Scape Franklin Street, in central Melbourne, is the largest asset included in the new fund and with 50,000 square metres of gross floor area, is the largest mixed-use and education building globally. Photo:

Scape draws investors to $6b student housing fund

Michael Bleby|4 hours ago

Student accommodation developer Scape has tipped its housing assets into a $6 billion open-ended fund – which it says is the first of its type in Australia – giving a wider pool of investors exposure to a sector that it says will grow strongly over the next decade.

Privately owned Scape last week received $700 million in funding from South Korea’s National Pension System and has put about $250 million of that capital into the purchase of $1.9 billion worth of six Scape-developed assets and two development sites to boost the fund.

Scape Franklin Street, in central Melbourne, is the largest asset included in the new fund and with 50,000 square metres of gross floor area it is the largest mixed-use and education building globally.

UBS Asset Management has also come in as a new investor, joining existing parties including APG, Bouwinvest and Ivanhoé Cambridge to provide the remainder of the $1 billion in equity needed to purchase the assets, along with $900 million in debt provided in a refinancing last year.

The fund expands Scape’s core fund set up in 2019 – originally as a closed fund, due to expire in 2030 – and will acquire student accommodation assets in development as they are completed.

It currently has 16,000 beds and will have access to Scape’s future 4000-bed pipeline and chase acquisitions in a consolidating market. It will also be able to engage in development itself, up to a limit of 20 per cent of the value of the fund.

“[Creation of the fund] provides investors with immediate access to a well-diversified portfolio of the highest quality PBSA assets,” Scape co-founder and chief executive Stephen Gaitanos said.

“This comes at a very exciting time, following the successful journey we have been on for the past 10 years, with our current portfolio at full occupancy and a clear need for more well-designed and located PBSA rental accommodation in Australia.”

The purpose-built student accommodation sector has enjoyed a bull run in Australia, having almost doubled to 132,700 beds over the past decade, Property Council of Australia figures show.

Despite regulatory uncertainty over student numbers – the Labor government’s proposed cap was blocked by the Coalition and the Greens in November – the sector was likely to keep growing at that pace over the next five years, with a pipeline of 30,000 new beds, according to a report the council published last year.

Being open-ended, the core fund – with return expectations based on stable income and with leverage capped at 40 per cent – did not lock investors in for set periods, Mr Gaitanos said.

“A key feature of the fund is its liquidity,” he said. “Under the new open-ended regime, investors can subscribe or redeem every quarter. A significant equity commitments queue has already built up showing investors’ confidence in the structure, whilst allowing us to grow the portfolio in areas of the market we have to date not been in.”

Scape is through to the second round of the $3.5 billion tender for Brookfield’s senior living business, Aveo, The Australian Financial Review’s Street Talk column reported on Tuesday.