QIP ON POST COVID-19 OPPORTUNITIES IN UK STUDENT ACCOMMODATION

14 May 2020

The Yield welcomes Alex Bellingham, Head of Sales at Q Investment Partners (QIP). He talks to us about student housing in the UK and their latest product offering.

Hi Alex, tell us about yourself and Q Investment Partners…

My name is Alex and I am the Head of Sales at Q Investment Partners. We are a Singapore-based private equity real estate firm. We raise capital globally and deploy it in developed markets such as the UK and the USA. We are also looking to invest capital opportunistically in APAC in places such as Australia.

Essentially, we invest in alternative real estate, specifically the living sectors. This refers to property utilised across your life cycle from cradle to grave i.e. student housing, co-living, multi family, and senior living: basically anything with a bed.

We have two live investment strategies. The first is in UK student housing, where we look to partner with local partners to develop and stabilise institutional grade student buildings. We look to hold the assets over the medium term, ideally around 3-5 years. The second investment strategy is in US co-living, where we also look to develop and stabilise assets with a medium-term investment horizon.

Let’s look at student housing in the UK… where do you like to invest?

This is best discussed through a “pre-COVID” and “post-COVID” lens.

We targeted pre-COVID investments in 15 out of a potential 77 UK student markets and looked at key fundamental investment indicators such as the strength of the university  (the Russell Group of Universities is probably the best example of one such metric), supply of student beds and demand from students.

The advent of COVID-19 does not mean that we have radically changed our investment criteria, but we have started to re-imagine what the new norm will be, and respond accordingly. The pandemic has opened our minds to a broader investment approach – in both our investment principles and strategy.

In relation to investment principles, for example, some of the oldest, most well-established universities and the cities they operate in are being stress tested. Those that do well in adapting to change will naturally attract further capital investment often described as a “Flight to Quality”.

We are now going back to first principles to help us reassess our investment underwriting. Fortunately, in the markets where we have capital deployed, we have seen positive responses from the universities and local governments in their approach to managing COVID-19.

As we look forward to the 2020 academic year, it will be important to observe additional quantitative factors such as financial stability of all universities, and qualitative factors such as individual universities’ capability in diversifying their curriculum to both online and in person. We will also assess the quality and appeal for their courses in “need-based” sectors such as healthcare and education. We are keeping an eye on accommodation bookings between July and September to gain greater insight.

Anecdotally, we have seen a well-known UK university respond to the pandemic by making their domestic and international students feel very unwelcome, such that many of them returned home with a 10-day notice period. As a result, the university told the student accommodation provider to refund the students as they would not be attending. That market is now off our target list.

The new norm will not mean a revolution in investing in UK student housing, but there will certainly be an evolution. How this evolution will unfold will be seen over the next 3-24 months. We are constantly monitoring the situation and waiting to validate interdependences between quantitative and qualitive factors. Fortunately, we are in a good position to manage the impact of the change. Our investment strategy is dynamic, and we are raising capital shortly to exploit dislocation opportunities in equity and debt across the real estate life cycle.

Staying in the UK, how are you finding the impact from Brexit?

The election result and ‘completion’ of Brexit gave us political clarity. In its immediate aftermath, we found the demand for student housing to be at the highest that we have experienced before the pandemic became an issue. We had many investors chasing us for student housing opportunities. This is testament to the sector’s growth into a core investment class and this clarity only reaffirmed this for our investors.

We are also now looking into adjacent sectors such as UK care homes. We are still confident, but naturally we are monitoring each operator closely on how they respond to COVID-19.

Tell us about your product offering.

We have the benefit of forming our investment principles through our GFC experience between 2009-2012. Despite the very negative economic situation at the time, we consistently produced returns of 20% per annum, which is also testament to the resiliency of the sector.

COVID-19 isn’t the same as the GFC but we are observing many opportunities coming through in the sector. Real estate as an asset class is relatively illiquid compared to financial assets such as equities and bonds. Therefore, the knock-on market dislocations will take some time to filter through.

In this respect, we expect dislocation opportunities to arise in the next 6-18 months, and I am excited at the prospect of the upcoming opportunities. However, capitalising on these opportunities is going to require ready cash and an established network of local relationships to allow us to move quickly. To date we have a pipeline of deals we expect to be distressed, and having gone through previous crises, we are confident in our ability to execute once they are ready to be transacted. Hence, we are looking to raise for an opportunistic fund in order for us to be nimble and prepared with ready capital.  

Our new product offering will adopt a flexible investment strategy to take advantage of the market dislocations. It will encompass opportunities from the ground up, across the entire real estate life cycle and across the whole spectrum of debt and equity. Throughout our strategy, we will be optimising our investment principles for the new norm as well.

Who are you looking to reach for this product offering?

