Carlyle prepped for UK student housing market

The private equity group has plans to create at least 4,000 beds in London as it announces a joint venture with UK student accommodation operator, Generation Estates

The Carlyle Group’s real estate arm has struck up a joint venture with British student accommodation operator Generation Estates as it enters the sector in the UK for the first time.

The Washington DC-based firm has bought a site next to an underground station in Highbury, north London, which already has planning permits for a 400-bed, 10,800 square metre student housing scheme, it revealed today. 

It is hoping to have the property ready for occupation in time for the 2012 academic year, it explained, disclosing how a freshly struck JV with Generation Estates seeks to develop a further three sites in London, providing the group with an initial portfolio with capacity for around 1,850 beds that could be valued at £350 million (€411 million; $555 million).

Carlyle is making the UK student housing play on behalf of CEREP III, its latest European fund that raised €2.2 billion in June 2008.

It intends to expand the business so that eventually it owns at least 4000 beds in London, including the initial pipeline of schemes. Each site will comprise a mix of studio rooms and smaller en-suite study bedrooms, which will be in the three-to-four star end bracket.

For its part, GEL will remain the operating partner of the completed developments.

Carlyle is pinning hopes on a continuing supply-demand imbalance in the student living sector and in London particularly, where there are over 260,000 full time students but only enough purpose-built accommodation for around 16 percent of them. 

However, it is not alone in pushing into the sector. The Blackstone Group, for example, created a brand called Nido Student Living in 2006, which has properties in London and Barcelona.
Commenting on the joint venture, Robert Hodges, managing director of Carlyle European Real Estate, said in a statement: “We have been aware of the attraction of student accommodation for some time, given the strong fundaments of the market, particularly the ongoing supply/demand imbalance in the UK and the new joint venture follows our entry into the student accommodation market in the Benelux region in October last year.”

He added: “One of the crucial factors with regard to any student accommodation investment is to ensure that the management of the end product can be undertaken by an experienced operator.”