Large Scale Investors Eye Alternative Real Estate Says Wall Street Journal

It was only a matter of time before more and more articles like the one below will emerge highlighting the interest in the alternative real estate and non conventional property investment markets from larger and institutional investors.  The article below highlights both student accommodation investment and care home investments as sought after areas (all be it on a larger scale) we feel here at Gower & Mae that this article backs up what we have been saying to our property clients for some time.  We have projects spanning both the Student property Investment and Care home Investment sectors that we are working on please feel free to contact us today to discuss your interest.

Two expected sales of U.K. student housing totalling £1.4 billion $2.23 billion have highlighted the attraction of investors to alternative property classes in Europe.  Barclays Capital PLC is close to selling its majority stake in the University Partnerships Programme, which has 22,000 student rooms, to Dutch pension fund PGGM for £1 billion. Meantime, U.S. private-equity giant Blackstone Group L.P. BX -0.48% is expected to sell its Nido student-accommodation blocks, in Londons Spitalfields, Kings Cross and Notting Hill districts, to Round Hill Capital for more than £400 million.

International real-estate investors increasingly are looking to buy student accommodation, health-care facilities and hotels in Europe, industry observers say.

While some investors are driven by the prospect of higher returns and more-stable income streams, others simply cant find good deals in traditional sectors such as commercial and office space amid a shortage of stock.”

Pension funds and annuity funds are increasingly targeting alternative investments because of the shortage of long-term, securely let, traditional real estate on the market in Europe,” said James Hanson, lead director, health care, at property-services company Jones Lang LaSalle.

Experts say sectors such as student housing, which is valued at £20 billion in the U.K. alone, and health care offer stable, noncyclical income to investors and long leases, of around 15 to 25 years, while providing high occupancy levels and low rental default.

For example, health-care real-estate investment is expected to rise to £500 million this year from £300 million in 2011, Mr. Hanson said. Companies are likely to undertake significant sale and leasebacks in 2012 and 2013, driving investment volumes, he added.

Competition already is growing in the U.K. Investment inflows into the student market are expected to exceed £2 billion in 2012, compared with £950.6 million in 2011, according to Jones Lang. So far this year, 11 major deals already have taken place, totaling £337.4 million, the company said.

The deals include Student Castles purchase of the 617-room Goodmans Fields development in London for £80 million and Carlyle Groups £46 million purchase of three London sites, on which it plans to build student housing with 1,400 beds.Such niche assets can come with their own complications. Finding suitable sites for doctors surgeries, student housing or hotels, especially the much-in-demand budget variety, isnt easy, industry participants say.In the U.K., “a restrictive planning regime makes it difficult for developers to adapt existing buildings to student homes, and major new developments are usually opposed by planners,” said Philip Hillman, a director at Jones Lang.

via Investors Eye Alternative Real Estate – WSJ.com.

12:01 pm - Posted by Jon Scott

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