Our capital comprises the entire investor spectrum from professional investors, family offices and institutional investors. For this offering, we are also looking to partner with existing investors who are looking to re-invest. We also work extensively with intermediaries who provide access to the above capital.

We are looking to work with any capital providers who seek an opportunistic real estate allocation in a resilient asset class.

And as I alluded to earlier, the opportunities in the student sector are going to be extensive… we will possibly see once in a lifetime buying opportunities over the next 6-18 months. For those who are prepared with ready capital, there will be a definite advantage in allowing investors to exploit the situation.

This article appeared in The Yield 14 May 2020.

 

 

MASLOW CAPITAL FINANCES 198-BED STUDENT PROJECT IN EDINBURGH

13 January 2020

Singapore-based Q Investment Partners (QIP) and HG Developments Limited (HGD) have secured debt finance from UK development lender Maslow Capital for their purpose-built student accommodation (PBSA) development in Edinburgh.

The facility will be used to fund the purchase and development of a 198-bed PBSA scheme located opposite Meadowbank Stadium.

QIP and HGD bought the site in September from property developer Summix.

The development will be delivered by HG Construction Limited and managed by Homes for Student under the Prestige Student Living brand. Once complete, the building will be a contemporary state-of-the-art development comprising a mix of clusters and studios together with a community/office space, common areas, a laundry and cycle parking. 

Ben Hall, head of investment at Q Investment Partners, said: “The prime location of the scheme is further bolstered by Edinburgh’s reputation as a top tier student city, with a university ranked 23rd in the UK by the Times Good University Guide and 29th in the world by the Times World University Ranking.

“Despite the uncertainties surrounding Brexit, investor interest in UK PBSA remains strong. The sector is also best positioned to benefit from the on-going trade tensions between US and China as Chinese students look to study outside the US.”

Mr Hall added: “Moreover, the outlook for UK PBSA is very encouraging and will be driven by positive fundamentals, supportive demographic trends, strong international demand and growing pressure on housing.

 “Demand from Asia-based investors is particularly robust, and through this project, QIP is delighted to support Singapore-based investor Diamond Hospitality with their global real estate ambitions. Birbal Singh Bajaj and Sebestian Soh, founders of Diamond Hospitality, are looking to expand their footprint in the UK as capital partners with QIP for future projects.”

Maslow capital deal originator, Sky Mapson, said “From a development perspective, there is currently a structural undersupply of PBSA in Edinburgh, there is a limited pipeline and a large international student population relative to the UK average. The strength of the location is also underpinned by the high level of rental growth seen in PBSA rents over the past few years, making it an attractive location for further investment”.

Highlighting the collaboration between all three partners, Rob Greaves, director for HGD, said: “Maslow Capital understands the intricacies of the student market and we believe that along with our experienced contractors HG Construction and proven operators Homes for Students, we have assembled a leading team fully committed to the delivery of this project.”

This article appeared in Scottish Financial News 30 Jan 2020.

 

 

NEW LUXURY STUDENT ACCOMMODATION OPENS IN THE HEART OF SHEFFIELD

1 November 2019

A new 284-bed luxury student accommodation complex has opened in the heart of Sheffield’s city centre.

 

Straits Manor, which is based on West Street, is a development project led by Singapore-based private equity real estate firm, Q Investment Partners, in partnership with their local delivery management team DML Development Managers, UK bank Shawbrook and UK main contractor Bowmer + Kirkland.

 

The property is managed by Homes for Students, one of the UK's largest providers of student accommodation, under its premium brand Prestige Student Living, with almost full occupancy achieved for the rooms available at the start of the academic year.

 

QIP views the UK's purpose-built student accommodation (PBSA) sector as a prime investment market.

 

A spokesman said: "UK purpose-built student accommodation has continued to attract strong investor interest, despite uncertainties surrounding Brexit.

 

"The recent policy U-turn on post-visa studies - allowing foreign students to stay in the UK for two years after graduating instead of four months, will serve to further boost the UK’s appeal as a university destination for overseas students."

Ben Hall, head of investment at QIP, said: “We are glad to work with one of the most established student operators in the UK, it is great to see how they proactively support the needs of the modern-day student and universities. They are extremely experienced and are excellent partners to work with.

 

“We are excited to continue our journey in the purpose-built student accommodation sector with our local partners. Our development portfolio stands at 1,000 beds for 2019 and we are on track to more than double this in 2020.”

 

Rachel Warren, DML’s development director, said: “Qualifications gained at a UK university are held in high regard around the world and this is driving record numbers of international students coming here to study. The need for luxury accommodation is being driven by this growing market and we’re really proud of the quality of product we can now offer.”

 

Martin Corbett, managing director at Homes for Students, added: “We are proud to have built this relationship with QIP and DML and to add this property to our UK portfolio of 21,000 student beds of which 4,000 are under our Prestige Student Living brand.

