Dutch pension fund provider PGGM has purchased a stake in the UK’s University Partnerships Programme (UPP), a developer and operator of student accommodation.
PGGM has bought 60 percent of UPP from funds managed by Barclays Infrastructure Funds Management (BIFM) for an undisclosed amount, according to a joint press release. UPP has an enterprise value of £1.4 billion (€1.7 billion; $2.2 billion) and a portfolio of 28,000 rooms in operation or development.
The company plans to spend a further £1 billion over the next two years growing its business and posted earnings before interest, tax, depreciation and amortisation of £46 million for the financial year ending 2011/2012 and a £104 million turnover.
Post-sale, funds managed by BIFM will still retain a 40 percent holding in UPP. It is understood that BIFM will consider disposing of its remaining stake in UPP if the right offer comes along, but is not actively working on selling it.
“The deal is a good example of implementing the fund’s direct investment strategy in stable social infrastructure sectors with a long-term focus. Furthermore, the inflation-linked, stable cash flows are an excellent match with our client liabilities,” Henk Huizing, PGGM’s head of infrastructure, commented in a statement.
In an interview with PERE’s sister magazine Infrastructure Investor published last September, Huizing explained why PGGM decided to go the direct route instead of investing trough traditional infrastructure funds:
“What pension funds like about infrastructure is the long-term stable cash flows of these assets. If you invest through a fund, there’s no yield in the first two or three years because they are still in the build up phase. Then there’s this huge exit return, which means there’s certainly not a long-term, stable cash yield. So if you invest in infrastructure through a fund, you don’t get access to the really nice characteristics which this asset class can offer a pension fund.”
PGGM manages some €125 billion on behalf of six Dutch pensions in the care and welfare sectors.
The investment by PGGM was advised on by Macquarie Capital. Jonathan Harris, Macquarie Capital's head of European real estate told PERE how it further evidenced the the rise of direct investors in infrastructure and real estate assets in the UK and globally.
“[It] also continues the recent trend of large scale institutional investment into residential property and related sectors in the UK,” he said.