The Coral Student Portfolio ('Coral'), a fund that invests in student accommodation funds and joint ventures set up with student accommodation operators, has recently participated in one of the UK's biggest real estate transactions of 2012. Launched in 2009 and advised by CBRE, Coral made a cornerstone investment, structured as a combination of debt and equity, into Round Hill's acquisition of the Nido Student Accommodation portfolio.
The Nido portfolio comprises 2,526 beds across three prime London schemes situated in Kings Cross, Spitalfields and Notting Hill. The deal further increases Coral's exposure to London, which is a primary target for the fund as part of its strategic objective to increase exposure to core university cities with attractive supply and demand fundamentals.
At the same time, Coral has exceeded £100 million net asset value (NAV) demonstrating the attractiveness of student accommodation as an asset class to global investors. The fund currently has seven investments providing exposure to 85 properties and over 28,000 beds. The NAV has passed the £100 million milestone through a combination of strong portfolio performance of over 30% since its launch, and increasing commitments from investors at a time when capital raising for real estate funds has been challenging.
Research from CBRE forecasts transaction volumes for the UK student accommodation market to reach £1.5 billion in 2012, 30% more than the £1.16 billion invested in 2011. CBRE also anticipates that demand for university places will continue to exceed the number available, despite the number of applications for the 2012/2013 academic year falling slightly compared with 2011/2012. As at March 2012, applications were already 80,000 ahead of the number of acceptances in 2011.
John Kennedy, Co-fund Manager of the Coral Student Portfolio, said:
"As an asset class, student accommodation appeals to a wide range of investors who can relate immediately to the supply and demand story through their own personal experience. Investors are attracted to Coral's unique offering providing exposure to a mix of leading student housing providers and the compelling supply and demand imbalance in the UK. Whilst the fund was originally established to anticipate the demand of retail investors, we are seeing increasing interest from institutions attracted by the strong rental growth that characterizes the market and the opportunity to diversify their portfolios."
Tony Martin, Executive Director, Real Estate Finance, CBRE, said:
"The success of the Coral portfolio is driven by multiple factors, including the comparative resilience of student accommodation assets to the economic downturn. The shifting composition of the student population will continue to generate investor interest as international students play an increasingly important role in UK higher education with numbers expected to rise by an average of 3% to 6% during 2012. This dynamic serves to increase the appeal of well-located schemes in specific cities. Consequently, we are positioning the portfolio accordingly with London as a primary target."
Source: FTI Consulting