Scape Australia is preparing to launch a $1 billion core fund to invest into a growing portfolio of facilities which the student accommodation provider is developing along the eastern seaboard.
Backed by a group of institutional investors, Scape is on the way to becoming the country’s largest purpose-built student accommodation (PBSA) provider with 2500 student rooms open already and more than 8000 rooms in development.
In all, the Scape business plan spans 18 properties built or in development, accommodating close to 11,000 beds and creating $4 billion in assets under management over the next 5 years.
The provider has begun construction at four sites for more than 2500 student rooms including the world’s tallest student accommodation tower at 99 Franklin Street in the Melbourne CBD. The 175-metre tall tower is on track for to open in 2021 with 950 student beds.
The next step is looming: a core-style fund to hold the developed assets as they become close to fully occupied. The Australian Student Accommodation Fund is targeting a first close of $1 billion, with up to $2 billion in equity commitments potentially.
So far, Scape’s development of facilities has been channelled through two funds. One was backed by Dutch pension investment managers APG and Bouwinvest and Scape’s founders while a second $500 million fund was closed with support from two European institutional investors and a Middle Eastern sovereign wealth fund.
In the next phase, it is expected the institutional investors of the first fund would typically want to retain at least half their exposure to the assets as part of their allocation to the sector while recycling the balance. The Scape principals will also take a stake in the core fund before recycling further capital into development.
The first cabs off the rank to roll into the core fund will be a 765-bed facility on Swanston Street in the Melbourne CBD, a boutique 54-bed dorm at the University of Sydney, a 788-bed building at Brisbane’s Southbank, and the Toowong development which opened earlier this year with 751 beds.
It is expected Scape’s core fund would also be open to acquiring third-party developed student digs which fit within its investment mandate.
Bidding is already underway on the country’s fourth largest portfolio, run by Urbanest, as well as the Goldman Sachs and Blue Sky’s Atira joint venture. It is understood Scape is a potential player in that process.
Scape is global player. Its local arm was founded by Craig Carracher and Stephen Gaitanos who previously owned student accommodation management group The Pad which was sold to Goldman Sachs and Blue Sky and was rebranded Atira.
Scape launched the first listed REIT in the UK for student accommodation six years ago. It now has has a market capitalisation of about £680 million, with 4100 beds across 10 buildings in London, Bristol, Surry and Brighton.
The proposed Australian fund could potentially form the basis for a listed student digs property trust although such a move is less likely in this market until greater scale is reached. It is understood Scape is not considering a float at this point.
Underpinning the investment thesis for a student digs fund is Australia’s popularity as a destination for international students, ranking third behind the US and UK.
Education is the country’s fourth largest export at around $35 billion, behind iron ore, coal and LNG.
There are an estimated 105,000 PBSA bed spaces nationally. Supply is not keeping up with demand though, with the shortfall forecast to pass 45,000 beds in Sydney and Melbourne combined next year.
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