SA’s first unlisted fund, Growthpoint Student Accommodation Reit, which hopes to grow from R2bn in 2021 to R12bn, has invested about R1.2bn in property development projects for the next three academic years.
The Reit is targeting a listing in seven years to create liquidity and attract more capital from institutional investors, investment holding companies and family offices.
Growthpoint Investment Partners, the co-investment business of JSE-listed real estate investment trust Growthpoint Properties, launched Growthpoint Student Accommodation Reit in December 2021.
Its portfolio of 7,200 beds will get a boost with two new developments adding 1,610 beds scheduled for completion in time for the 2024 academic year, as demand for quality student accommodation outstrips supply.
These include Fountains View in Pretoria targeting Tshwane University of Technology students, and Horizon Heights in Johannesburg positioned for University of Johannesburg students.
“We see lots of opportunities and pent-up demand in the student accommodation sector — with room to grow into other provincial capitals,” said George Muchanya, head of Growthpoint Investment Partners.
He said there is appetite from investors with the fund achieving 9.5%-10% total returns, while targeting 13%-16% in the long term.
Muchanya said the universities of Pretoria, Cape Town and Stellenbosch have attracted lots of capital into student accommodation compared to other universities around the country.
He said private entrepreneurs and investors with deep pockets who chose the three localities previously drove the sector, which is still largely informal.
Muchanya said the fund recently purchased a property in Parktown, Johannesburg, for R35m and will spend R170m converting it into 500 beds ready for the 2025 academic year. It is targeting Wits Medical School students.
In Cape Town, the fund prefers to develop its own products, as asset prices are high, while assets in Johannesburg are correctly priced but localities are not ideal for student accommodation.
He said the fund is expanding its footprint to accommodate students in provincial localities including the University of KwaZulu-Natal, the Free State and North West.
For example, he said since the 1990s, the University of KwaZulu-Natal has built 200 beds, adding that shortages are countrywide and this will drive their growth strategy.
A report by World Bank investment arm the International Finance Corporation says enrolments in SA’s higher learning institutions is set to grow to almost 1.6-million by 2025, and this will create a demand gap of 781,000 beds.
Growthpoint’s Thrive Student Living accommodation provides amenities such as study areas and games rooms, backup power and water, as well as its Student Life programme which offers 24/7 support to students for academic performance, physical health and mental wellness. The portfolio is 94% occupied for the 2023 academic year.
“Supportive environments boost academic success and graduation rates — investing in student accommodations leads to more graduates, positively affecting the economy and society,” said fund manager Amogelang Mocumi.
Mocumi said the long-term socioeconomic effects, and Growthpoint’s new developments, will boost job opportunities, municipal infrastructure development and attract impact investors.
With Andries Mahlangu
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