Cordea Savills, the international property fund manager, has completed the sale of two assets on behalf of its Student Hall Fund and the purchase of a new prime project in Edinburgh. The transactions are in line with the Fund's stated strategy of investing in a UK capital city.
The purchase comprises the buildings and site of a redundant brewery in Sugar House Close, Edinburgh for an initial payment of £8.25 million (approx. 9.3 million). The site will be redeveloped in conjunction with Watkin Jones at an anticipated construction cost of £13.5 million to create a mixed-use development comprising fully managed student accommodation.
The property benefits from a flexible planning consent that allows it to be used as an aparthotel during the Edinburgh Festival and outside of term time. It is anticipated that the asset will deliver a net yield of 6.5% from August 2012.
The transaction has also been structured to ensure the Fund will still receive strong income throughout the construction phase. The sales comprise Studios 51, Bagot Street, Birmingham for £11.5 million and Neuadd Willis 1&2, High Street, Bangor for £16.25 million.
The assets, which are modern, income-producing, purpose-built student halls with strong operational track records, were sold to Knightsbridge Student Housing Ltd, a new student accommodation investment company backed by Oaktree Capital Management.
Patrick Carr, Fund Director of the Cordea Savills Student Hall Fund, commented: "The sale of the two halls has provided us with a strategic opportunity to rebalance our portfolio towards Russell Group universities (the top 20 research-focused universities) and capital cities, which we believe offer very strong rental growth prospects.
"Edinburgh is a prime university location and this acquisition not only improves our weightings but also provides the opportunity to increase the diversity of the portfolio by offering studios as well as traditional en-suite cluster flats. The project will be highly accretive to the Fund's performance."
Bob Crompton, Chief Executive of Knightsbridge Student Housing, commented: "The purchase of these two assets provided us the rare opportunity to acquire existing high quality modern student accommodation blocks in strong regional cities which advance our strategic objectives.
"Collectively, they have added 533 operational bedspaces to our portfolio, with Studios 51 in Birmingham, which is a direct let asset, providing us the platform to launch our new student management business, The Student Housing Company. Meanwhile, Bangor has a lease to Fresh Management Limited, which gives us an attractive index linked income."
Simon Scott, Investment Director at the Watkin Jones Group added: "We are delighted to be working on another landmark development project with Cordea Savills, with whom we have developed a strong and successful working relationship."
Lawson and Partners acted as agent for Cordea Savills on both of the disposals, whilst Pinsent Masons LLP acted as legal adviser for Cordea Savills on both the sales and acquisition. Watkin Jones will be the Fund's development partner. Practical completion is scheduled for August 2012.
The Student Hall Fund, which has an annualized target return of 10% over the life of the fund, was launched in 2006 and seeks to achieve a balance of secure income streams provided by halls let on long leases or nomination agreements, complemented by halls let directly to students and forward commitment/funding opportunities offering the prospect of enhanced returns and capital growth. The Fund is a closed-ended Jersey property unit trust.
Source: Citigate Dewe Rogerson
