JLL names DREF leading private owner of student accommodation
Deutsche Real Estate Funds (DREF) has acquired a student residence in Munich for 60 million euros, bringing the total amount it has invested in the sector since June 2015 to more than 200 million euros. With 3,200 student residences in its portfolio and 2,530 notarised units in the pipeline, a recent report by Jones Lang La Salle* named DREF as the leading private owner of student living space in Germany.
“This latest acquisition follows an intense 12 month period of activity during which DREF issued the very first bond to fund student accommodation and significantly expanded the bench of talent across its business. We have worked hard to become the leading established private owner and operator of student living space in Germany, both in terms of units owned and in sector knowledge and expertise. With the foundations now in place, we plan to at least double the size of our portfolio as we continue to roll out our student brand ‘TWENTY FIRST Student living,’” says Felix Bauer CEO and CSO of Deutsche Real Estate Funds Advisor.
The volume of transactions in the German student housing market is increasing significantly and was up 525 million euros year on year in 2015. Having completed more than 200 million euros of transactions since June 2015, DREF is making a significant contribution to this trend.
DREF continues its growth trajectory
Since June 2015, DREF has invested more than 200 million euros in the acquisition and modernisation of student living space and has purchased 17 student residential properties in 12 German university cities. To finance the properties, DREF issued the very first bond to fund student accommodation and increased the bond volume at the request of the investors in the autumn.
In 2016, DREF continues to work on a substantial pipeline of projects. In addition to the 2,530 notarised units, it has a further 1,800 units in the pipeline. For these investments, DREF now has 150 million euros of investment capital available, including a credit line of 50 million euros with the credit asset manager Chenavari Investment Managers.
Transaction volume in Germany at record level
The German market for student housing is picking up momentum: the transaction volume almost doubled year-on-year in 2015 and since 2011 it has quadrupled. With 525 million euros transacted (last year: 276 million euros) it is still a niche market with significant potential, especially when compared to the British market which transacted 6.3 billion euros in the same period.
This growth dynamic is reflected by the increase in investor interest in the sector. In addition to owner-managed local investors, an increasing number of institutional investors like insurers, pension funds or special funds, as well as international asset and fund managers have meanwhile appeared on the scene.
In the past 12 months, average (median) prices were in the region of approx. 85,000 euros per residential unit. The mean 50-percent range varies from 72,000 to 86,000 euros per unit. The achievable initial return on investment in the same period averaged about 5.5 percent with a medium range of 4.7 to 6.5 percent – depending on the concept, age and location of the relevant buildings and on the prevailing residential market structure.
* The JLL report was commissioned by DREF to analyze the principal private and nationwide active owners and operators of student accommodation in Germany.