Return of international students drives $568m GIC housing deal

35 views 2022-04-27 13:39:27

Listed Singaporean developer Wee Hur has sold a half-share in its Australian student housing portfolio to its home country’s sovereign wealth fund, GIC, in a $568 million deal highlighting global investor confidence in the purpose-built sector.

The portfolio, which Wee Hur has been developing since 2015, comprises 5662 beds across seven towers in Sydney, Melbourne, Brisbane, Adelaide and Canberra.

Of these towers, four have been completed and are operational, including a huge 1578-bed facility in Brisbane with the remaining three towers – including two in Sydney – expected to be finished by the end of 2023.

Reco Weather Private Limited is named as the buyer of the portfolio, which The Australian Financial Review understands is a subsidiary of GIC, the world’s third largest sovereign wealth fund. The Financial Review in February revealed it was the biggest offshore player in Australian commercial real estate.

GIC’s real estate interests in Australia include a stake in rival student accommodation provider Iglu.

Wee Hur describes Reco Weather as a “company incorporated in Singapore, which is an indirect, wholly owned subsidiary of a major global institutional investor”.

Reco Weather’s 49.9 per cent stake in the Wee Hur PBSA Master Trust values the portfolio at $1.138 billion. Wee Hur will retain the remaining 50.1 per cent stake.

The deal is due to be completed over a number of settlement stages, the last being by December 31, 2025. It is subject to a number of conditions, including that the portfolio achieve an aggregate occupancy of 60 per cent, and that Wee Hur shareholders back the sale to GIC.

Wee Hur Capital chief executive Goh Wee Ping told AFR Weekend its Australian properties were performing very well.

“Some of them opened pre-COVID and are now at occupancy rates of 80 to 90 per cent. The two we have just opened are at 40 to 50 per cent occupancy, so the market is coming back very strongly,” he said.

Mr Goh said Wee Hur’s student accommodation investments in Australia were targeting annual returns of 15 per cent.

Asked why Australia’s purpose-built student accommodation market was attractive to overseas investors, Mr Goh said the real estate market, tax and legal systems were on par with developed countries such as Singapore and Japan.

He said there was also certainty about property ownership in Australia. “Land titles are important,” he said.

Students welcomed back

The deal comes as international students return to Australian universities in droves, bringing overseas capital with them to invest in new projects.

In January and February, more than 98,000 international students arrived in Australia to commence their studies. Despite this surge in arrivals, these numbers are still more than 70 per cent below pre-COVID-19 levels, according to the Australian Bureau of Statistics.

However, institutional investors are taking a medium- to long-term view of the sector as the recovery builds and as Australia reclaims its position as one of the world’s biggest international education markets behind the US and Britain.

Among those making major investments in Australian student accommodation are fund manager Cedar Pacific and its affiliated operator UniLodge, which last month opened a 52-level high-rise tower – one of the tallest student accommodation buildings in the world – at 480 Elizabeth Street in the Melbourne CBD.

Also seeing opportunities in the sector is global real estate giant Brookfield, which made its first investment in the Australia sector in March, taking over a development site opposite the University of Melbourne, seeding what it hopes is a $500 million pipeline of assets.

In Perth, another global real estate player, Nuveen, opened a $90 million high-rise rental tower in March offering 483 beds for students and young professional seeking affordable accommodation.

Operating under local brand, The Switch, Nuveen has a $450 million pipeline of rental towers under development in Adelaide, Sydney and Melbourne.

This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/return-of-international-students-drives-568m-gic-housing-deal-20220422-p5afcw

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