Carlyle Group has become the third US private equity firm to invest in the UK student housing market.
Carlyle has formed an exclusive joint venture with developer Generation Estates, which has been working on two student housing schemes with Blackstone Group, and will aim to build a portfolio of at least 4,000 beds in London.
The joint venture has already bought a site on Isledon Road near Finsbury Park in north London, which has planning permission for a 400-bedroom, 116,250 sq ft scheme and 15,400 sq ft of commercial space.
Demolition will start in October for completion ahead of the 2012 academic year.
Robert Hodges, managing director of Carlyle European Real Estate, said: “The Isledon Road site fulfils our investment criteria of being well located near to several universities and transport connections, in an area that has a strong supply-demand imbalance and will provide well-designed student accommodation.”
Carlyle and Generation are progressing schemes on another three sites, which will be bought subject to planning permission.
These acquisitions will provide an initial portfolio 1,850 beds with a value of around £350m.
The supply-demand dynamics of developing student housing in London are compelling. There are more than 260,000 full-time students, but 83% live in private housing.
Of the remainder, 13% live in university halls, leaving just 4% in purpose-built student housing, which is provided by companies such as Blackstone Group, through its Nido brand, and Unite Group.
Although the average rent for student housing in the UK is £134 a week, Nido is able to charge up to £330 a week.
Blackstone has two schemes in London at King’s Cross and Spitalfields, which were developed in a joint venture with Generation.
Generation was set up in January 2004 by Alan Artus and Gareth Davies. Before Generation, Artus ran the £500m central London investment and development portfolio of City & West End while it was owned by Security Capital.
Davies was a director of the Osborne Group, where he was responsible for several mixed-use schemes.
Both started their careers at property services firm St Quintin, which was later bought by Insignia Richard Ellis.
As revealed by Property Week, Oaktree Capital Management, the US private investment firm, also plans a £1bn entry into the UK and continental European student accommodation sector, although it is not just confining itself to London, like Carlyle and Blackstone.
Carlyle’s plan follows its development of the City Living student accommodation scheme in the Netherlands in 2009. It is also considering a similar venture in Paris. Carlyle will invest through its European real estate fund, CEREP III.