"Straits Manor is the first of a number of new schemes, which we are working on with QIP and their UK partners, where we proactively input into the schemes from inception, creating communities that students love.”

This article written by Greg Wright  appeared in Yorkshire Post 3 Dec 2019.

 

 

QIP AND HG DEVELOPMENTS MAKE STUDENT ACCOMMODATION DEBUT WITH £30M PURCHASE

8 October 2019

Singapore’s QIP and HG Developments have made their debut in the student accommodation sector with their first joint acquisition in Edinburgh.

The duo have purchased a £30m student scheme from Summix Developments, as part of a newly formed partnership that will look to aquire purpose built accommodation in Scotland to create a portfolio.

The 198-bed scheme was approved by Edinburgh Council in June.

 

QIP’s head of investment, Ben Hall, said: “Despite the uncertainties of Brexit, UK PBSA remains an attractive asset class and Edinburgh is proving to be a top student accommodation investment market.”

 

Development director at Summix, Stuart Black, added; “This development will serve to address the increasing demand for student accommodation, fulfilling the ambitious growth plans of world-leading universities in the city, which are key drivers of the economy.”

Montagu Evans’ Residential Capital Markets advised QIP and HG Developments on the deal.

This article written by Jessica Newman appeared in Property Week 8 Oct 2019.

 

 

NEW REAL ESTATE INVESTMENT MARKET ON THE CO-LIVING CODE WITH CHRISTINE MCDANNELL

2 October 2019

Peter Young had the opportunity to be on The Co-Living Code with Christine McDannell sharing what excites QIP most about Co-Living as an investible real estate asset class. We are glad to be at the forefront of this growing real estate sector where we were the first to provide Asian Investors with access to this strategic sector that is growing in importance. Co-Living is the modernisation of real estate – it provides affordable and conducive living environments for professionals in expensive gateway cities with a thriving community right at home.

Interview link: https://www.youtube.com/watch?v=A7inmSfLRvI&feature=youtu.be

 

MASLOW CAPITAL PROVIDES £20M FINANCE FOR STUDENT DEVELOPMENT

28 August 2019

Q Investment Partners (QIP) has announced it has secured £20m of debt finance from UK development lender Maslow Capital for a 300-room student accommodation project in Nottingham.

UK construction business, Robertson, has been appointed as the main contractor and completion of the development is due to be September 2020.

Head of investment at QIP, Ben Hall, said: “We are excited to continue our journey in the purpose-built student accommodation sector with our local delivery DML Development Managers. This project increases our development portfolio to 600 beds for 2019 and we are on track to more than a double this in 2020.”

Maslow Capital’s head of deal origination, Sky Mapson, said: “QIP is an extremely professional and experienced partner to work with. This is an exciting transaction for us, PBSA in the UK has emerged as a major asset class as institutional investors recognise how rewarding yet defensive it can be.”

This article written by Jessica Newman appeared in Property Week 28 Aug 2019.

 

 

89.3 MONEYFM TRENDSETTERS: Q INVESTMENT PARTNERS

18 June 2019

Peter Young had the pleasure of sharing with Singapore’s first and only business and personal finance station MONEY FM about co-living and how investors in Asia are gaining access to the defensive real estate asset class through QIP’s start-to-finish investment platform.

Co-living is about providing an affordable and conducive living environment for professionals in expensive urban cities. Tenants enjoy great private space, convenient shared amenities and access to a thriving community – factors that strengthen tenant stickiness and make co-living a viable, investable thesis.

Interview link: https://omny.fm/shows/money-fm-893/trendsetters-q-investment-partners#description

 

QIP HOSTS INVESTMENT SEMINAR AT LOTTE HOTEL, SEOUL

14 May 2019

QIP hosted its first investment seminar at Lotte Hotel, Seoul where we shared our thoughts on opportunities in alternative real estate sectors such as student housing and Co-Living to the Korean investment community. It was a huge success and a full house! 

Special thanks to Carol Park and the team at Access Communications for making it all happen! 

 

CO-LIVING BECKONS TO PRIVATE EQUITY INVESTORS

4 March 2019

As co-living gains traction around the world, it is drawing attention not just from young people looking for an affordable, communal way of living, but also from investors eyeing its promises of stable returns and potential for growth amid rapid urbanisation.


Developers may soon have to take note, too, as demand grows for partners who are fully integrated and able to create well-rounded, communal experiences for end-users rather than just brick-and-mortar buildings, says Peter Young, co-founder and chief executive officer of Singapore-based real estate fund manager Q Investment Partners (QIP).


This is because property is becoming more like a service than a commodity in the sharing economy, as people value different experiences and a better living environment over ownership.


