More capital heading for Europe’s counter-cyclical PBSA

More investors are putting capital into PBSA in Europe, experts agreed during the Financing Opportunities in Student Housing online briefing, which was held this week on REALX.Global.

“There will be more and more institutional capital going into the student housing sector, because it is maturing and is seen as counter-cyclical,” said Arron Taggart, head of UK investment, Cheyne Capital. “It’s an entirely different playing field. With more and different types of capital coming into the sector, there is an optionality for developers and borrowers to tailor their debt needs to their business model and to the opportunities.”

It is particularly good to have alternative capital providers at times of high volatility like now, to help new schemes come to fruition.

Banks take negative view of development

“Banks tend to have quite a binary view, they’re either in or out, and at the moment they’re out, at least on development projects,” Taggart said. “We operate across the board and we’re big on development and mezzanine. We love the transparency of the sector, as there is so much in-depth research and analysis.”

Investors and lenders are able to examine in detail the supply situation in every city, as well as data on transactions and on domestic and international students arriving.

“You can really drill into the numbers, which makes it easier to analyse risk and to make good investment decisions,” said Taggart. “In real estate only the hotel sector is as transparent as this.”

Another positive for the sector is its resilience.

“The important differentiator is that we don’t expect a lot of distress to come into student housing, unlike other sectors where we see it happening already,” said Mark Quigley, managing director, UK real estate finance, Beaufort Capital. “That’s an extremely strong fundamental to have and it’s one of the reasons why we invest.”

PBSA in a good place compared to retail and offices

The sector “is in a very good spot compared to other asset classes like retail or offices,” said Leo Hertog, senior portfolio manager real estate, APG Asset Management.

“Student housing is definitely coming of age,” said Rob Bould, non-executive director & senior advisor, IPSX. “In the UK the largest REIT is Segro, the second Land Securities and the third is Unite, so student housing is bigger than British Land, which used to be the biggest REIT.”