Growthpoint, SA’s largest listed property group, is tapping into the thriving purpose-built student accommodation sector in SA, with an initial portfolio valued at R2bn.
A lack of suitable facilities is giving rise to the formation of specialist real estate investment trusts (Reits), both globally and locally. In SA demand far outstrips supply, thus making the sector an attractive investment.
To this end, Growthpoint’s Student Reit has been launched to meet the growing demand.
Due to the high occupancies and rental growth levels of these assets, they attract record capital inflows from investors looking for alternatives to traditional property investments.
In SA, the government and universities have shifted the provision of student accommodation from universities to partnerships with the private sector to address supply issues, said George Muchanya, head of corporate finance at Growthpoint.
“Education accounts for a significant share of public and family budgets, and the government’s commitment to tertiary education supports purpose-built student accommodation,” he said.
The Student Reit gives investors exposure to direct real estate driven by long-term fundamentals rather than traditional listed real estate, with high volatility driven by short-term sentiment. The company said it will consider a separate JSElisting within seven years, once the student fund’s assets have reached a value of about R12bn.
In line with its investment strategy, Growthpoint has invested R250m into the initial fund.
Property developer Feenstra has invested R160m in the student Reit with a three-year “lock-in” commitment. The company has over 20 years of experience developing purpose-built student accommodation in SA.
The balance of the fund is made up of third-party investors.
The portfolio comprises seven purpose-built student accommodation properties acquired from a group of vendors led by Feenstra. The deal includes a two-year rental underpin to mitigate against the short-term effects of Covid-19.
Growthpoint will manage the fund, and using its quality-control measures, will ensure regular investment income from the Student Reit’s six-monthly dividend payment policy. Feenstra will be manage the properties.
Growthpoint Student Reit provides an opportunity to invest for positive social and economic impact, said Muchanya, adding that education is a major social need in SA.
He said about 60% of students accommodated in the new buildings are from low-income households and supported by the National Student Financial Aid Scheme (NSFAS), thus providing them with a conducive learning and living environment.
Muchanya said the student Reit’s NSFAS-approved Gauteng-based portfolio is located close to the University of Pretoria and University of Johannesburg campuses respectively.
He said the fund has several acquisition and development opportunities in the pipeline for the 2023 academic year.
Strong portfolio
Growthpoint owns a diversified property portfolio across Africa, Australia, the UK and Eastern Europe, which includes a 50% stake in the V&A Waterfront in Cape Town.
The Student Reit is the third specialist, unlisted alternative real estate investment opportunity to be launched under Growthpoint’s funds management business. In 2018, the company introduced Lango (formerly Growthpoint Investec African Properties), which has since grown to a value of $650m.
Later in 2018 Growthpoint Healthcare Property launched SA’s first Reit focused exclusively on healthcare property investment, which now holds assets worth R3.2bn.
Growthpoint CEO Norbert Sasse said its funds management business is an opportunity to further diversify company assets and harnesses new opportunities to create sustainable value.
“Funds management provides Growthpoint and our co-investors with access to alternative opportunities in the unlisted and co-invested environment. We are pleased that our funds management platform has gained even stronger momentum with the launch of the Growthpoint Student Reit and continues to attract third-party capital successfully,” said Sasse.
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