APG and Ivanhoé Cambridge Back Scape's $658M Student Housing JV in Australia

Australia’s largest owner and operator of student housing is about to move up a grade with Scape announcing today that it has formed a fresh A$1 billion ($658 million) joint venture with the Netherlands’ APG Asset Management and Canadian pension fund manager Ivanhoe Cambridge to add to its portfolio of 17,200 operational apartments.

With Scape having already set a target of 22,000 student beds by the end of this year, the joint venture is seeded with a 1,000-unit project at Melbourne’s Queen Victoria Market, near the University of Melbourne, as the company maintains its focus on creating purpose-built student accommodation (PBSA) in urban locations close to Australia’s top universities.

“The strategy to develop and operate PBSA properties in key gateway cities in Australia is entirely in line with the urbanisation megatrend, which also aligns with our sustainability aspirations,” APG head of Asia Pacific real estate, Graeme Torre said in a release. “The PBSA sector is often considered the entry level for young renters in the residential sector and as a consequence helps address important issue such as housing affordability and availability.”

APG had backed Scape’s earlier development joint ventures, which were established in 2015 and 2018, with Ivanhoe Cambridge having committed $649 million to the company’s core strategy in 2022.

Record Student Enrollments

“This investment allows us to participate in the institutionalization of the living sector in APAC and support the provision of well-managed, high-quality housing for students,” said George Agethen, head of Asia Pacific for Ivanhoe Cambridge. “The exposure to this development JV complements our recent investment in Scape Core Program and will further diversify our APAC portfolio with defensive cashflows that are driven by the favourable demographics in the region and the demand for quality education in Australia.”

In January, international student enrollments in Australia reached a record 582,636, according to government figures, at the same time that vacancy for rental housing in the country’s core cities hovers at around 1 percent.

Scape sees development of purpose-built student accommodation under the new joint venture as helping to relieve pressure on the rental housing market, and providing safe and designed-for-purpose homes.

The company’s Queen Victoria Market project is part of an A$1.7 billion development which received formal planning approval from the Victorian state government in late March, just one week after Scape, Lendlease and the City of Melbourne signed off on the urban regeneration effort. Construction is expected to begin in the coming months with completion set for the 2028 fiscal year.

Returning Partners

Founded by Stephen Gaitanos and Craig Carracher in 2014, Scape predicts that the explosion in students flocking to the Australia’s major cities over the past ten years is set to continue over the next decade which, alongside a structural undersupply of rental housing and affordability constraints, presents an opportunity for the joint venture.

“We are excited to have high calibre global investors APG and Ivanhoe Cambridge partner with us again in the PBSA sector, for our third develop-to-core JV, following the successful journey we have been on for purpose-built student housing over the past 10 years,” Gaitanos said. “This comes at a very exciting time with our current portfolio at full occupancy and a clear need for more well designed and located rental accommodation in Australia.”

With 10 purpose-built student housing and urban living assets under development set to add to its 36 operational properties, Scape has acquired 22 major project sites since establishing its first development joint venture in 2015.

Having built a team of more than 700 staff, including in-house development, design and operations teams, the company promotes its ability to invest in systems, technology, and security which provide an institutional grade living setting for its tenants and reliable returns for investors.

“Our ambition is to democratise the rental market for students and other renters alike by leveraging our operational scale and delivering inspired intelligent design experiences at value,” Scape’s Carracher said. He added that, “Built on decades of developing and creating living design experiences, our Rent-to-Live model leverages efficiencies of scale and a proven track record of successful place-making and built environments purpose built for the leasing consumer.”

Earlier today, Ivanhoé Cambridge issued a press release stating Scape Australia closed its third PBSA development JV at AUD1.0bn alongside it and APG:

Alright, so Ivanhoé Cambridge and APG have partnered up with Scape on a third joint venture to build more purpose-built student accommodation (PBSA) in urban locations close to Australia’s top universities.

 Scape is obviously an excellent partner to have in such a joint venture as it has experience buying the land to be developed, building and operating these units:

With 10 purpose-built student housing and urban living assets under development set to add to its 36 operational properties, Scape has acquired 22 major project sites since establishing its first development joint venture in 2015.

Having built a team of more than 700 staff, including in-house development, design and operations teams, the company promotes its ability to invest in systems, technology, and security which provide an institutional grade living setting for its tenants and reliable returns for investors.

