Private property development company Eris Property Group has raised R500m for its social impact student accommodation fund from a consortium of local and international investors.
They include the country's second-largest pension fund, Eskom Pension and Provident Fund, and Momentum Metropolitan Life.
Eris will develop student accommodation from scratch so that all required standards are met. The company said in a statement that it had been “leveraging on its existing skills within property developments and management to alleviate ... student accommodation shortages in SA”.
There is a shortage of 250,000 to 600,000 beds in SA, according to Alexandria Procter, founder of DigsConnect, an online platform on which landlords list student rooms. With more than 60,000 rooms listed, it is SA’s largest student housing marketplace.
Eris has developed a sub-brand, Rise Student Living. It is a property management service whose technology allows the entire leasing process to happen digitally, Eris said.
Rise will manage the fund’s first investment, Units on Park, Hatfield, a 988-bed student accommodation property developed and managed by Eris. Units on Park is co-owned by listed construction company WBHO and was completed on November 1, ready for the first intake of students in January 2021.
This transaction marks the first of a R5bn pipeline of assets now under consideration for development and inclusion in the fund.
The fund is considering various projects with the objective of aggregating a quality portfolio of prime assets in select cities across SA, it said.
Vuyani Bekwa, Eris’s executive head of investments and fund management, said the fund will invest in properties that house a minimum of 70% of beds at National Student Financial Aid Scheme (Nsfas) rates or below.
“Our intention is to seek further capital in the next 12 months as we have a number of exciting opportunities for the fund,” Bekwa said.
“The minimum investment amount is R50m, and the fund is hoping to attract the attention of fund managers and pension funds or those investors with long-term investment horizons,” he said. “The fund is structured so that fees are only applicable to drawn capital, rather than all capital committed, ensuring that investors receive value for any fees charged by the manager.”
He said Eris is targeting a 14% internal rate of return after tax.
“We believe our investment proposition is very attractive over the long term. The intention is to add to the number of beds available and not to acquire existing projects. However, that will be dependent on the ability to deploy the funds, which we have been working on for the past three years,” he said.
Bekwa said it is considering projects that could support students at the University of the Witwatersrand, Cape Town University of Technology and Vaal University of Technology.
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