Scape Plans $1bn UNSW Gateway Precinct

Student accommodation developer Scape Australia has acquired a portfolio of gateway sites at the University of New South Wales, with plans for a $1 billion accommodation precinct.

The three Kensington sites, totalling close to 6,000sq m, are located at the corner of Todman Avenue and Anzac Parade at the new light rail station. Scape has flagged plans to integrate future student accommodation with retail space, a multi-purpose exhibition centre and amphitheatre and public amenity.

The sites were identified as part of Randwick council’s $300 million Kensington to Kingsford draft planning strategy.

The rezoning strategy proposed new building heights for up to 18-storeys and expanded floor-space ratio controls along the light rail corridor. Current planning limits restrict building heights to seven storeys. The planning strategy was endorsed for public exhibition in May.

To date, Scape Australia has secured $1.1 billion in equity from Allianz, Dutch pension funds APG and Bouwinvest, German fund WPI, Chinese bank ICBCI and a middle eastern sovereign wealth fund. Scape’s principals have invested from 12 per cent to 50 per cent in various projects, executive chair Craig Carracher said.

Carracher said that developer plans to “release the pressure value” on an undersupplied Australian student accommodation rental market.

“UNSW has the lowest availability of off-campus PBSA rooms in Australia.

“The demand for student accommodation has been exacerbated by growth exceeding 15 per cent in 2018 in the number of international students commencing at UNSW.”

Earlier this year, Scape Australia won financial backing from US funds giant Starwood to develop a student accommodation skyscraper on Franklin Street in Melbourne. The 56-storey tower will add close to 1000 student beds to the market.

Carracher said Starwood is not involved in funding the UNSW project and Scape is working with several banks to fund the debt along with equity partners.

Scape has also acquired a permit-approved Elizabeth Street site in Melbourne’s CBD to add to its growing portfolio of more than $3 billion of student accommodation assets nationally.

The increasingly-institutionalised student accommodation sector is moving into the next part of its market cycle, shifting from development to the early stages of its operational phase.

Carracher says mergers and acquisitions are likely to pick up in the space now that large scale developments are being delivered to market.

Scape is a reported frontrunner to acquire student accommodation provider Urbanest’s $2 billion-plus portfolio.

“Important to the maturity of the sector now though is the need for product diversification,” Carracher said.

“The all-inclusive nature of an offering will be differentiated from a bedroom and a study desk offering – not all PBSA is the same and it is central to the institutionalisation of the sector that the market understands that not all beds are the same.”

A recent JLL report into the sector revealed that by the end of 2019, there will be 86,000 purpose-built student accommodation beds in Australia.

“We expect to see yield compression across the sector over the next 3-5 years as assets and broader portfolios are taken to stabilised rates of occupancy with proven performance before core capital enters the market,” JLL head of alternative investments Noral Wild said.

Buoyed by 14.3 per cent growth in international students in 2018, Wild said there is an institutional appetite emerging for prime operational assets including large portfolio opportunities that allow new entrants to gain immediate scale.

“We have already seen global capital groups such as APG, Bouwinvest, Goldman Sachs and GIC partner with major operators in the sector and expect the global appetite for Australian PBSA to continue to grow.”