Global private equity firm The Carlyle Group announced the expansion of its real estate operations into the Benelux region. Through a joint venture with Benelux Property Group SARL, itself a joint venture between Opal Group, the UK's largest private owner of student accommodation, and the MacGregor family, Carlyle intends to build a portfolio of student housing in the region. Carlyle will invest through its third European real estate fund CEREP III, which has 2.2 billion of equity.
The joint venture, is targeting 5,000-7,000 student beds across a maximum of 20-25 properties in The Netherlands and Belgium over the next five years. Within the joint venture, Carlyle and Benelux Property Group will provide finance for the acquisition and development of the sites and be responsible for the planning, design and construction phases of the projects. The finished products will then be let, on long leases of 20-25 years, to City Living SA (in which Carlyle is also a minority stakeholder) who will operate the accommodation business and take responsibility for the welfare of the students. Carlyle and Benelux Property Group want to develop City Living into the leading student accommodation operator in Benelux. Agnès Riban, Associate Director of The Carlyle Group, based in Paris, will be responsible for overseeing Carlyle's investments in the region.
The joint venture's portfolio currently comprises two properties, the first of which is a newly refurbished 146 room student housing unit called Home Ruhl in Liege, Belgium, which is 100% let, since opening in September 2008. The supply of good quality student accommodation in Liege does not currently match the very high demand from the 30,000 Belgian and international students in the city.
The second property is a development project called Van Limburg Stirum Huis in The Hague (Den Haag), The Netherlands, which is currently a retirement home located close to the Den Haag Holland Spoor train station, as well as several universities and colleges. The current occupiers will vacate the property in 2012 when it will be refurbished, increasing the number of rooms from 170 to 250, with the building ready for occupation the start of the September 2013 academic year.
Carlyle, with its joint venture partners, intends to make City Living, the leading student accommodation brand in the Benelux region. Students will be offered secure accommodation which comprises fully furnished rooms with en-suite facilities, a flat screen TV and free wi-fi. The kitchens will be equipped with modern appliances such as dishwashers, microwaves and ovens, as well as fridge and freezer space for everyone. All students have access to both large common rooms and quiet study areas. Laundry facilities will be provided in every building with some properties having their own private bar and café area as well as fully fitted out gyms.
Student accommodation has emerged as a very stable and resilient asset class, underpinned by increasing numbers of students attending universities and an ongoing lack of supply. This is constrained by the fact that universities tend not to be new producers of student accommodation and the relatively high barriers to entry for private sector participants. The business model has been proven in the UK, where the City Living management team has built over 60,000 student accommodation beds over the last 25 years and currently has 20,000 beds fully let and under management through Opal.
Commenting on the joint venture, Robert Hodges, Managing Director European Real Estate, said: "We see the market for student accommodation as a great opportunity that meets all the criteria we look at for in an investment such as barriers to entry, lots sizes, returns, resilience to economic downturn and a strong supply and demand imbalance. It also plays to our core property and development skills, which we believe are fundamental to successful investment. The business model has been proven in the UK and we are seeing an attractive pipeline of suitable investments as a first mover in the
