Student accommodation: a worthwhile investment

Aengus Investment Properties, a South African property fund that has carved a speciality in student accommodation, has set its sight on offshore opportunities and in emerging markets where demand for its service seems insatiable.

A Greenfield student accommodation project with 2 000 beds has recently kicked off outside Accra, the capital of Ghana and the company says it has plans to build more beds in that region soon.  It added that it will open its first student buildings in Brazil this year.

Aengus has has nearly 10 000 student beds in its portfolio and claims to have pioneered up-market student accommodation in South Africa.

“This is an untapped market, particularly in emerging economies,” Aengus Richard Rubin.

As education levels improve and millions more students attend universities in the BRICS countries, emerging market student accommodation as a sub-sector of commercial property is attracting the attention of forward-looking investors.

“Whether you’re in Rio de Janeiro or Accra, there is a severe shortage of safe, secure, affordable accommodation for students globally. It’s proving to be an excellent investment opportunity regardless of macroeconomic conditions affecting the property environment.”

The company notes that historically, accommodation for students has been provided by tertiary institutions themselves, but as operating budgets are slashed and property becomes increasingly expensive to acquire and maintain, many universities are outsourcing the provision and management of student accommodation to independent companies and in many instances partnering with them to do so.

In Europe, listed student property funds have been around for quite some time. Publicly quoted players such as Unite PLC and Opal are well known to equity investors; however a niched emerging market private fund, such as Aengus is new.

“The fundamentals of the market remain strong: insatiable demand, consistent revenue streams and above-average investment returns.”

“Universities simply couldn’t provide enough accommodation for the increasing numbers of students,” says Rubin.  “We started by converting one or two inner-city buildings in Johannesburg, South Africa from offices into residential accommodation suited for students and within weeks of opening, all our buildings were fully leased.”

“Key to our success has been understanding that students are not that different to any other type of residential tenant,” says Rubin.  “They’re looking for safe, well managed accommodation in a convenient location.”

“Education is a massive investment for families and sponsors, so students are looking for value for money when it comes to accommodation. But this doesn’t mean cheap and nasty – these are discerning customers.”

“Because we’re used to the complexities of the South African market where the political and economic landscape is constantly changing, we’re well positioned to expand into other emerging markets where there is massive demand for our kind of offering,” says Rubin.

“By the end of 2013 we should have 3 000 student beds outside of South Africa and it seems opportunities for growth are endless,” says Rubin.

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