Having mastered hotel-quality student housing in the UK, Collegiate AC is now on a mission to become a market leader in Europe. It already operates three properties on the continent and has many more in the pipeline.
To make a success of expanding your business overseas, you first have to master your market at home, says Heriberto Cuanalo, chief executive of Collegiate AC. And with more than 15 years’ experience in the student accommodation sector, he should know.
Cuanalo founded Collegiate nearly seven years ago. The operator’s focus has always been the UK market, until last year when it took its brand of hotel-quality purpose-built student accommodation to Europe where it now operates three properties, with many more in the pipeline.
The UK, however, is still very much its “heartland”, he says, adding: “Our learning has come from the UK sector. When we started out, we worked on some of the UK’s largest projects, such as the University of Hertfordshire and the University of Edinburgh, and we managed less than £100m of stock. Our portfolio has now not only grown to around £2bn of assets that we operate or are under construction, but it is now exclusively filled with properties designed by Collegiate.”
Cuanalo is happy to tread his own path in the student property market, both in terms of his attitude towards developer and investor partnerships and in the design of the accommodation.
“I have a background in hospitality and it became clear that the future of design and room layout would be different,” he says. “We wanted to develop the next generation of rooms that didn’t just have an ensuite bathroom but also an enclosed kitchen and great communal areas where students can meet so they don’t get lonely.”
The types of facilities students can expect from the Collegiate brand include dinner-party rooms, lounges, gyms, roof terraces, saunas and pools. These facilities offer “all the advantages of having their privacy without the loneliness”, says Cuanalo.
In for the long haul
Cuanalo has a selective and long-term attitude to the partnerships he undertakes. The optimum number of clients the company works with is 10. “Trying to work with 100 clients would mean we could not help our clients achieve their goals,” he says.
And given the number of services that Cuanalo and his team provide, including financial appraisals, the design of the room mix and room layouts, development and construction and acquisition support, it is easy to see why.
However, when Collegiate does take on a partnership, Cuanalo is prepared to be in it for the long haul. “Our philosophy is to be involved in very long-term projects where we see a change of ownership depending on the capital profile of the stage of the project.
“For example, at development stage, providers of riskier capital want a higher return. At the portfolio-building stage, funding is potentially private equity capital or some sort of higher-yielding return capital. Finally the scheme transitions into final stages where it ends up in the hands of longer-term partners where we end up working with institutional money, insurance funds or pension funds looking for 20- to 25-year returns.
“We want to design something at the start of this process that is going to attract long-term investment at the end of it. We stay with the scheme because we want to make sure it is successful.”
Collegiate also offers its clients the opportunity to buy the operating lease of one of its assets if a partner is looking for other means to generate long-term income.
The team has launched several schemes this year, taking its UK portfolio to around 40 assets. In Nottingham, a scheme of almost 500 beds was completed; it included a library, a gym and a games and karaoke room. Similarly, the Cardiff location, which boasts 650 rooms, has set new standards for the city’s student accommodation. Durham, which has 350 beds, a sky gym and dinner-party rooms, was also completed in time for the 2017-18 academic year.
So what’s next for Collegiate – further UK growth or is Europe where the company’s focus lies?
“Over the next three to five years, we have some exciting UK projects in the pipeline, but we have to accept that it is becoming more expensive for our clients to buy land in the UK and construction costs have gone up, which is why we looked at the move into Europe.”
Before making a move overseas, Cuanalo’s team analysed the markets and looked at what students were paying to establish if it was feasible to export a product with a 20% to 30% premium to alternative stock. With few firms offering the same type of quality accommodation and competing largely with religious institutions offering humble spaces for students to live in, Collegiate saw a gap in the market for its product.
Around 40% of Collegiate’s UK custom already comes from international students, so their accommodation requirements are no mystery. “International students are no different to students who live in the UK – they are young people and at the end of the day they all want the best university experience they can have.”
With its current pipeline, the company is now set to become the market leader in Spain and Portugal by 2019. It has schemes in cities including Madrid, Valencia, Barcelona and Lisbon, to name just a few. The strength of Collegiate’s proposition, says Cuanalo, is understanding the company’s limitations.
“We have the resources to hold our clients’ hand when they come into a new market but we don’t try and be experts in areas we are not. We use local and international lawyers and work with partners who can bring the correct expertise to the project. We never assume we know it all and we know when we need to ask for help. That’s experience.”
Having built up a strong pipeline in Iberia, the next phase of expansion will be into Holland and Germany, but Cuanalo is quick to add growth will be steady and manageable with a handful of global clients who share Collegiate’s ambitions.
Steady it may be, but he can’t help confess he already has designs on becoming the market leader in the new European destinations.