Growthpoint Properties (JSE: GRT) has launched South Africa’s first unlisted purpose-built student accommodation real estate investment trust (REIT). The Growthpoint Student Accommodation REIT has a R2bn portfolio with 5 000 modern beds.
Locally and globally
Globally, the thriving purpose-built student accommodation sector is giving rise to the growth of specialist REITs and is attracting record capital inflows and consistently recording high occupancies and rental growth. As a result, the sector has been one of the outstanding outperformers internationally.
On the local front, the launch of Growthpoint Student Accommodation REIT has opened focused investor access into this defensive alternative asset class.
Strong market interest
The introduction of the purpose-built student accommodation REIT received strong market interest. Its first close exceeded expectations, attracting third-party capital commitments of some R1.1bn and around R1.5bn in total, including the capital commitments from Growthpoint as well as Feenstra Group, one of the largest seed portfolio vendors.
Feenstra’s R160m gives it an 11% holding. Growthpoint’s R240 million investment represents a 16% holding, and it will remain a cornerstone investor, targeting between 5% and 20% of the equity in this investment.
Growthpoint is the fund manager and assumes overall responsibility for the success of the student accommodation REIT, while Feenstra Group will be the property manager.
The Growthpoint Student Accommodation REIT’s R2bn portfolio comprises seven high-quality purpose-built student accommodation properties acquired from a group of vendors led by Feenstra Group. A two-year rental underpins, to mitigate against short-term impacts of Covid-19, was included in the deal. After conclusion of the acquisition, the Growthpoint Student Accommodation REIT launched in December 2021.
The Student REIT is unlisted, giving investors exposure to direct real estate that tends to be driven by long-term fundamentals rather than listed real estate volatility driven by short-term sentiment.
Growthpoint Investment Partners (previously its fund management business) seeks to identify investment opportunities in sectors that are underpinned by strong fundamentals and that have the potential to be built to scale. It aims to grow the new Growthpoint Student Accommodation REIT towards R12bn in assets and a stock exchange listing within seven years.
Head of Corporate Finance at Growthpoint, George Muchanya, explains, “The demand for specialised student accommodation in South Africa far outstrips supply, making it an attractive investment. This is a very positive step for all stakeholders and will contribute towards job creation, growth of SMMEs, and will contribute towards municipal revenues as new developments are rolled out.”
Demand for quality student accommodation
The massive demand for quality student accommodation in South Africa is driven, in part, by the demographics of a young population.
The unlisted REIT’s Gauteng-based portfolio is geographically split between Pretoria (71%) and Johannesburg (29%), with each property a short walk from the University of Pretoria or the University of Johannesburg campuses.
With significant growth expected to come from new development, the Growthpoint Student Accommodation REIT leverages off Growthpoint’s exceptional property development expertise. New developments will boost job opportunities, municipal revenues, and communities.
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