"The world is changing. The world isn't about holding assets and ownership, and having long tenancy with a single landlord anymore," Mr Young told The Business Times. "The user groups are more picky, more specialised, and more nimble. In this very quickly changing world, the sharing economy is impacting real estate as well."


QIP is offering Asian investors the opportunity to invest in this asset class through its partnership with co-living developer and operator The Collective, which runs The Collective Old Oak in London, said to be the largest co-living development in Europe. The two companies collaborated for the first time on a co-living project in Chicago in October 2018, and plan to work on more in gateway cities in the US such as New York, Boston and Miami.


"We want to build an investment platform that focuses on co-living and shared living in a way that is scalable, that we can bring to the institutional investor market," said Mr Young. "From QIP's experience in developing student housing, we know about building and creating a product for the end user with an income stream that moves the sector into an institutional space. From an investment perspective, that's our vision for co-living."


While co-living is often portrayed as part of a hip lifestyle targeted at millennials, it reaches a larger user base by addressing other issues like a severe lack of housing supply in major cities and changing consumer habits, such as people choosing to settle down later in life.


The Collective Old Oak's occupants reflect this wider target market, ranging in age from 18 to 60 years, with 25 per cent above the age of 35.


However, The Collective co-founder and CEO Reza Merchant thinks the millennial mindset still figures large in co-living and the way residents seek constant learning and growth through interactions with one another.


The Collective Old Oak hosts 25 events every week ranging from business support and other educational classes to recreational events with musicians and DJs, and has seen businesses start, love blossom and lives transform in various ways through the community.


"Connections and interactions are really what this generation is about, and they are priceless," said Mr Merchant. "What price do you put on meeting your future business partner or your future soulmate? It very much appeals to the mindset of today."


On a more practical note, he also points out that residents at the Old Oak project hail mainly from the growing middle-income segment, with an average annual salary of £34,000 (S$60,850).


"Think about how deep the demand is for the end product. If you look over the long term, the number of people on that middle-income range will only increase with growth in urbanisation," said Mr Merchant.


He added that co-living is not cyclical like other real estate asset classes such as office, retail and higher-end residential. In downturns, co-living could even see better returns as more people look to rent affordable accommodation.


Mr Young said QIP's strategy for co-living involves buying well, developing the co-living buildings on time, operating with the best in the sector and creating an income stream that drives an attractive internal rate of return of about 15 to 20 per cent over about three to five years.


With the asset class's similarities to student housing, he believes Singapore conglomerates that have invested in purpose-built student housing will be natural in-buyers to co-living as well. He also expects other investors to be won over by the lower dependence of co-living on economic circumstances for performance.


"We're seeing a change in family and private clients, from simply investing in a condominium and hoping for capital appreciation, to looking at who they are partnering with and the basis of return that they're likely to get, typically through the development profit or creating something that has value," Mr Young said.


"Recent trends in capital profits in markets like Singapore and Hong Kong are very cyclical compared to some of these value-added things we do, where we've seen performance with 16 per cent per annum returns. That's where I think it's worth a comparison."

This article appeared in the Business Times featuring QIP CEO Peter Young

 

QIP AND HMLET HOSTS SINGAPORE'S FIRST GLOBAL CO-LIVING SUMMIT

26 February 2019

Thank you to everyone who attended Singapore's very first global co-living summit! Along with leading co-living players in Asia and the UK, we had a fruitful sharing of our thoughts on the global co-living wave, and answered questions on why we believe co-living is here to stay, and the sector's investment opportunities. Many thanks to Peter Young (Q Investment Partners), Reza Merchant (The Collective), Yoan Kamalski (Hmlet) and Ian Lau (commontown SG) for sharing your valuable insights!

This event is in the past and is no longer open to registrations.

 

QIP HOSTS CO-LIVING SEMINAR AT THE WORK PROJECT, HONG KONG

18 September 2018

QIP hosted an educational seminar at the Work Project, Hong Kong to speak about Co-Living as the next institutional real estate asset class. Key speakers QIP Head of Investment Ben Hall, QIP Strategic Advisor John Kennedy and Hmlet Director of Real Estate Dominik Wiesent share their insights on Co-Living from a tenant's, developer's and investor's perspective.

This event is in the past and is no longer open to registrations.

 

CO-LIVING IS REVOLUTIONISING CITY LIVING

20 Aug 2018

A new real estate asset class is attracting significant attention and pulling property investors back into cities such as London and Singapore.


Co-living apartment blocks offer private rooms that individuals can rent on flexible leases, starting from just a few days. In exchange for smaller private spaces, the apartments offer significant communal amenities that merge business and pleasure, with large living areas, shared kitchens and co-working desk spaces. Some co-living apartments even include gyms, spas, restaurants and cinemas. These developments are drawing investors’ attention back to London, a city that is suffering from low rental yields and declining house prices.


