More than 500 000 students are in need of dedicated beds located close to their respective universities, according to a 2020 study conducted by the International Finance Corporation (IFC).
This shortage is expected to grow by more than 50% over the next three years as government's ambition to increase enrolments outpaces the development of new student housing.
South African Student Accommodation Impact Investments, an investment platform managed by Eris Property Group, recently raised R400 million to increase committed capital to over R1.2 billion. The platform was said to now be able to initiate new projects that, once developed, would provide beds for more than 12 000 students in tertiary institutions across the country.
Following a strategic review of the market-gap in student accommodation, coupled with its substantial development pipeline, the group opened the opportunity to the investment market and raised much-needed capital. Hence, SASAII was created to supply more beds and boost supply by leveraging the Eris skills-set.
In a press release, Eris Property Group’s executive head of investments and fund management, Vuyani Bekwa, said by providing safe and accessible accommodation, they gave students the opportunity to fulfil their potential as future leaders. “That’s what this investment is all about and we couldn’t have done it without our partners. Our aim is to provide as many quality beds as possible,” Bekwa said.
Completed in November 2019, the platform’s first investment Units on Park in Hatfield, Pretoria was a 988-bed student accommodation property developed and managed by Eris Property Group. Performing strongly since its first intake in 2020, Units on Park is currently fully let in a well-catered-for market.
The new projects under construction are Units on Jorissen in Braamfontein, Johannesburg, which is targeting Wits University with 1 071 beds, and Units on Cape Station in Cape Town CBD which is targeting Cape Peninsula University of Technology and surrounding academic institutions with 3 085 beds. Both projects will be opening in the 2024 academic year. Bekwa says there is a strong pipeline of interesting projects in the works, to be rolled out as soon as the details have been finalised.
Bekwa says Eris’ dynamic approach to private student accommodation will endeavour to commit to projects that house a minimum of 75% of the beds at the NSFAS (National Student Financial Aid Scheme) rate, ensuring that students are receiving wi-fi, water, electricity, laundry as an all-inclusive rental over and above the norms and standards as prescribed by the Department of Higher Education and Training.
All SASAII assets will qualify for globally recognised sustainable design certification and all buildings will achieve IFC Excellence in Design for Greater Efficiencies (EDGE) certification or a similar green building qualification, such as Leadership in Energy and Environmental Design (LEED).
The medium-term aim of the South African Student Accommodation Impact Investments platform will be to convert the platform into a Real Estate Investment Trust (REIT) at listing, offering the investment opportunity to the wider market and adding to the number of listed companies on the JSE. This liquidity event will ensure that early investors will be able to cash out some or even all of the equity they have pumped into the platform, according to the media statement.
Like any asset class, the South African property sector is subject to cyclical ups and downs, but last month, Makhosini Ndlovu, the product head at FNB Commercial Property Finance, said that while the global economic concerns were currently weighing on investors in most sectors of the domestic property market, those invested in student accommodation continue to reap solid returns. “Despite one or two shifts in recent years, student accommodation remains a very positive property sector, particularly given that demand for rentals in this segment continues to consistently outstrip supply.”
According to IFC, the Tshwane University of Technology has the highest demand (in excess of 25 000 beds across all campuses for student accommodation) followed by the University of KwaZulu-Natal (about 24 500 beds) and the University of the Free State (20 000), which all have a net effective demand north of 20 000 beds.
According to the report, that net effective demand did not necessarily translate into unmet demand (students with nowhere to sleep).
However, Ndlovu was quick to point out that not all student accommodation was created equal, and there were some fairly significant differences in how investors and developers should be approaching the sector depending on the type and location of the universities their accommodation services.
Ndlovu points out that the provision of undergraduate student funding through NSFAS has been a key contributor to the strength of the student accommodation sector over the past three years.
BUSINESS REPORT