Singapore’s sovereign wealth fund and a big US property developer have agreed to buy a £3bn-plus portfolio of student housing, signalling confidence in the UK property market despite soaring inflation and rising interest rates.
Final bids for Student Roost, owned by Canadian fund Brookfield, were submitted on Friday, and GIC and Greystar emerged as the successful bidders overnight on Sunday with an offer of more than £3.3bn, according to people with knowledge of the process.
The pair have beaten a trio of competitors including US private equity giant Blackstone, UK company Unite Students and specialist student housing investor GSA, according to two people with knowledge of the deal.
The transaction is among the largest UK real estate deals struck since the pandemic began more than two years ago, and according to one real estate banker it sends “a good message” to owners of residential properties that investors are still willing to transact despite a gloomier economic outlook in the UK.
Rental housing and student properties have remained a target for investors despite the cost of living squeeze and rising borrowing costs, in part because rents are revalued frequently and can be adjusted to match inflation.
But there are also indications that economic headwinds could slow dealmaking as the year progresses. Bids for Student Roost had originally been expected to hit £3.5bn, but some of the participants in the auction were deterred by rising borrowing costs.
“We weren’t comfortable above £3bn because borrowing costs have more than doubled,” said one rival bidder for the portfolio.
GIC and Greystar remained committed to a deal that will substantially increase their presence in the UK student housing market. Student Roost manages more than 20,000 beds across the UK.
Greystar already operates high-end student housing brand Chapter, which is focused on London, and GIC has made a string of investments in UK student accommodation over the past decade, including a number of purchases made alongside Unite.
Blackstone and Unite are already big players in the sector, with the former having acquired the iQ Student Accommodation platform from Goldman Sachs and the Wellcome Trust for almost £5bn in 2020, and the latter owning and managing rooms for about 75,000 students.
Brookfield, which was advised by Eastdil Secured and Morgan Stanley on the deal, put Student Roost on the market earlier this year as coronavirus restrictions were eased and occupancy of student halls returned towards pre-pandemic levels.
Brookfield and Greystar declined to comment. GIC did not immediately respond to a request for comment.