“Thanks to the recently completed work for one client, we had a very competitive development market – one client bought a £38 million student programme in central London – and immediately leased a third of the empty student units that were surplus for their own needs.” The Board of Directors of Empiric Student Property plc is pleased to announce that the Group has entered into a nomination agreement with the University of Bath (the “Appointment Agreement”) for the Group`s three operational properties (Piccadilly Place, Canal Bridge and Widcombe Wharf) and two assets completed in September 2016 (1-3 James Street West and James House) in Bath. The duration of the appointment agreement is five years from the beginning in September 2016 (with the exception of the 141 James House studios, which are covered by the appointment agreement for one year from the beginning). Local planning authorities could play a role in this regard. The national planning policy requires local authorities to take into account the need for student housing. It also allows local authorities to count student residences in their housing supply targets, as it frees up existing housing for the local population. This provides an incentive for local authorities to build relationships with student housing providers. Another type of student residence project is that of projects negotiated by the university on campus where the university has different levels of control, but often, to obtain that control, the university must make a commitment through an appointment agreement. “We are delighted to have secured access to these beds on behalf of the students at the University of Bath. We recognize the importance our students place to live that is convenient, safe and conducive to effective learning. We believe that Empiric understands these requirements and that our students appreciate the quality of the accommodation offered. Specially built private student dormitories, on the other hand, are regulated by the HMO licensing system.
This is the case whether or not the supplier has accepted an approved code of conduct. The HMO license is mandatory when five or more students share a kitchen. This means that studios and small shared apartments would not fall under the regime. Here, the operator has to market the PBSA directly to the students, rent and manage the block. The mechanics are similar to how traditional property managers manage a property for rent in the private rental sector. However, managing the PBSA`s inventory requires a much more hands-on approach and usually requires an on-site team if the program is substantial (over 150 beds), which many tend to be. Marketing methods and tactics aimed at students should be tempting and encourage students to occupy the accommodation, which usually has a contract of 43 to 51 weeks. There are as many different types of collateral as there are types of PBSAs. Each guarantee applies not only to the transaction in question, but also to each market. Careful consideration of the property and its position in the local market at the university or city level is necessary.
One thing that remains constant is that the UK`s reputation for first-class education, the weakening of the pound sterling and the undersupply of housing will continue to secure PBSA`s place as an attractive asset class. “If this trend continues, it will be an additional consideration for the student housing market, but there is still very strong demand, especially in London, where there is an increase in demand from international students with higher purchasing power.” Jonathan Fewster, a partner at Bircham Dyson Bell LLP, believes investors are turning to student dormitories because they can be backed up by academic appointment agreements, putting the risk on the institution rather than the investor. So how are student dormitory developments funded? One of the main strengths of a university-backed model is that it is possible to move from ordinary commercial financing to a project funding structure that has the following advantages: From understanding the need for universities to attract students to the intricacies of continuing management, we have practical experience in executing major projects. On the other hand, the university may simply allow the provider to advertise their accommodation on campus and beyond, not to enter into an agreement. In some cases, the university may actively oppose the development and have no relationship with the provider. “In the past, student housing has not triggered a planning gain requirement through affordable housing, although we have recently seen the trend reverse in Southwark, which imposed an affordable housing requirement on a recent program. Again, good faith clauses can be helpful. However, challenges that apply to the applicability of such clauses should be taken into account when considering what this should accomplish in the circumstances, as they are generally interpreted restrictively. Harper Macleod has worked for many developers of commercial student housing projects, including the Derwent Housing Association as an investor, developer and provider of facilities management services in a number of these projects. Harper Macleod was involved in the renovation of a large student residence at FifePark for the University of St Andrews in 2014.
The development will be built and managed in collaboration with Campus Living Villages. M&G Investments provided project financing under a bespoke leasing and governance structure with inflation-related rent reviews and management controls maintained by the university. However, this does not prevent students from living in makeshift shelters during the first few weeks of university, when important social bonds are formed. Unless the university supports its agreement, funders will assess the risk associated with the application by examining the location of the university, the location of the campus and, in particular, the possibility of renting unused space to students from other nearby institutions or to key workers. For some institutions in large cities with multiple educational institutions, this may not be a big problem for funders, while in other regions it may be a significant blocking factor. The regulation of student housing varies between private and university providers. .
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- On April 14, 2022
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