In June Deutsche Real Estate Funds (DREF) issued the first bond to finance student housing in Germany. Now it has acquired a further student residence in Kiel with a market value of €20 mln. It is a development property consisting of 208 units that the company purchased from a Hamburg property developer and that supplements DREF’s existing portfolio in student housing.
DREF, whose shareholders include Internos Global Investors and Somerston Group, already purchased five existing properties with the issue proceeds of the bond placed in June. The €44 mln bond has a coupon of 4.675%/year and an investment grade rating. These acquired properties are currently being refurbished, so that a large part of the students is expected to move in during the winter semester 2015/16.
While student housing is an established property asset class in the US and in UK, the market is now also gaining pace in Germany. At €232 mln, the investment volume in 2014 was the highest recorded to date, up by around 40%year-on-year. The substantial supply gap for student accommodation – 314,000 units versus 2.7 million students –, an enormous modernization backlog and rising student numbers make Germany a market with great potential for private investors.
The student residence in Kiel is a property that is nearing completion. It is located in the immediate vicinity of the campus of the university of applied science, where the number of students has almost doubled in the past 25 years. Since the last winter semester, more than 25,000 students have enrolled in Kiel – an all-time high. However, the accommodation quota in student residences, at less than 10%, is below the nationwide average. Accordingly, the level of demand for affordable student accommodation is high.
Source: Deutsche Real Estate Funds