A Brookfield student housing project in the UK where the group has been active since 2016
Brookfield Asset Management has entered the student accommodation market in Australia, kicking off its first development project in Melbourne under a portfolio that it aims to grow to over A$500 million ($370.5 million) as the country reopens its borders to international students.
The Canadian investment giant said Monday that it had teamed up with local property developer Citiplan and its accommodation manager unit Journal Student Living on the project opposite the University of Melbourne’s main campus in the city centre.
“With the recent reopening of the international border, we believe now is an opportune time to enter the student accommodation sector in Australia as international students are slowly coming back and still view the country as an attractive place to study (particularly students from Asia),” Brookfield’s Australia real estate investment head Ruban Kaneshamoorthy told Mingtiandi on Monday.
Brookfield’s announcement of its entry to the market comes just two weeks after Australia reopened its borders to vaccinated travellers on 21 February, after having shut out most foreign arrivals for nearly two years due to the pandemic, while housing rents in key cities have begun to bounce back amid supply constraints, according to a report by Savills.
Project to Open in 2025
The Brookfield joint venture acquired the site at the corner of Grattan and Bouverie streets in the inner-city suburb of Carlton through an off-market deal with unnamed private investors for an undisclosed amount.
Ruban Kaneshamoorthy of Brookfield
The partners plan to build a 400-unit student housing complex on the site by 2025, with Brookfield and Citiplan in charge of development works and Journal Student Living managing the asset.
Kaneshamoorthy said the Melbourne site will soon be followed by more projects in the pipeline as the venture targets assets across Australia and New Zealand, including in Brisbane, Sydney and possibly Perth.
“The thematics driving student housing are strong as we move into a post-COVID environment,” he said in a release. “There has been significant growth in international student enrolments over the past 10 years, driven by a burgeoning Asian middle class who view Australia as an attractive studying location, and we expect growth to rebound in the coming years.”
The Brookfield executive said the limited supply of high-quality, purpose-built student accommodation in the capital, coupled with the growing number of students attending universities outside their hometowns, should boost demand in the sector.
“Given the headwinds the sector has faced through COVID-19, we see this as a highly favourable environment to aggregate sites that will only be delivered once the market has normalised,” he said.
Alternative Real Estate Market
Brookfield’s student housing venture marks its latest show of confidence in Australia’s alternative real estate market, more than two years after it took over the senior living business of ASX-listed Aveo Group in a A$1.27 billion deal in 2019.
The Toronto-based investment firm with over $690 billion in assets under management globally proposed to shareholders last month a plan to spin off part of its asset management business into a separate, “asset-light” company worth $70 billion-$100 billion as its operations in Asia Pacific outpace the rest of its regional markets.
In Australia alone, Brookfield has $30 billion worth of assets spanning residential, office, industrial, nursing homes, data centres, hospitals, utilities and ports, including the 30-storey 388 George Street office tower it owns in Sydney that was refurbished in 2020.
The investment giant has also been expanding its $7.4 billion student accommodation business, which owns 197 assets across Europe and the US, including the 619-unit UK student accommodation portfolio it bought last month for £94 million ($124.2 million) from IP Investment Management and Glenmore Group.
Student Housing on the Rise
Speaking at an MTD forum last May, market players remained optimistic on rental housing as a promising alternative to “traditional” assets like office and retail, citing the sector’s ability to produce higher yields.
Stephen Gaitanos, managing director and group chief executive of rental housing operator Scape Australia, said cap rates for student housing assets in the country’s prime locations are still attractive at 4-5 percent, despite being down from 6-7 percent six years ago, especially with the bright prospects of the country’s education sector.
“Education is our third-biggest export industry, and Australia is the globe’s third-biggest education market,” said Gaitanos, whose company has been actively expanding its portfolio in the UK and Australia.
Savills is projecting demand for student rental housing to bounce back this year, with up to 150,000 international students returning after Australia relaxed its travel restrictions for vaccinated visa holders starting last December. The influx will likely push rents higher given the limited supply of operational accommodation.
“Investors have therefore sought development-led deals, either directly through acquisitions of sites, or alongside local developers in structured transactions,” the Savills report said. “We foresee a strong transactional market in 2022 buoyed by the confidence of occupancy levels improving and gradual re-stabilisation of revenue flows.”
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