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Student

Accommodation: Ideas from UK and Europe

REHDA Institute Conference

24 September 2018

Caroline Dellasega │EMEA Capital Markets

September 2018 | Cushman & Wakefield

Cushman & Wakefield

Student Accommodation Capabilities

2

Investment Advisory

• Experience as principal

investors.

• Pan-European investment

and advisory team

• Operational knowledge

Valuation & Advisory

• Dedicated student

accommodation valuation

teams

• Valued in excess of £3.0bn

of student housing

Research & Analysis

• Student Accommodation

Tracker – over 602,000

PBSA bed spaces

• Strong relationships across

all participants in the PBSA

market


New Mainstream

Why PBSA

UK and Europe Markets

Customer Needs

Malaysia Context

3

Purpose Built Student Accommodation

Ideas from the UK and Europe

UK Investment

Market


UK Investment Overview

PBSA now a mainstream asset class

5

UK PBSA market worth in excess of £40bn

Between 2009 and 2016, the student housing market in the UK

outperformed the more traditional asset classes

PBSA has become an established asset class in its own right

Much of the investment activity has been dominated by international

investor funds and owner operators acquiring portfolios, continuing the

trend of consolidation and the desire to acquire additional scale


£0

£1,000,000,000

£2,000,000,000

£3,000,000,000

£4,000,000,000

£5,000,000,000

£6,000,000,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ST

UD

EN

T A

CC

OM

MO

DA

TIO

N T

RA

NS

AC

TIO

N

VO

LU

ME

Upwards trend

UK Investment Transaction Volumes


Ca. £1.4bn traded so far

Mayflower portfolio has shown demand and sentiment for secondary assets in the market

A number of portfolios under offer, namely Project Colorado (Watkin Jones) and

Project Stellar (Fusion),

Brunswick House and Nido West Hampstead are under offer at a premium to current

prime yields – yields therefore expected to shift inwards

UK Investment Market

Update


Categories Locations Indicative yield profile

Prime London Zone 1-2 4 - 4.25%

Outer London Zones 3-6 4.5 - 5%

Super Prime Regional Oxford, Cambridge, Bath, Brighton, Bristol 5 - 5.25%

Prime RegionalGlasgow, Edinburgh, Manchester, Leeds, Birmingham,

Guildford, Egham, Exeter, Bournemouth5.50% - 5.75%

Secondary Regional

Southampton, Portsmouth, Nottingham, Coventry, Swansea,

Cardiff, Durham, York, Newcastle, Liverpool, Leicester,

Chester, Sheffield

5.75 - 6%

Tertiary Regional All other markets (such as Huddersfield, Plymouth etc) 6.5%+

*All yields are indicative, and based on prime schemes in each given market.

Q22018

UK Yield Profile Range

European

Investment Market


European Investment Transaction Volumes

Opaque data

10

• Limited transparency

• No widely used definition of PBSA to record transaction volumes

13.6bn EUR2017

Source: Real Capital Analytics

29%Increase on 2016


Q2 2018 Update

*All yields are indicative, and based on prime schemes in each given market.

Netherlands

0.7m

75k

5.00%

UK

1.7m

397k

4.00%

France

2.5m

310k

4.75%

Germany

2.8m

350k

3.75%

Poland

1.4m

60k

6.5%

Portugal

0.4m

40k

5.75%

Spain

1.5m

90k

5.25%

Italy

1.7m

75k

5.75%

Country

Total Students

Int. Students

Prime Yield


Key European Transactions

Acquiring scale

12

.

SELECTED PORTFOLIO TRANSACTIONS 2017

Country Portfolio Seller Purchaser Size

Spain RIO Oaktree GSA Est. €180m

Germany NeonWood LJ Capital GIC/GSA €250m

Spain RESA Azora AXA Est. €400m

Ireland River Oaktree Hines €100m


European JVs

Investors/Developers and Operators

13

.

c.2,500 operating beds;

c.4,000 pipeline

c.1,700 operating beds

c.2,500 beds under

management or development

c.800 operational beds;

c.1,500 pipeline beds

c.3,000 beds under


c.600 secure development beds

c.560 operating beds;

c.2,000 pipeline beds

c.1,000 operating beds

c.5,000 secured beds

c.1,000 secured beds

c.2,200 beds under


c.9.000 operational beds

c.1,000 beds under


c.300 operational beds

c.1,300 beds under

development

c.1,100 operating beds;

3,000 pipeline beds

c.3,000 beds under operation

or development

c.2,300 operating

beds; c3,300 pipeline

beds

c.500 operating beds;

1,000 beds under

development

c.600 secured development

beds

So Why Has PBSA

Gained Such Traction?


