EREC Estates is a joint venture company that brings together the sons of two very different real estate tycoons.
The Hon William Cadogan, son of Earl Cadogan, heads one half of the partnership, Trust Estates. The other half, European Real Estate Company (EREC), is led by Pan Rui, son of Pan Shiyi, chairman and founder of the developer SOHO China, which Blackstone is in talks with to buy for $4bn (£3.29bn).
The combination means EREC Estates, a specialist in student accommodation investment and development, is as well placed as any to take advantage of the hitherto growing influx of Chinese students into the UK.
Today, EREC Estates is relatively small. By this summer, when its latest developments will have been completed, the company will have a portfolio of around 1,300 beds spread across various university towns and cities including Newcastle, Sheffield and Coventry.
However the Anglo-Chinese company has big growth ambitions, despite the short-term threat posed by the coronavirus pandemic.
In the next three to five years, it is aiming to expand its portfolio to around 5,000 beds. To help it on its way, EREC Estates secured a £40m refinancing deal with RM Funds and Industrial and Commercial Bank of China at the end of last year.
The company is also looking to raise equity and is working with John Kerrigan’s JSK Capital, which advised on the refinancing, to help with the fundraising.
“The latest refinancing has given us the support we need to start our growth plan, but we are also looking to raise more equity,” says managing director Weipeng Gu. “We’re looking for partners that have a good understanding of the business and can help us grow further.”
As well as developing new student blocks, EREC Estates plans to buy and refurbish standing assets. The company, which invests, manages and operates its properties itself, is targeting “good university towns and cities” with at least one reputable university, says Gu.
He claims one of the key factors that sets EREC Estates apart from others that are expanding in the student accommodation market is the company’s Chinese connections. All its properties have Chinese-speaking staff and EREC Estates markets its buildings through its partners in China.
A lot of student accommodation companies with large numbers of Chinese students tend to focus on the high-end market, but Gu says EREC Estates is targeting a broader demographic.
“We believe our product is mid- market,” he says. “We’re not looking to provide a luxury experience, but we are looking to provide quality accommodation with plenty of social space.
“We build a lot of communal space to make sure that we foster a social atmosphere, so people don’t just live there but have their lives there.”
The approach has worked so far. The next challenge for EREC Estates will be to replicate it on a larger scale – especially in an environment that has so many new immediate challenges as a result of coronavirus.