Co-living developments in the UK are appealing to the 17 million millennials and 1.7 million full-time students who live and work there. Currently, there are only 600 co-living beds available, so the opportunity is considerable. This is the real estate evolution that investors have been waiting for: city-centre living that is affordable and attractive to a new generation of renters who are looking to combine the benefits of the digital age with the comforts of modern life in central locations. The institutional interest is also increasing as this important market potential is finally being fulfilled.

 

In central London, rents have not kept up with the pace of house price increases after the global financial crisis, so yields have declined. Rents are at record highs, however, and the cost of living is exceeding earning capacity for many residents. In London, average rents are £34,622 ($60,733) a year and average salaries only £34,473, so most people have to consider home sharing or long and expensive commutes to live more affordably. On the other hand, co-living rents are all-inclusive and competitive. The monthly rental fee covers your apartment, furniture, WiFi and utility bills, as well as access to communal amenities. This makes it easy for renters to budget and is up to 25% cheaper.


In Singapore, co-living apartments are primarily geared towards young expats whose short-term plans require a greater amount of flexibility. Early pioneers had an unsuccessful start even though occupancy rates were high. Recent entrants, such as Mamahome and Hmlet, are showing how the model can work in Singapore, even though issues of home affordability— which plague the likes of London — are minimal and the longer-term success of these developments has yet to be seen. In Singapore, home ownership stands at above 90% as HDB provides subsidised public housing for locals. This may uniquely limit the scope of co-living in Singapore to expats. So far, however, it has proven quite popular with the target demographic.


When Hmlet@Joochiat was launched last September, it gained a 95% occupancy rate within six weeks of opening. In London, the issues of affordability and availability are well known. Co-living has therefore become an affordable way for young Britons to live and work in the country’s capital and the development pipeline is strengthening. It is still early days, but we are already seeing signs that this is an exciting asset class for investors to consider.


The Collective was London’s first large-scale co-living development. Since it was built in 2016, developers have been quick to submit plans for new sites in key locations across London, including Canary Wharf and London Bridge. The Collective, no doubt inspired by the likes of other sharing economy pioneers such as WeWork and Airbnb, has since raised US$400 million ($552 million). Its expansion plans will take it to the US and Germany, as well as further sites in the UK.


Co-living was recognised by the Greater London Authority as an accommodation class in its draft London Plan — a policy document that
provides guidance to London councils. Still, the definition of “co-living” is not yet clear and consistent. It is also important to ensure the location is right and the product will be institutional
grade. The planned exit, and how it will be achieved with each specific product, is critical.

This article written by CEO Peter Young appeared in Edgeprop 20 Aug 2018.

 

QIP HOSTS CO-LIVING SEMINAR AT DBS AUDITORIUM

15 September 2018

DBS Chief Investment Officer, Mr Wey Fook Hou spoke on DBS's Q3 2018 market views. QIP Head of Investment Ben Hall and John Kennedy, Strategic Advisor to QIP and a pioneer of UK Student Accommodation, shared their views on the living trends of millennials and the emergence of co-living as an institutional real estate asset class. Special guest Zenos Schmickrath from Hmlet Singapore was in attendance and participated in the Q&A session.

This event is in the past and is no longer open to registrations.

 

QIP SECURES SENIOR DEBT FINANCE FOR 284 BEDROOM STUDENT ACCOMMODATION IN SHEFFIELD

26 March 2018

• The company has secured senior debt financing with UK-based Shawbrook Bank, a specialist funder that offers development finance within the residential real estate market

• Working with QIP’s real estate delivery partners in London, DML Development Managers Ltd, they have also secured construction group Bowmer & Kirkland, who will begin the build later this month

• This represents a major milestone for Asian investors who want to access UK purpose built student accommodation assets

Singapore-based Q Investment Partners, announced today that they have secured debt finance from UK bank Shawbrook for their purpose built student accommodation (PBSA) development in Sheffield, England. UK real estate group Bowmer & Kirkland are confirmed as the main contractor and are scheduled to commence works in March 2018 under a fixed-price contract.

“This is a significant milestone for Asian investors who are seeking access to UK PBSA assets. Without companies such as QIP and our UK delivery partners DML, an investor would need local UK presence in order to secure the finance. This can make it an expensive, time-consuming and resource-heavy task,” says Ben Hall, Head of Investment of Q Investment Partners.

Asian overseas real estate investors are becoming increasingly interested in alternative forms of property investment in markets such as the UK. Traditional residential routes are facing higher taxes and stricter regulations. According to QIP, this is having a positive impact on the purpose built student accommodation market.

“Regardless of Brexit, the UK maintains its appeal and Asian investors still want to hold UK investments,” says Hall.

