PGIM Real Estate acquires PBSA portfolio from Unite

PGIM Real Estate acquires a Unite PBSA portfolio and intends to conduct a rolling refurbishment programme across the entire portfolio.

PGIM Real Estate and Generation Partners acquire a PBSA portfolio from Unite Group | PBSA News
PGIM Real Estate and Generation Partners acquire a PBSA portfolio from Unite Group.

Real estate investment arm of PGIM, PGIM Real Estate, has acquired a stabilised purpose-built student accommodation (PBSA) portfolio from Unite Group plc for £184m (Unite share: £76m). 

The portfolio consists of six PBSA properties totalling 2,948 beds, and includes Jennens Court in Birmingham (596 beds), North Court in Cardiff (253 beds), The Grange in Leicester (219 beds), Prospect Point in Liverpool (635 beds), St Peter’s Court in Nottingham (808 beds) and Exchange Works in Sheffield (437 beds). Generation Partners will act as the asset and development manager and its operational management arm, Now Student Living, which will be retained as the Property Manager.

The acquisition was made on behalf of PGIM Real Estate’s European core plus strategy, and the transaction was originated by James Wright in the UK equity team. 

Unite’s disposal is part of the Group’s portfolio management strategy to increase alignment to high and mid-ranked universities, which have the strongest outlook for student demand and support sustainable rental growth.

The portfolio has an average age of 18 years (Unite average: 13 years). 31% of beds are let on short-term nomination agreements (Unite: 53%, 5.8 years average remaining term). 

“In the current market environment, it’s rare to find a stabilised portfolio with high-quality yielding assets located in key regional cities.

“We believe the UK PBSA sector has strong underlying fundamentals as demand for student housing is only set to increase with more students applying for university.

“We are confident that, together with Generation Partners, we can add value to this portfolio on behalf of our investors, whilst delivering a secure stable income stream from day one.”

Tobias Waldschmidt, Senior Portfolio Manager of European core plus strategy, PGIM Real Estate

The disposals are priced in line with book value, reflecting an NOI yield of 6.2%. Proceeds will be recycled into asset management activity and used to meet redemption requests in Unite UK Student Accommodation Fund (USAF).

The properties were held for sale at December 2023 and the disposal was incorporated into the company’s guidance for adjusted earnings of 45.5p to 46.5p in the 2024 financial year, which remains unchanged.

“These disposals continue our disciplined approach of recycling capital for reinvestment and further increases our alignment to the strongest universities. The growth outlook for PBSA remains compelling and we are tracking a number of new investment opportunities at attractive returns.”

Joe Lister, Chief Executive, Unite Students

PGIM Real Estate intends to conduct a rolling refurbishment programme across the entire portfolio. The aim is to modernise the accommodation and to provide best-in-class facilities to better serve student needs when studying, socialising and residing in the property.

The refurbishment programme will also enable material improvements to sustainability and energy efficiency via initiatives including passive measures (building fabric) that minimise the energy demand, refurbishment of plant to provide more energy efficient services and the introduction of on-site renewable energy sources.  

“Now Student Living are enthused to be working with PGIM on this exciting new venture. 

“This portfolio represents a selection of well located, well provisioned PBSA residences that are ideally suited to serve a broad range of domestic and international students looking for affordable, well managed accommodation throughout their time studying in leading University cities. 

“Now Student Living was formed in 2023 from a desire to deliver a better service both for students and for our strategic investment partners, and this portfolio takes our beds under management to c.10,000 across the UK and Ireland, allowing us to further build on our approach which has already led to our achieving Gold Investor In Student accreditation.”

Paul Watson, Co-Founder and Managing Director, Now Student Living

Now Student Living appointed UK based procurement agency – Fjeld Consulting – to project manage the handover process for portfolio streamlining operations and driving efficiency.  

“We are proud that Fjeld Consulting have played a pivotal role in supporting the rapid growth journey of the Now Student Living PBSA platform.

“In under 12 months, we’ve worked closely with the team to support their expansion from inception to a remarkable portfolio of 22 properties, and most recently the acquisition of six properties from Unite Students. Our partnership with Now Student Living has not only driven operational efficiency, but has also had a significant impact on investment prospects. 

“Leveraging our expertise and strategic guidance, we have project managed the handover process, engineering solutions and executing initiatives that have propelled the growth of the business and championed operational excellence. 

“The collaboration exemplifies our dedication to driving tangible and scalable results that deliver value beyond expectations. We look forward to continuing our collaboration and contributing to the ongoing success of Now Student Living’s PBSA platform.”

Scott Blakeway, Head of Consultancy Services, Fjeld Consulting

PGIM Real Estate’s European core plus strategy targets Europe’s most liquid markets, allocating to sectors benefiting from structural trends driven by digitalisation, changing demographics and decarbonisation.

Focusing on these high-conviction themes, the strategy will invest in sectors such as last mile logistics, residential including rental, senior and student housing. 

“Generation is excited to be working in partnership with PGIM Real Estate on this portfolio in conjunction with our recently established operational management arm, Now Student Living. The opportunity to upgrade these assets to provide high quality PBSA whilst still appealing to a broad student demographic is an exciting challenge and we look forward to working with PGIM to deliver our joint objectives.”

Alan Artus, Chief Executive, Generation Partners