I'd like to hone in on what Ivanhoé Cambridge Head of Asia Pacific, George Agethen, said on his deal: 

We are pleased to enter into this new strategic development partnership with Scape in the Australian student housing sector. This investment allows us to participate in the institutionalization of the living sector in APAC and support the provision of well-managed, high-quality housing for students. The exposure to this development JV complements our recent investment in Scape Core Program and will further diversify our APAC portfolio with defensive cashflows that are driven by the favourable demographics in the region and the demand for quality education in Australia.

Big pension funds invest in big student housing programs because they're recession-proof businesses that add defensive cashflows to their portfolio.

This is critically important, it's not just about demographics or international student enrollments in Australia reaching a record 582,636 in January. 

That's obviously important, but there's a defensive component to purpose-built student accommodation that pension funds find very attractive.

What about Canada? Canada's immigration Minister Marc Miller recently set a limit of 606,000 study permit applications for international students for 2024. Originally targeting 485,000 new students, adjustments were made for extensions and exemptions, leading to a revised target of 364,000 approved study permits.

The problem here is the student housing market is very fragmented, I had covered the market back in 2018 when Jonathan Turnbull, former Managing Partner at Alignvest Student Housing, sent me a guest comment on institutional grade student housing investment opportunities in Canada (read it here).

Apart from Alignvest, nobody is really tackling this market in Canada the same way Scape in Australia or other operators in the UK or US are doing (Alignvest is small potatoes in Canada).

Canada has great universities and specialized student housing has only recently taken off, we are in the Dark Ages relative to the US, UK and Australia.

Just go around Montreal, Toronto, London, Kingston, Vancouver etc and show me purpose-built student accommodations that compares to anything in other countries I cited.

Interestingly, last summer, the Government of Quebec and CDPQ announced the conclusion of an agreement in principle to conduct a feasibility study on converting a portion of the old Royal Victoria Hospital site into a world-class inter-university campus:

Through this pubic-private partnership, the proposed project will involve creating an inter-university campus that will consist mainly of student housing, as well as a research incubator, local shops and offices. This initiative is in line with the spirit of discussions held during hearings on the site redevelopment project led by the Office de consultation publique de Montréal. This project will contribute to strengthening Montréal’s role as a leading university city and significantly expand student housing, which is in short supply.

Located in the heart of the Mount Royal heritage site, the project will be developed with due regard to the built and natural heritage and in consultation with the community and stakeholders.

Following the feasibility study, which will be conducted by Ivanhoé Cambridge, CDPQ’s real estate subsidiary, the government will decide if it will award the project to CDPQ for execution. If applicable, a development agreement will be concluded at that time. CDPQ aims to present the government with a solution in 12 to 18 months.

In my opinion, that project can't come soon enough and will ease the affordability crisis in the city of Montreal. 

Like I said, in Canada, we are behind the student housing curve, we need a private company like Scape to set up operations here.

It's also worth noting that student housing isn't new, most, if not all of Canada's large pension funds have been investing in this space and continue to do so.

For example, last week, CPP Investments announced it has established a new real estate investment and operating platform focused on purpose-built student accommodation (PBSA) in continental Europe:

CPP Investments is forming this platform through its acquisition of Round Hill Capital’s minority stake in Round Hill European Student Accommodation Partnership (our existing joint venture), and the full acquisition of Nido Living, a leading European PBSA operator and manager. Through these combined transactions, CPP Investments is investing up to C$40 million in the platform.

Operating as Nido, the platform will be backed by CPP Investments’ real estate investment strategy and will be a wholly owned, but independently operated portfolio company with pan-European exposure. Going forward, the company will be focused on investing in and expanding the existing CPP Investments owned portfolio of over 5,000 beds, the majority of which has been operated by Nido since acquisition.

“CPP Investments and Nido together are well placed to meet the increasing demand across Europe for high-quality PBSA,” said Tom Jackson, Managing Director, Head of Real Estate Europe at CPP Investments. “Premium quality and affordable student housing is in high demand due to increased student mobility and growing participation in higher education. In Europe, student populations are increasing as labour markets upskill, resulting in growing pressure for accommodation, positioning this platform well to deliver strong risk-adjusted returns for the CPP Fund.”

In addition to managing the existing CPP Investments portfolio, Nido will continue to manage high-quality PBSA assets for other international investors. Nido will continue to provide a best-in-class service to customers during this transition. Nido, established in 2007, is a European market leader and was recently awarded ‘International Operator of the Year’ at the 2023 Property Week Student Accommodation Awards and ‘Best Private Housing, Europe’ by the 2023 Global Student Living Index. Nido’s focus on driving value for both investors and residents fits well with CPP Investments’ approach to the sector. Initially, core target growth markets will be Germany, Italy and Spain, focusing on acquiring and developing additional assets to continue to build a diversified pan-European portfolio.