QIP’s PBSA development in Sheffield was launched and closed in July 2017. The company has now secured GBP20m of debt finance from UK bank Shawbrook. QIP originally sought debt finance throughout Asia, including Korea, Hong Kong, China and Singapore, before agreeing terms with Shawbrook in the UK.

“Securing senior and mezzanine development finance is becoming harder, particularly in the UK. We are delighted that we have secured debt finance from Shawbrook. They are a proactive bank, that understand regional markets across the UK and offer real estate expertise in development finance,” says Hall.

Terry Woodley, Director of Development Finance at Shawbrook says, “This is an exciting transaction for us as we continue to support residential development projects across the UK. QIP is an incredibly experienced and knowledgeable partner who we are proud to be working with.” When it came to uncovering the right construction partner, the QIP team wanted to work with a contractor who had experience building PBSA, ideally in Sheffield, and an outstanding track record. The pool of options was limited but one company stood out.

Rachel Warren, DML’s development director, says, “We needed to find a main contractor who could work with us to achieve our strict budgets and timescales. We are impressed with their approach and believe we have the right building team in place. They are one of the UK’s largest independent construction groups with considerable experience in delivering projects of this type.”

Bowmer & Kirkland Regional Director, Steve Chambers, says, “We have a specialist team in place for projects such as QIP’s Sheffield PBSA development. We are currently in the process of completing a scheme for Chinese investors, with a construction value of GBP67m, which is also in Sheffield. We understand how to build quality housing primarily aimed at overseas university students and how to work with companies such as QIP and DML on delivering value for investors.”

 

QIP OFFERS FIXED INCOME INVESTMENT IN UK STUDENT HOUSING PROJECT

11 December 2017

The continued uncertainty over the Brexit talks in the UK and the fluctuating pound sterling has clouded the investment horizon of investors, particularly "private wealth", namely high-networth individuals and family offices, says Peter Young, CEO and co-founder of Singapore-based boutique real estate fund manager Q Investment Partners (QIP).

In the middle of this year, QIP launched its maiden project under its develop-operate-sell model: a 284-bed, purpose-built student accommodation in Sheffield, the UK. Roadshows in Hong Kong and Singapore in June raised GBP9 million ($16 million) in equity for the development. The minimum entry level for investors was GBP350,000, with a four- to five-year investment horizon. Investors can expect a 16% annual non-compounding return, net of fees, according to Young. The fund has closed, and construction of the project, which is expected to take about two years, has begun.

With the protracted uncertainty over the Brexit talks, some investors who had purchased residential properties five to 10 years ago may reap gains upon selling these assets. However, they are unable to realise their investment as the pound has weakened, and doing so will mean incurring a net loss upon currency conversion.

New option

Recognising the predicament such investors are in, QIP is offering them an option to invest in a shorter-term, fixed-income product for its second student accommodation project in 1Q2018. While investors can still opt for the longer-term direct investment into the develop-operate-sell model, there is a second option for those with a shorter time horizon. According to Young, the entry level is also lower, from GBP150,000, and an annual coupon rate of about 8% will be paid in pounds.

This second student housing project is located in Nottingham. It comprises 350 beds and has an estimated gross development value of GBP35 million. "The fixed-income product is tailored for investors who are still holding on to the pound sterling and looking at a shorter investment time frame with stable returns," says Young.

Glenn Howells Architects (GHA), famous for its design of the 27-storey Urbanest student housing tower at King's Cross and the student housing at Leamington Spa old town, is the appointed architect for the student accommodation project in Nottingham.

Potential in build-to-rent market

Besides purpose-built student accommodation, QIP sees potential in the build-to-rent sector. According to the British Property Federation's latest figures, there are 95,918 build-to-rent units either completed or planned across the UK, including 17,001 completed and 24,012 under construction, and a further 54,905 with planning permission. Of the 95,918 build-to-rent units, 54,978 (57%) are in London, and 40,940 outside of London. BPF is projecting that the build-to-rent market could drive property investment to GBP70 billion by 2022 and supply is projected to hit 240,000 units by 2030.

According to QIP's Young, the firm will look at the build-to-rent market in London and focus on projects with gross development value of up to GBP50 million. It will also adopt the same develop-operate-sell model for its build-to-rent projects as that for its purpose-built student accommodation projects.

"Institutional investors are still investing in the UK real estate market as it's still perceived as an attractive asset class over the long term with the added benefit of the weaker pound," notes Young. "High-net-worth investors behave differently. As long as visibility is unclear, they are less willing to make a longterm bet on the market." As a result, QIP had to change its fundraising strategy in its next project in response to the way these individual investors look at returns.

With the Singapore property market, especially the residential sector, recovering, some of the high-net-worth investors have also started to relook at investing in the local market. "I think it's starting to happen," says Young. "The en bloc sales have excited everyone, and the Singapore market is looking more positive. However, that hasn't affected investor interest in the UK market."