Demand

Global and Growing

15

8.0 millionForecasted no. of

students

studying abroad by 2025

4.6 millionStudents studying abroad

in 2015

Source: OECD

130%

Increase since

1999


Demand - International

University rankings – where are the top universities in the world?

16

18

5

4

1

1

Source: QS, Project Atlas 2017, UNESCO 2017



Mobility – Change and key countries

17

0.60.8 0.9

1.2 1.3

1.9

3

4.2

4.6

0

1

2

3

4

5

6

1970 1980 1990 2000 2010 2020

Higher Education Students Enrolled Outside their Home Country (millions)

758

300

166

76 71 61 61 45 42 37 35 33 33 29 28 27 27 27 26 25

0

100

200

300

400

500

600

700

800

Origin of Students studying in Top Ten Higher Education Countries (000’s) (2016/17)

Source: OECD



Middle class population driving tertiary education demand

18

0%

10%

20%

30%

40%

50%

60%

70%

NorthAmerica

Europe Centraland SouthAmerica

AsiaPacific

SubSaharan

Africa

MiddleEast

Projected Share of Middle Class by Region

2009 Share 2020 Share 2030 Share0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

1990 1993 1996 1999 2002 2005 2008 2011 2014

China - Households with Disposable Income (000’s)

0

10,000

20,000

30,000

40,000

50,000

60,000

1990 1993 1996 1999 2002 2005 2008 2011 2014 2015

India – Households with Disposable Income (000’s)

Source: WorldBank and World Economic forum


Investors are attracted by…

Key drivers

19

Growth▪ Rental growth

▪ Capital growth

▪ Development potential

Supply▪ Constrained supply

▪ Changing needs of GenZ

▪ Relationship with Universities

Demand▪ International student

mobility

▪ Growing student population

▪ Flight to quality

Investment▪ Liquid asset class

▪ Anticyclical qualities

▪ Diversity

UK Student

Accommodation

Market Overview


-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

Source: HESA 2007/08 to 2016/17

3%

7%

21

UK DemandStudent numbers continuing to rise


0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

UK outside region EU Non-EU

11/12 16/17Source: HESA 2011/12 to 2016/17

Still a growing demand pool for accommodation

8%

9%

7%

Full-Time Student Number Growth

22

UK Demand


International students disproportionate demand for PBSA

FULL-TIME STUDENT NUMBER GROWTH

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Full Time 2018/19 PBSA 2018/19

Share of International Students in the UK

Domestic International

Source: Cushman & Wakefield Research

23

UK Demand


Bed spaces and rise in studio flats

24

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2014 2015 2016 2017

Growth in Studio Bed Spaces (2014-2017)

0%

10%

20%

30%

40%

50%

60%

Standard En-Suite Studios

Bed Spaces by Room Type (2016/17)

Total Bed Spaces

632,000

UK


UK Supply


UK PBSA Ownership

Turning towards private development

25

30%

35%

40%

45%

50%

55%

60%

Private University

UK PBSA Ownership 2018/19


22,947 Units PBSA

Delivered in 2018/19

11,135 Units PBSA

Delivered by 2020/21

84%

16%

Private Sector University

Development pipeline


UK Market

Rental growth and yield premiums

26

1.92%

3.56%

2.65%

3.12%

0.85%

3.58%3.40%

3.18%

2.81%2.54%

4.92%

1.54%

2.46%

Rental Growth in UK Regions (2017/18)

