Student accommodation heavyweight Scape Australia has become the largest player in the country after acquiring the $2 billion portfolio of dorms run by Urbanest.
Scape’s Australian PBSA fund and its capital partners have entered into binding conditional contracts to buy the 14 asset strong Urbanest portfolio which is due to settle next year.
The fund was set up in September in partnership with Allianz Real Estate, AXA Investment Managers, and APG Asset Management.
The deal will see Scape buy a series of purpose-built student accommodation towers from M3 Capital Partners’ Evergreen Real Estate.
The Urbanest portfolio comprises 6,805 beds across seven student dorms in Sydney, four in Melbourne, one in Brisbane and two in Adelaide.
The deal follows Scape's acquisition of the Goldman Sachs and Blue Sky's Atira joint venture for $700 million.
Scape chairman Craig Carracher, who previously ran James Packer's private equity investment business, said it is an exciting time for student accommodation in Australia.
“We are confident that the combination of our businesses and our people will offer the Australian education market the scale required to satisfy the growing demand from our students, universities and the broader education sector to support Australia’s leading position in the global education market,” Carracher said.
Savills UK managed the process to sell the Urbanest portfolio while Moelis Australia and Morgan Stanley advised Scape. CBA, Morgan Stanley and UOB acted as lead debt providers.
Scape will now become the country's largest purpose-built student accommodation provider with 2,500 student rooms open already and more than 8,000 rooms in development.
The assets were used to seed Scape's monster new student accommodation fund backed by Allianz Real Estate and AXA Group. Scape will target $1 billion for its first close and be worth as much as $2 billion.
Approximately 430,000 foreign students select Australia each year for international study, making it the third most sought-after destination globally, behind only the UK and the US.
The number of people applying for a higher education visa from outside Australia increased by 118 per cent between 2010-11 and 2016-17, with international students representing 32.4 per cent of the full-time undergraduate population.
Despite the rampant demand only 35,000 new PBSA beds have been completed in over the last five years at an annual growth rate of 7.8 per cent, according to the latest research from property consultants Urbis. In total, there are an estimated 105,000 PBSA bed spaces nationally.
According to the latest research from property consultants Urbis, developers and institutions pumped a record $1.46 billion into the sector this year alone, an increase of 231.82 per cent from last year.
However, the sector is still “playing catch-up” to support the growing mobility of both domestic and international students, with 30,000 PBSA beds in the construction pipeline—set to come online over the next four years.
The majority of those beds however remain in the planning phase with uncertainty regarding if and when they will proceed.
Melbourne which will receive 46 per cent of the current student accommodation pipeline will still have the biggest deficit in 2022, with 5.2 international students per bed.
Sydney, with another 3,600 beds to be delivered by 2022, will have 4.7 international students for every purpose-built student bed.