Back in November of last year, BCI's Quadreal Property Group announced it has acquired CA Student Living, the student housing division of Chicago-based CA Ventures:

QuadReal Property Group, a global real estate investment, operating and development company headquartered in Vancouver, British Columbia, announced it has recently acquired the U.S. student housing business of CA Ventures. Under QuadReal’s ownership CA Student Living (“CASL”) will operate as a new brand, Article Student Living.  

The acquisition of the U.S. student housing business supports QuadReal’s long term investment strategy in the sector where it continues to have high conviction. QuadReal first became a real estate partner of CASL in 2017 and has held an indirect passive stake in the business since September 2020.  

“We are thrilled to launch Article Student Living, which represents a key part of QuadReal’s long-term investment strategy in the U.S. Article’s 500 employees are passionate about elevating student living and delivering operational excellence, and we will continue to build on their existing momentum and commitment to bring a best-in-class experience to our residents and partners,” said Dennis Lopez, Chief Executive Officer, QuadReal Property Group. 

The full acquisition will enable QuadReal to combine capabilities, resources, and best practices and create the leading real estate investment manager dedicated to U.S. student housing.  Its aim will be to meticulously craft living spaces that inspire growth and foster learning and connection.  

“We have witnessed firsthand QuadReal’s unwavering commitment to the success of our team since we first partnered,” said Thierry Keable, President, Article Student Living. “Today marks an important milestone in our journey together. Our new brand represents our commitment to deliver quality and strong performance. At Article Student Living, we strive to offer students more than a place to stay. We build and provide vibrant hubs of learning and connection.” 

To learn more about Article Student Living including services, properties and career opportunities, visit www.articlestudentliving.com.

As you can see, student housing is a high conviction area for the real estate groups at all of Canada's large pension funds.

Lastly. since I am talking about real estate, last week, Ivanhoé Cambridge, PSP Investments and Greystar announced the final completion and grand opening of, 13-story, 230-unit residential complex located at 600 Park Ave W in Denver’s historic Five Points neighborhood:

“We’re excited to be celebrating the grand opening of The Dorsey alongside Greystar, PSP and the numerous additional collaborators that played an integral role in bringing this sustainable project to its successful completion,” said Eric Desjardins, Senior Director, Investments, U.S. Residential at Ivanhoé Cambridge. “Denver is an attractive city with a balance of live, work and play and we’re thrilled to deliver a new green residential offering with dedicated co-working spaces that meets the continuously evolving demand in the Mile High City, while simultaneously aligning with our inherent commitment to sustainable investment.”

“We’re thrilled to announce the completion of The Dorsey,” said Hailey Vergatos, Senior Director for Development Services at Greystar. “The Dorsey’s strategic location offers residents ease of transportation and proximity to Downtown Denver. Greystar is committed to providing exceptional living experiences for our residents, and we look forward to welcoming a new community to the Five Points neighborhood.”

The Dorsey is comprised of 230 units, a mix of 40 studios, 143 one-bedroom, and 47 two-bedroom residences, featuring a wide range of in-unit features including the choice of two modern color themes, quartz countertops and backsplashes, stainless steel appliances, in-unit washers and dryers, wood flooring, smart locks and thermostats and a complimentary Wi-Fi offering in each apartment.

Building and shared resident amenity spaces include a sun deck and pool, a state-of-the-art fitness center and wellness studio, an entertainment kitchen, a lounge, co-working and private office spaces. Additionally, The Dorsey includes a pet wash station with grooming services available to residents by Wag N’Wash, a ski and bike repair area, and on-site parking equipped with EV charging stations.

Located in the heart of Downtown within the Five Point’s region, The Dorsey is situated within close walking distance to a variety of dining, shopping and entertainment offerings, earning a strong walk score of 95. The Dorsey has additionally received a bike score of 99 and transit score of 76 due to its central location and ease of access to multiple regional light rail, bus stations and major area roadways inclusive of I-25.

For more information on The Dorsey and to contact the team, please visit here.

This is obviously more upscale living than student housing and plays on another recession-proof theme, the continuation of income inequality in the US and around the world.

Below, international students give you a tour of Scape student accommodations in Melbourne, Australia. 

You'll notice it's no frills, nice, clean and safe, with safety being the primary factor as to why students choose to rent there. We can easily create similar purpose-built student accommodation in Montreal and other Canadian cities lacking such accommodations (governments at all levels, pay attention).