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

UK Student Accommodation Yields

PBSA London Prime PBSA Regional Prime

London City Offices London West End Offices


The European

Markets


• Global demand for education increasing

• Increasingly mobile and tech savvy generations

• Fundamental undersupply of student beds

• Annual rental growth inline with or exceeding inflation

• Opportunity to capitalise on 1st mover advantage & secure strong locations

Increasing activity across the continent

The European landscape

28


Increasingly competitive educational landscape with growing student mobility

What are the student drivers

29


New immature markets need to be developed out

Development Forward funding Forward purchase Stabilised product

UK

FRANCE

SPAIN

PORTUGAL

GERMANY

NETHERLANDS

ITALY

30

European student accommodation

The Customer

Base


Three customers

A unique asset class

32

Student Parent University


Generation Z

Thinking ahead

33

96%Own a Smartphone

60%Will Not Use a Slow

Website

74%Average Time Spent

Online

66%Purchase Via Social

Media Directly

$44bnContribution to US

Economy

0% 10% 20% 30% 40% 50% 60% 70% 80%

Listening to Music

Texting

Playing Games

Watching Videos

Using Text Based Apps

Percentage of Gen Z Who Participate Daily

33%Population in 2020

26% Population in 2015

Source: Commscope


Change in student needs

Must haves

34

High Speed

Wi-Fi

Games Room Gym and Pool

Facilities

High Spec

Rooms

On-Site Social

Spaces

70%65%

60%55% 53%

48% 46% 42%35%

30% 27% 25% 25% 23% 23% 21%15% 15%

Influencing Factors in Student Accommodation Choices


How has student accommodation changed?

Sleek design aesthetic and communal facilities

35


University drivers

Relationships are key

36

University agreements

• Reservations/ soft nomination

• Hard nomination

• Income strip

• Straight lease

University experience

Reducing costs

Sharing generation

Stable revenues

Mental well being

Summer lets

Investment

Opportunities

September 2018 | Cushman & Wakefield 38

Investment opportunities

What are the best opportunities in the UK market?

Secondary markets

Older first generation

stock

Studio conversions

Flexible living

models

September 2018 | Cushman & Wakefield 39

Investment opportunities

What are the best opportunities in the European market?

Development JV

Grow in new

markets

Create new offer

Debt solutions


Key themes

Operator Selection

• Each market (and region) is different. Local knowledge is key

• Service level provision needs to reflect the differences

• Immature markets also create opportunity by providing the potential to enhance

service levels and boost rental growth

• Knowledge of local regulations, planning and operating permits is also critical

Building Design

• Design varies by market, but studios much more prevalent across European markets

• En-suite rooms are relatively untested

• Communal spaces traditionally have also been under-developed compared to the UK

market

…and

LOCAL EXPERTISE

40

What to consider when investing in European PBSA

Malaysian

context


Where do students come from?

Net importer of international students

42

Top 10 Sending Countries to Malaysia

Country Number of Students

Bangladesh 34,155

Nigeria 14,705

China 10,899

Indonesia 8,039

Yemen 5,599

Pakistan 5,110

Iran, Islamic Rep. 3,455

Libya 3,047

Iraq 2,749

India 2,204

Key indicators

Total number of students abroad 64,655

Students hosted 124,133

Inbound mobility rate 9.3


Centre of transnational education

Open and improving visibility

43


The policy background

Targets to improve quality and internationalisation

44

Country 2018 Rank 2012 Rank Change

Malaysia 26 35 9

China 30 38 8

South Africa 37 45 8

United Kingdom 3 10 7

Switzerland 2 5 3

Turkey 41 44 3

Netherlands 6 8 2

Singapore 9 11 2

Germany 15 17 2

Chile 34 36 2

Malaysia Education

Blueprint - 2025 Targets

• Improving tertiary enrolment

rates to 53% (36%)

• 1 in Asia’s Top 25, 2 in Global

Top 100, 4 in Global Top 200

• Increasing international

students to 250,000 (134,000)

• Universitas 21 Top 25 (26)

Caroline Dellasega

Capital Markets

Head of EMEA Desk

Asia Pacific

T: +65 83 813 913

E: [email protected]

George Dyer

Partner

Student Accommodation Investment Advisory

T: +44 (0) 20 7152 5954


Paddy Allen

Partner


T: +44 (0) 20 7152 5334


Andrew Smith

Partner


T: +44 (0) 20 7152 5969


Luke Kemp

Partner

Student Accommodation


T: +44 (0) 20 7152 5995


Jagruti Joshi

Partner



T: +44 (0) 20 7152 5769


Oliver Close

Partner



T: +44 (0) 20 7152 5156


David Feeney

Partner


Research & Analysis

T: +44 (0) 161 235 7658


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