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Last updated: April 7, 2013 11:22 pm
A student housing landlord is to become the first education-property company to list on the stock market for a decade, in a move that underlines the depth of the recent bounce in investor appetite for real estate.
GCP Student Living, a London-focused provider of mid-market university accommodation, will this week ask investors for seed capital to fund a portfolio that it intends to grow to £500m over the next five years.
The decision to pursue an initial public offering follows successful flotations this year by a raft of property companies, such as Crest Nicholson, the housebuilder, and Countrywide, the UK’s largest estate agency.
The resurgence of investor interest is being driven by two factors: confidence of a recovery in the UK property market and a wider appetite for equities amid low yields in the bond markets.
GCP is vying to become the UK’s first student housing Real Estate Investment Trust – a tax efficient model that requires property companies to return 90 per cent of income to investors.
The company already owns 600 rooms in a £93m building in east London and is developing a further £160m worth of accommodation.
The company, part of Gravis Capital Partners, the infrastructure private equity group, will ask investors for £50m ahead of an initial public offering on May 10th. The company is targeting income return of 5.5 per cent and a total return – income and capital appreciation – of up to 10 per cent a year.
The student housing sector has not endured the value destruction suffered by many other parts of the UK property market during the financial crisis. This is due, in part, to the influx of overseas students during the last five years.
Worldwide, the sector has ballooned from a fringe investment a decade ago to a $200bn market today. The growth has been underpinned by a rise in the number of students enrolling on university courses, up from 98m in 2000 to 165m in 2011.
“A lot of people call student housing a counter-cyclical asset class because people stay longer in education in a weak jobs market,” said Tom Ward, a partner in GCP Student Living, “but we see it as one of perpetual returns due to the huge shortage of supply of purpose built university property”.
Mr Ward added that the stable demand – vacancy rates in student housing run at about 3 per cent, less than one-third of the figure for the wider property sector – meant that student property was similar to infrastructure; “a sleep at night kind of investment”.
The company will begin marketing to investors this week with Cenkos working as the sole book-runner.
The buoyant IPO market has drawn interest from other property companies. Both Foxtons, the London-focused estate agent, and McCarthy & Stone, the housebuilder, are understood to be mulling stock market listings.
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