A property fund has been launched targeting private houses rented to students near Russell Group universities.
The independent investment adviser to the Student Accommodation Opportunity Fund, Ingman Capital Partners, says the focus on high-quality shared houses constrains risk and creates the opportunity for greater returns than the traditional fund approach of buying purpose-built modern student accommodation blocks.
Philip Ingman (pictured), chief executive of Ingman Capital Partners – who has a long track record in student property investment – says the fund should be capable of generating an annualised total return of more than 10 per cent pa over the next five years.
He says: “Too many people still think of the Young Ones when you mention student houses, but students are becoming more demanding – and are prepared to pay for better facilities. Well-managed private housing can offer high standard accommodation and generate very attractive returns.”
The assets will be acquired and managed by SGB Property Managers run by Fergus Shields, who has a wealth of experience in the subsector. Houses in the fund will over time be refurbished to a standard template – each will have the same furniture, flat screen TVs, wireless facilities and comfortable but durable furnishings to bring them to a high-quality low-maintenance standard.
Shields says: “Demand for shared student houses is still outstripping supply, which underpins rents and property valuations. By focusing on Russell Group universities, which are oversubscribed and where the drop-out rates and incidences of bad debt tend to be lower, we can exploit opportunities in the sector and help manage risk.”
The fund is managed by Luxembourg Fund Partners. John Hill, a director of LFP, says: “Restricted levels of bank lending have left plenty of opportunities to buy properties that will benefit from cost-effective refurbishment.
“Though we’re not ruling out buying purpose-built blocks if the price is right, there’s a lot less risk in private housing. Assets can be purchased and disposed of more easily. A house can be sold to an investor or an occupier, whereas purpose-built student housing is restricted to the investment market.
“If necessary, houses can be converted for the professional tenancy market, which opens up the market and further supports rents. And renovation can be done in a more manageable way too – you don’t have to find the cash to refurbish a whole block in one go.
“A portfolio of private student houses may not look as glamorous as a large new student accommodation block, but investment should be about risk and return – and that’s what this fund is focused on.”
The Student Accommodation Opportunity Fund, which is a regulated open-ended Luxembourg SICAV SIF aimed at sophisticated investors, has a targeted rental income of 6.25 per cent p/a. The fund has a target annual distribution of five per cent, after an initial 18-month acquisition period, with surpluses reinvested.
It will be a sterling fund, with quarterly dealing and a 90-day redemption notice period. Gearing is restricted to a 60 per cent loan-to-value ratio. There is a 20 per cent performance fee on the total net return exceeding a hurdle of seven per cent.
The investment minimum for qualifying investors is GBP10,000.