This article, written by Cecilia Chow, appeared in EdgeProp Pullout, Issue 809 (Dec 11, 2017)

 

WHY 2018 IS THE YEAR TO DIVERSIFY YOUR REAL ESTATE INVESTMENT PORTFOLIO

29 January 2018

At QIP, a Singapore-based private equity real estate firm, we are firm believers that investing into property should be part of every investor's portfolio.

However, each individual sector of property has an upside and a downside, and for those who are looking to invest in markets such as the UK, 2018 is a good time to see which non-traditional options are available that might better suit the economic forecasts and investor sentiments for the years ahead.

Real estate is featured in only 20 percent of Asia Pacific Family Office portfolios and yet it has proven itself to be a reliable class of asset, particularly for those seeking longer term returns.

Real estate has consistently provided positive returns with low volatility for investors so why have more investors not entered into the property market?

Many individuals place their trust in bricks and mortar - investing into an asset that can be seen and touched - however, the implications of becoming a landlord (particularly a residential property landlord) can be off-putting for many high net worth individuals and family offices in particular.

The majority of Singaporean real estate investors have full time careers away from property. As an asset class, it is "high maintenance". Property requires considerable time, energy and further capital to be a well-managed, long term investment.

Arranging furnishings, sourcing tenants, checking references, managing deposits and keeping the property maintained are important, yet time consuming aspects of becoming a real estate landlord.

In addition, landlords need to keep up to date with the various laws affecting overseas property investors, not to mention annual tax returns and regulatory matters that must be adhered to.

If you are an accredited investor, then you may want to consider the most efficient and profitable way to still benefit from real estate without the need to be as hands-on.

REITS are often invested into for this reason, but they are subject to the risks inherent in equity markets, and the tradeable price is often reflective of investor sentiment and not necessarily the underlying asset value. However, REITS are an easy-in and easy-out option.

Areas of real estate investment that are becoming increasingly popular for professional investors include student accommodation, retirement homes and healthcare, which tend to sustain growth throughout economic cycles due to the demands inherent in these types of residence.

For example, in the UK there is currently a critical undersupply of property for university students and the pipeline of new developments is not sufficient to meet demand.

International student numbers are high, and they expect modern, well-equipped and well managed rooms throughout their university studies. However, the vast majority of available accommodation is converted residential housing that is subsequently registered as HMO (houses in multiple occupation). These tend to be located out of town and are poor quality due to minimal management and upkeep. Meanwhile, the demand for city-centre accommodation with good amenities is rising rapidly.

In terms of investment risks, with Brexit on the horizon, the number of EU students in many of the country's universities is relatively minimal so even if there was a notable decline in EU student applications, this would have a nominal effect on the demand from overseas students as a whole, which is far outweighed by countries outside of Europe such as China.

There is significant value in diversifying your investment base this year, both into real estate as an asset class and amongst the various real estate sectors that are available such as student accommodation.

The global economy has finally recovered from the financial crisis of nearly a decade ago and central banks are tentatively starting to normalise policy. The economic cycle is relatively mature, but the warning signals of the next recession are still largely absent, especially with a short-term boost to come from US tax cuts.

As ever we can find risks - geopolitics, Brexit, trade friction, Chinese credit bubble - but they do not seem unusually intense. However, valuations of financial assets are stretched, which is the main challenge in constructing an investment portfolio and which is why diversification is key.

This article was printed in Edge Prop and written by Alex Bellingham, Head of Capital Raising at Q Investment Partners

 

QIP OFFERS OPPORTUNITY TO INVEST IN UK STUDENT ACCOMMODATION

19 June 2017

The student housing sector has become increasingly hot, fuelled by multibillion-dollar acquisitions by Singapore's sovereign wealth fund GIC and Temasek-linked Mapletree Investments. Early this month, Maple tree Investments purchased a portfolio of student housing and multi- family properties in the US and Canada. This brings its total portfolio of student housing assets in North America and the UK to 43, with a total of 18,024 beds. The portfolio includes assets held under its sponsored Mapletree Global Student Accommodation Private Trust.


Peter Young, co-founder and CEO of Q Investment Partners (QIP), a Singapore-based boutique real estate fund manager, feels there is a niche for non-institutional investors who want to invest in student housing assets, but do not have the financial muscle of GIC and Mapletree to buy entire portfolios of assets.

The investors that QIP is targeting are high-net-worth individuals (HNWIs) and family offices that want to invest in institutional-grade properties, but may not have access to them.

"We [run] a buy, develop, operate and sell model, to enhance the value of the asset," says Young. "We occupy a niche between providing HNWIs with institutional-level real estate that they would ordinarily not have access to, and institutions such as GIC and Mapletree, which seek to buy yielding assets, but don't have the capability to develop them."

