Vita's £600M Sale Of Manchester Student Housing Is A Straw In The Wind
Deutsche Bank asset management business DWS has acquired four Manchester student housing projects from Vita. It is a £600M straw in the wind, a possible foreshadowing of more interest in the sector.
Vita said it will scale up its growth as a result of the deal, with expansion in the UK and Europe now a priority.
DWS acquired a portfolio of 3,198 Vita Student beds dominated by Manchester, but also including properties in Birmingham and Scotland. Vita Group will continue to manage and operate the buildings on behalf of DWS. Vita Group was advised by Savills and Rothschild on the transaction.
“This deal is hugely significant for both the next chapter of growth for Vita Student and the wider Vita Group as we bring more innovative brands to market,” Vita Group Chief Executive Mark Stott said.
It could be significant beyond the company as well, as it signals a massive redirection of capital flows into the sub-segments of the residential sector. Student housing, along with senior housing, build-to-rent and co-living, is set to benefit, as Cushman & Wakefield’s Future of Demand report predicts.
“The ‘Vita Student’ portfolio provides a significant opportunity for DWS to further re-balance our European portfolio towards the residential sector and its sub segments,” DWF Head of Strategy for Alternatives Matthias Nauman said in a statement. "It allows DWS to increase its presence in a sector offering strong long-term growth prospects while being defensive during downturns. This is very much in line with the investment strategy of our funds."
Yields for purpose-built student accommodation have been tracking down for some time, whilst rental growth has been slowing. Brexit-related fears about a fall in overseas student numbers may have played some part, but the consensus is that both the downward yields and slowing rental growth are signs of a maturing market. This peaks investors’ interest.
Knight Frank said headline rental growth for PBSA increased by 2.26% for the 2018/19 academic year, down from 2.55% in 2017/18. It said the slight moderation is in line with its expectation that rental growth will slow as the sector matures.
Yields have been falling steadily from the 5.7% recorded in 2017, according to Savills. The total volume of PBSA transactions in the UK is now comfortably above £5B a year, and rising, it said.
Vita Sale Portfolio Breakdown
The deal incorporates the following assets:
Vita Student, First Street - Manchester – 279 units
Vita Student, Circle Square Building 10 - Manchester – 496 units
Vita Student, Circle Square Building 11 - Manchester – 220 units
Vita Student, Circle Square Building 9 - Manchester - 384 units
Vita Student, Glasgow – 501 units
Vita Student, Strawberry Place - Newcastle – 332 units
Vita Student, Edinburgh – 250 units
Vita Student, St Albans - Leeds - 376 units
Vita Student, Birmingham - 360 units
