 percent.

Paideia Capital UK Trust had an initial aggregate committed capital of £60 million upon its first closing. The fund aims to acquire purpose-built student accommodation assets in Britain to increase its portfolio size to £150 million.

Singapore Seeks an Education Advantage

At the time that the purpose built student housing (PBSA) fund was launched Metro’s group chief executive said that, “Together with our experienced partners LKT and WH, we will leverage on this platform to grow the PBSA portfolio across England, Scotland, Wales and Northern Ireland, where we see promising prospects, given the resilience in demand for quality higher education.”

The decision to pursue opportunities in overseas student housing assets puts Metro and its partners in line with some of Singapore’s largest institutions, which are reaching for the enhanced yields that can be achieved through the management-intensive real estate niche.

In December 2019, Singapore Press Holdings acquired a portfolio of student housing properties in Britain for $583 million, more than doubling its university accommodation holdings to $1.1 billion. SPH had earlier bought 14 university halls from UK student housing provider Unite Students, later adding a trio of assets — one each in Southampton, Sheffield and Leeds — to the portfolio.

In the months leading up to SPH’s big buy, Mapletree Investments had paid Unite Students $117 million for a pair of student housing assets in Coventry, and SGX-listed developer Far East Orchard had acquired student digs in Leeds and Sheffield for $85 million and in Bristol and Liverpool for $73 million.

Investors from the city-state have also been active pursuing student housing opportunities in the US, with CapitaLand-managed Ascott Residence Trust agreeing to pay $95 million to purchase an Atlanta property just one week ago.