There are a number of ways to gain exposure to the student property market; one can buy-to-let (or even build-to-let), buy shares in a developer or a student accommodation property fund or invest in an emerging web-based student accommodation service. However there is a new addition to this plethora of options: invest in a student accommodation Real Estate Investment Trust (REIT).
REITs have in fact been around for many years, becoming more popular over the last decade or so as UK property prices continued to climb. A REIT is a security that trades like an equity and invests in real estate directly. The structure benefits from special tax considerations and typically offers investors higher yields generated from rental income and tax efficiencies. There are now 30 REITs listed on the London Stock Exchange, with an increasing number of those focusing on student property.
As many users of StuRents are aware, student property has been a fantastic asset class in the past that now attracts huge quantities of institutional money, resulting in an increasing supply of purpose-built student halls. These halls developments, which are often supported by local authorities, are seeking to cater to the growing demand from students (particularly internationals) demanding high quality and convenient accommodation. Following in the footsteps of the likes of Singapore's Sovereign Wealth Fund (GIC), it is this sector of the student market that REITs have their cross-hairs on.
'Empiric Student Property', which is the newest entrant to the student accommodation REIT space, owns approximately £40m of student accommodation assets with the ambition of expanding by £82m through the purchase of assets in Bristol, Exeter, Cardiff and Birmingham; this will result in a combined portfolio of over 1,100 beds. The REIT is targeting an impressive 13% return, which comprises a 6% dividend generated from rental income and 7% growth in assets.
StuRents expects demand for such student property funds will increase as student accommodation matures as an asset class in its own right.
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