SINGAPORE (EDGEPROP) - Covid-19 may have slowed activity in the private equity real estate sector but it has not deterred Singapore-based Q Investment Partners (QIP) from launching its largest fundraising exercise to date, with the target set at GBP30 million ($47.9 million). The fund will invest in five purpose-built student accommodation (PBSA) projects located in London, Edinburgh and Bath.
Young: The pandemic puts QIP in a unique position to access and unlock compelling real estate opportunities and deliver our proven PBSA strategies under a new lens (Photo: Albert Chua/EdgeProp Singapore)
“The pandemic opened our minds to a broader investment approach,” says Peter Young, CEO of QIP. “We quickly accepted the need to re-imagine what the new norm will be in the UK university sector and respond accordingly to build long-term student housing products that will be resilient.”
Up to 80% of the fund will be allocated to QIP’s core business, which is to buy, develop, operate, stabilise and exit a portfolio of PBSA assets in top-tier student markets in the UK, primarily in London, Edinburgh and Bath. The remaining 20% will be allocated to opportunistic investments that take advantage of “market dislocations” in some real estate sectors, for instance, retail and hospitality buildings that are facing operational difficulties across the UK, which could be repurposed for PBSA.
Besides retail and hospitality buildings, there could also be opportunities to purchase land at attractive prices, according to QIP. The repricing of retail-office values could also lead to repurposing or redevelopment into PBSA or purpose-built residential rental buildings in Tier 1 universitiy cities, for higher yields.
Despite concerns about Covid-19, more than 97% of universities will open their campuses for face-to-face learning, according to a poll of 92 universities by Universities UK (Photo: Bloomberg)
QIP hopes to build its portfolio in joint venture with local partners and will focus on 15 out of 77 prospective UK student housing markets it had identified pre-Covid-19. “The pandemic puts QIP in a unique position to access and unlock compelling real estate opportunities and deliver our proven PBSA strategies under a new lens,” says Young.
Despite concerns about Covid-19, more than 97% of universities will open their campuses for face-to-face learning, according to a poll of 92 universities by Universities UK. Universities serviced by QIP’s portfolio of PBSA have indicated that they will be opening their campuses for the upcoming 2020/2021 academic year too.
The UK has also surpassed the US as the preferred overseas study destination for Chinese students — for the first time this year, according to a report in June by an overseas study agency, the Beijing-based New Oriental Education & Technology Group.
Artist's impression of a purpose built student accommodation project in Bath that QIP is investing in (Photo: QIP)
QIP is currently managing and executing 14 accommodation assets with a total of 2,455 beds and investment value of GBP120 million. To align its interests with that of the other investors, QIP takes a 10% stake in its own development projects. It has established a track record of delivering internal rate of returns (IRRs) of up to 20%. In this latest fund raise, QIP is targeting returns of 13% to 15% per annum for its investors over a four-year investment period.
Last year, QIP invested in two PBSA properties in Edinburgh: one on London Street and the other on Canon Gate, with 200 and 103 beds respectively. QIP is investing in a PBSA at Locksbrook Road in Bath. It is seeking planning approval to increase the number of beds from 103 in this scheme. QIP’s recent investments into the PBSA space include a 300-bed property on Huntingdon Street in Nottingham, which is scheduled for completion sometime in 1Q2021, and a 284-bed project on West Street, Sheffield, which was completed last year.
QIP also entered the co-living space last year, with a focus on UK and the US. It tied up with New York-based co-living developer The Collective, which is behind The Collective Old Oak Common, Europe’s largest co-living development with 546 beds located in northwest London. The property changed hands for GBP125 million in 2018.
QIP’s maiden co-living investment is in a 170,000 sq ft co-living space with 381 rooms at LaSalle Street in Chicago’s South Loop, in the US. It has yet to invest in a co-living project in the UK, where its focus is still on the PBSA sector. “We will watch that space [co-living], and tackle it on a project-by-project basis,” says Young. “Our focus will still be ‘bums in beds’. There is no desire to look at the alternative residential bed sector for now.”
Fraxtor CEO Oliver Siah (left) with Rachel Teo and Daniel Teo of Daniel Teo & Associates (Photo: Albert Chua/EdgeProp Singapore)
In August, QIP signed a deal with Fraxtor, a Singapore-based co-investment platform that allows investors to pool together to invest in development projects. Founded in January 2017, Fraxtor is led by Oliver Siah, Rachel Teo and seasoned investors from the family office of Daniel Teo & Associates. Daniel Teo is the chairman and managing director of his family-owned property development firm Hong How Group, as well as a director of property development and investment firm Tong Eng Group.
Fraxtor, which stands for “fractional investors”, allows investors to become members only after they are verified to be accredited investors using MyInfo by GovTech. After verification, members can access the investment opportunities available on its platform. The minimum investment threshold is $50,000.
The tie-up between Fraxtor and QIP will mean Fraxtor’s accredited investors can invest in quality assets overseas, including PBSA projects in the UK that are developed and managed by QIP. The entry threshold through Fraxtor is GBP20,000.
“We have chosen to partner with QIP because of their strong track record in the UK PBSA,” comments Oliver Siah, CEO of Fraxtor, in a statement. “In light of the pandemic challenges, the business of UK higher education is expected to see through the immediate challenges faster than many other business sectors and remain strong in the medium to long term.”
From QIP’s perspective, its investors have always been high-net-worth individuals, as its minimum investment threshold is GBP350,000. The tie-up with Fraxtor will present an opportunity for QIP to tap the “mass affluent segment”, says Young.
“There is a natural synergy with Fraxtor as the group has invested in our investments in the past,” Young explains. “The tie-up with Fraxtor sees us combining their investment technology platform with our real estate and asset management expertise, along with capital management expertise.”