JSE-listed property investor Growthpoint Properties has launched an unlisted, purpose-built student accommodation real estate investment trust (Reit) named the Growthpoint Student Reit.
The trust, which was launched in December 2021, has acquired a R2-billion seed portfolio and has been approved by the National Student Financial Aid Scheme.
This is the third specialist, unlisted, alternative real estate investment opportunity to be launched under Growthpoint’s funds management business, and the first of its kind in South Africa.
The focused investment mandate in purpose-built student accommodation differentiates the Growthpoint Student Reit. This type of accommodation is built specifically for university students by private developers and is designed to be student-centred.
“The demand for specialised student accommodation in South Africa far outstrips supply, making it an attractive investment. Given the constrained fiscal budget to address the shortfall, government and universities have shifted student accommodation provision from universities to partnerships with the private sector.
“This is a very positive step for all stakeholders and will contribute toward job creation as new developments are rolled out,” said Growthpoint corporate finance head George Muchanya in a statement on January 27.
The Reit’s Gauteng-based portfolio is geographically split, with 71% in Pretoria, within walking distance of the University of Pretoria, and 29% in Johannesburg, within walking distance of the University of Johannesburg.
The portfolio comprises seven high-quality purpose-built student accommodation properties with 5 000 modern beds. It was acquired from a group of vendors led by property management group Feenstra. A two-year rental underpin – to mitigate against short-term impacts of Covid-19 – was included in the deal.
The introduction of the new Reit received strong market interest, Growthpoint said, with the first close “exceeding expectations” and attracting third-party capital commitments of about R1.1-billion.
About R1.5-billion was committed in total, including the capital commitments from Growthpoint and Feenstra – one of the largest seed portfolio vendors.
Growthpoint’s R240-million investment represented a 16% shareholding in the unlisted Reit. It said the investment was in line with Growthpoint’s co-investment philosophy, which underpins its funds management business.
The company will remain a core investor in the fund, owning between 5% and 20% of the Reit’s equity in future. Meanwhile, Feenstra’s R160-million gives it an 11% holding, with a three-year “lock-in” commitment.
Growthpoint will be the fund manager for the trust and assumes overall responsibility for the success thereof, while Feenstra will be the property manager.
Since the Student Reit is unlisted, investors will be given exposure to direct real estate driven by long-term fundamentals, rather than being exposed to listed real estate volatility, which is driven by short-term sentiment.
However, since Growthpoint is listed, investors can expect governance oversight frameworks; environmental, corporate social investment and sustainability resources; and regular investment income from the Student Reit’s six-monthly dividend payment policy.
Growthpoint said the thriving purpose-built student accommodation sector was giving rise to the growth of specialist Reits. It explained that these trusts were attracting record capital inflows by outperforming competing trusts based on consistently high occupancies and rental growth.
“The launch of the Growthpoint Student Reit has opened up focused investor access into this defensive alternative asset class, with its strong fundamentals and proven resilience,” the company stated.
Growthpoint’s fund management business seeks to identify investment opportunities in sectors that are underpinned by strong fundamentals and that have the potential to be built to scale. It aims to grow the new Student Reit towards R12-billion in assets, with a stock exchange listing within seven years.
Additionally, the Student Reit includes several acquisition and development opportunities. These include an immediate growth portfolio of two development projects, which are currently under way and will be open in time for the 2023 academic year; the acquisition of an additional Feenstra property, which is under development; and another asset where construction will begin later this year.
“We are pleased that our funds management platform has gained . . . momentum with the launch of the Growthpoint Student Reit and continues to attract third-party capital successfully,” said Growthpoint CEO Norbert Sasse.