Canada Pension Plan Investment Board (CPPIB), in a joint venture with The Scion Group and GIC, has added “significant scale” to its student housing portfolio with the US$1.1B purchase of 22 U.S. properties.
The portfolio, comprised of about 13,666 beds at 20 American universities in 18 states, represents a mix of recently developed class-A properties that also includes a selection of value-added assets.
“The new portfolios are diversified across markets and construction type (cottage, townhouse, mid-rise),” CPPIB said in an email reply to queries from RENX. “The average age of the properties is four years and are located within one mile of their respective campuses on average.
“The assets offer modern on-site amenities to students, such as study rooms, pools and fitness centres. These acquisitions also enable us to build significant scale in this sector.”
The properties were acquired from Harrison Street Real Estate Capital, one of the largest U.S. real estate firms dedicated to education, healthcare and storage sectors.
CPPIB and GIC each own a 45 per cent interest in the newly acquired portfolio and Scion owns the remaining 10 per cent.
14 new joint venture markets
“The properties are well-maintained, well-located in close proximity to campuses,” CPPIB said in the email statement. “The 14 new JV markets are easily accessible within Scion’s existing management footprint, which will allow Scion to increase operational efficiencies.”
The CPPIB said the U.S. student housing sector benefits from strong demand bolstered by demographic trends, limited supply of on-campus student housing, and a relatively limited supply pipeline for well-located product.
“This follow-on portfolio acquisition was an opportunity to broaden our existing student housing joint venture with GIC, a global partner, and Scion, a well-respected, large private owner/operator in the U.S.,” CPPIB added in the email statement.
“The U.S. is an important market for our real estate investment activities (and for the CPP Fund overall). As at September 30, 2017, our real estate assets in the U.S. were valued at CAD$10.7 billion, in office, industrial, retail and multi-family properties (for context, at the same time our global real estate assets totalled CAD$41.0 billion).”
Growing since 2016
This transaction follows a March 2017 sale of nine student housing properties to the same partnership – the Scion Student Communities LP – for $465 million.
Since January 2016, the joint venture has completed more than US$4.0 billion of investments primarily through four significant portfolio transactions, in which approximately US$1.4 billion in equity capital has been deployed.
The joint ventures portfolio now includes 73 student housing communities in 52 top-tier university markets, comprising 46,555 beds. The average effective age of the portfolio is less than five years and more than 70% of the assets are located within one mile of their respective campuses.
CPPIB’s investment in U.S. student housing
“This is a compelling investment opportunity to efficiently build further scale in the U.S. student housing sector with a portfolio of high-quality, well-located properties in new and existing joint venture markets,” said Hilary Spann, managing director, Head of Americas, Real Estate Investments, CPPIB, in a release.
“We believe the secular strength of the U.S. student housing sector will continue to deliver attractive risk-adjusted returns for the CPP Fund, and we look forward to continue growing the joint venture with GIC and Scion.”
Scion Student Communities LP intends to continue to pursue additional opportunities to acquire high-quality student housing assets in the U.S. in Tier-1 university markets.
The joint venture partners
Headquartered in Toronto, Canada Pension Plan Investment Board (CPPIB) is a professional investment management organization that invests the funds not needed by the Canada Pension Plan (CPP) to pay current benefits on behalf of 20 million contributors and beneficiaries. As of Sept. 30, 2017, the CPP Fund totalled $328.2 billion Cdn.
GIC Private Limited is a sovereign wealth fund established by the Government of Singapore in 1981 to manage Singapore’s foreign reserves.
The Scion Group is a leading North American owner, operator and advisor of student housing. It has advisory experience in more than 200 campus markets and an operating portfolio of nearly 61,000 beds.
Harrison Street Real Estate Capital LLC has its head office in Chicago with an office in London. It is one of the largest real estate investment firms dedicated to the education, healthcare and storage. The firm has approximately $12.8 billion US in assets under management.