APG and Ivanhoé Cambridge target Australia’s student housing sector
The student housing sector in Australia is seeing a strong recovery this year, following the country's full reopening of its borders in February. The number of international students applying for visas hit a record high in June.
“International education continues to be Australia’s largest services export and Australia’s fourth-largest overall export after iron ore, coal and liquified natural gas,” Brian Hung, director of real estate for Asia-Pacific at APG Asset Management, told AsianInvestor.
Read also: APG doubles allocation to Australian real estate debt
With international education playing a key role in the Australian economy and continuing to receive strong federal government support — the purpose-built student accommodation (PBSA) sector has become a critical part of the equation in supporting the continued growth of Australia’s international education sector, Hung said.
APG Asset Management
“Australia’s high-quality living standards and high-quality education institutions are major drawcards and drivers of the PBSA sector,” he said. “Furthermore, we're noticing increasing domestic student demand for high-quality PBSA. This complements strong international student demand for PBSA and also acts as a diversifier.”
Through its eight-year partnership with student accommodation provider Scape Australia, the $646 billion Dutch pension fund manager is able to target PBSA investments in Australia’s gateway cities, which offer attractive lifestyles and world-class educational institutions.
“Scape is Australia’s largest owner-operator residential-for-rent platform, and therefore APG benefits from Scape’s scaled, vertically-integrated platform, which encompasses all facets of the investment life cycle, from asset origination to operations to ESG focus, allowing us to work together to deliver superior returns to investors,” Hung said.
“We expect PBSA demand to continue to rise in both the short and long term as we have already seen student visa applications at record highs, which currently exceed pre-Covid-19 levels. Moreover, Scape has seen a significant increase in bookings and occupancy since borders re-opened to international students in December 2021,” he said.
UNDERSUPPLIED
Ivanhoé Cambridge, the real estate subsidiary of $290 billion Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), announced a commitment of $668 million to the Scape Core Program fund on November 1.
The venture holds the largest student housing portfolio in Australia, with 27 buildings and more than 13,000 beds, predominantly located in Sydney and Melbourne.
Read also: Ivanhoé Cambridge wants to double its allocation to APAC real estate
The investment now represents nearly half of the CDPQ subsidiary’s total C$2 billion ($1.5 billion) allocation to Australia’s real estate market, according to George Agethen, executive vice president and co-head of Asia-Pacific at Ivanhoé Cambridge.
Ivanhoé Cambridge
“Since the Australian government reopened its borders earlier this year, the PBSA sector is once again on a tear, and the students are well and truly back. Student housing is a massive sector and is still quite undersupplied in Australia,” Agethen told AsianInvestor.
Ivanhoé Cambridge, which manages a $52 billion real estate portfolio for CDPQ, sees student housing as a favourable sector for investment in the current inflationary environment, Agethen said.
“We like the sector for many reasons. With inelastic demand, we see investments in Australia’s PBSA as being very resilient to market conditions,” he said.
Australia is one of the top destinations for international students, being home to students from more than 100 countries, and “has been for a very long time now,” Agethen said.
“We also currently have a residential shortfall in Australia, so we feel that it's a great time to pursue investments in the student housing industry.”
Ivanhoé Cambridge recently opened an office in Sydney as a base to continue to target real estate investments in the country as part of its Asia-Pacific expansion.
With the new office, the company is seeking to consolidate ties to its partners in Australia, where it has made several major investments in recent years in the logistics, residential, life sciences and mixed use sectors.
“Australia has done really well for us over the last few years, and remains a major market that we'd like to keep investing in,” Agethen said.