'Asset-by-asset approach'

QIP is offering an "asset-by-asset" investment approach. Part of the attractiveness of this approach is that it is easy for HNWIs to understand what they are buying into in terms of the location of the project, financing terms, investment period and exit strategy, says Young.

The firm's first investment opportunity is a 284-bed purpose-built student accommodation block on West Street, the main thoroughfare of Sheffield city centre, in South Yorkshire, the UK. QIP is looking to raise £9 million ($16 million) in equity for the development.

The student housing block is located less than 1km from major academic institutions such as the University of Sheffield and Sheffield Hallam University, as well as retail and transport facilities. Sheffield presents an opportunity as existing and future developments cater to only 40% of the student population of 60,000, says Young.

The minimum investment is £350,000, with a four-year investment horizon. Investors can expect to get 16% annual non-compounding return, net of fees. Roadshows to raise capital in Singapore and Hong Kong have seen "an overwhelming response", says Young.

In the UK, QIP works with Development Managers Ltd, a development and project management company headed by Kevin McGovern, who has a team of 16 professional staff. Besides handling the development and project management of QIP's project in Sheffield, DML has also invested in it. McGovern was formerly with American real estate builder and investor Tishman Speyer Properties, Canadian real estate company Markborough Properties and Rosehaugh, a major property developer in the City of London and Docklands in the 1980s. The team will develop QIP's development and investment projects in the UK.

Upon completion of the accommodation block, QIP will operate the asset until it has achieved stable income, generally over a two- to three- year period. The exit strategy will be to sell to a property fund or institutional investor buying into the income stream, says Young.

'Counter-cyclical'

According to QIP Head of Capital Raising Alex Bellingham, the attraction of the student housing sector is "its counter-cyclical aspect". Unlike residential property, which is affected by both political and economic uncertainty, the recent UK election has had "zero effect" on the student housing sector, he adds. What will affect the student housing market, and specifically QIP's development, reasons Bellingham, is the number of international students in the location.


QIP is also looking at Nottingham as a potential location for a student housing development, as well as Birmingham and Edinburgh, cities with top-tier universities. The target is to have a pipeline of four student housing assets of £30 to £40 million each, with an eventual portfolio size of £150 million, says Young.

QIP chose to focus on the UK student housing sector owing to its principals' track record in developing and investing in such assets. Young, for instance, was CEO and executive director of IP Investment Management for two years until November 2015. Prior to that, he was investment director at IP Global for two years. IP Global was founded in 2005 by its chairman, Tim Murphy, who specialises in property investments around the globe.

At IP Global, Young was involved in the investment and development of six student housing projects with over 800 beds in six cities, such as Birmingham, Cardiff and Edinburgh. Those investments achieved internal rates of return ranging from 12% to 20% over a three-year period.

Bellingham was formerly IP Global director and head of its Singapore office for seven years. He was also the officer responsible for IP Global's fund management business in Hong Kong before joining QIP.

Finding value

In the course of marketing projects from around the world at IP Global - Birmingham, London and Manchester in the UK; Chicago in the US; Melbourne, Australia; Niseko, Japan; and Berlin, Germany - Belling ham has seen many clients accumulate property over the years. He has, likewise, done the same. "It was always about the ease of buying a property and generating returns for clients," he says. "However, with the new taxes in place and difficulty in securing a mortgage, it has become harder to find value buys."


At QIP, the team will be rolling up their sleeves, undertaking development of their projects, securing financing, and operating or letting out the assets to generate returns for investors. "The assets will then [be] flipped to institutional investors looking to buy into the income stream," says Young.

The recent weakening of the pound sterling has increased the purchasing power of most international students planning to study in the UK, reckons Young. "Given the large number of established, high-ranking universities in the UK, a degree from a British university will remain a major draw irrespective of Brexit and the geo political environment," he adds.

Bellingham agrees. "The current position of the pound against many of the main currencies, including the US dollar and Singapore dollar, is also good for our investors as many of our clients are taking advantage of the current cheap currency to stay invested in Britain."

He believes the student housing sector will continue to boom. In periods of uncertainty, more people will leave the workforce to seek a quality education, and possibly a change in careers, Bellingham notes. "This could further increase demand for student housing, thereby worsening the supply-demand metric."

QIP has seven staff members in Singapore.Young's equity partner and QIP co-founder is Singaporean Eu Khoon Ang, executive director of the firm and an entrepreneur who has invested across a wide range of venture capital and private equity businesses.

Besides student housing, QIP also sees potential in aged care and build-to-rent sectors in the UK. The private equity firm is also focusing on two other markets, Australia and the US, where it sees potential in student accommodation and aged care.


This article appeared in The Edge Property Pullout, Issue 784 (June 19, 2017) of The Edge Singapore

 

© Q Investment Partners 2019