Oaktree-backed student accommodation provider marks first year with £50m purchase

Knightsbridge Student Housing has bought a 1,329-bed scheme in Lincoln in its largest acquisition to date. The company, which is backed by Oaktree Capital Management, has bought the Pavilions campus from Barclays Capital for £50m, which reflects a net initial yield of 7.5%.

The South Street Asset Management-operated campus is fully let and rents are around £100 a week. “It’s the biggest village I’ve ever dealt with,” said CEO Bob Crompton, who previously headed Victoria Hall, the student accommodation arm of the O’Flynn Group. “I like Lincoln, I’ve always liked Lincoln. It keeps going up the university rankings.”

The purchase takes Knightsbridge’s portfolio to 3,500 beds and almost £200m in its first year of operation. In that time the company has moved into new headquarters in Ely Place
in London’s Holborn and increased its head office headcount to 17.

It has also developed an operating platform, the Student Housing Company, to manage its assets in Newcastle, west London, Bangor, Birmingham, Bournemouth and Lincoln. It is on track to build up a £1bn portfolio in five years. Crompton said the lack of senior debt was a challenge, but the company had managed to find debt for every purchase from banks such as Santander, Nationwide and Clydesdale.

Knightsbridge’s first purchase at the end of last year was the Stephenson Building in the Shieldfield area of Newcastle from Talisman Properties for around £10m, at an initial yield of 6.5%.

The six-storey complex has 330 single-study bedrooms within 58 self-contained flats. It is let to Northumbria University and the rent changes each year in line with the Retail Prices Index.

“It was a good start — we wanted a vanilla deal,” said Crompton. Knightsbridge then carried out a £30m forward-funding of Dorchester House in Bournemouth. The block, which is being developed by the vendor Watkin Jones, will be completed next year and will be let by Knightsbridge.

Then in February the company agreed the £60m forward-funding of a 730-bedroom scheme in Acton, west London. Berkeley Group is developing the Costume Store, which will be let on a 25-year nominations agreement to the University of the Arts of London in September next year. Students will come from the London College of Fashion.

Knightsbridge’s fourth purchase, in July, was Studios 51 on Bagot Street, Birmingham, for £11.5m and Neuadd Willis 1 and 2 in Bangor for £16.25m from Cordea Savills. The blocks are
let directly and operational.

“We want to appeal to a broad range of students, not just wealthy overseas students,” said Crompton, “The low-hanging fruit’s been done. Sheffield’s been done, Manchester’s been done, they’re obvious. Lincoln’s not finished yet, Bournemouth’s is not finished by a long way.

“We’re looking beyond the obvious. We’ve got to get value for our investors and these schemes are the ones where we’ve found most value.”