Bouwfonds REIM, part of the Dutch Rabo Real Estate Group, is to launch a Europe-wide fund investing in student housing. The Bouwfonds European Student Housing Fund will be structured as a German ‘Spezialfonds’ and will be placed with German institutional investors. The fund, with a ‘core’ risk profile, focuses on major European university towns and cities with a healthy housing market, principally in Germany and France, followed by the United Kingdom, the Netherlands and Scandinavia.
The targeted fund volume is between €200 million and €300 million. The expected annual yield for investors is around 4% (IRR of 5.5-6.5%) and the maximum leverage 40%.
Investment manager Bouwfonds REIM has experience in acquiring and managing student housing. The Bouwfonds European Residential Fund created in 2007 now comprises six student housing complexes, located in Germany and France, for example in Stuttgart, Marburg and Toulouse.
“If we compare the direct yields with those of more conventional residential real estate in our portfolio, these student residences are outperformers, despite their need for more intensive management,” comments fund manager Xavier Jongen.
Bouwfonds REIM was prompted by its own positive experience of investing in student housing to carry out an extensive study of the long-term profitability of the major European student housing markets.
This study, ‘Investing in European Student Housing’, focuses on the core countries Germany, France and the Netherlands, where Bouwfonds REIM is active, together with the United Kingdom. The study mentions the relatively attractive yield and points out other positive features of investment in student housing. It predicts long-term stable demand for student housing in Europe, bearing in mind the important relationship between education – resulting in higher productivity – and economic growth in a Europe grappling with the problems of an aging population. This demand will be driven in particular by growing numbers of foreign students from outside Europe.
“Europe can benefit from the growing tendency among Asian students, for example, to study abroad due to the wide range of fairly affordable courses, an increase in the number of programs taught in English, and the attractive cultural and historical cities of Europe,” says Jaap Gillis, CEO of Bouwfonds REIM.
Another plus point is the anti-cyclical nature of the student housing market: in times of economic weakness and poor job prospects, more people opt for higher education and tend to study longer. Another factor is the limited risk for investors. There is a wide gap between supply and demand in the most important university cities, certainly those with a buoyant housing market, which reduces the risk of vacancies in student housing, according to the report.
The study looks in depth at key characteristics of the student housing market in Germany, France, the UK and the Netherlands. It also analyses the sector’s assumed ‘existing’ professional investment market, roughly estimated at around €20 billion.