Cordea Savills has completed the purchase of a high quality block of studio flats in Birmingham for its Student Hall Fund. The property will be directly let to students and is being bought for €18,8 million(£13.5 million). The fund, which is targeting a return above 10% per annum, already owns four halls, including three in the south of England let on long leases with index-linked rental uplifts and another in Bradford directly let to students. The latest purchase means that the value of the fund's assets, including property commitments, is circa €139 million (£100 million).
The new acquisition is called Penworks Studios and comprises 150 studio flats over ground and four upper floors located adjacent to Aston University and the University of Central England. The gross rental income will be of the order of €1,3 million (£944,000) per annum, providing a net income yield of 5.25%. Cordea Savills expects the yield to rise rapidly, reflecting strong demand from students and summer rental potential. Although the property will not be completed until September 2007, the deal has been structured so that the investment is immediately income producing.
Alison Puhar, the Fund Director, commented: "Student halls are increasingly appearing on institutional investors' wish-lists as they appreciate the rental growth prospects and the relative security of income they offer. Although Birmingham has a substantial pipeline of private halls, 72% of the 46,000 full-time students in the city cannot be accommodated in private or university-owned purpose-built student housing. Rents in Penworks will initially range from €146,16 (£105) to €278,40 (£200) per room per week, reflecting substantially larger than average rooms which can accommodate double occupancy and the high quality of the scheme, which is a redevelopment behind an attractive period facade. This will be the best student accommodation available in Birmingham."
Source: Cordea Savills