Metro Holdings and partners starts UK student accommodation fund with initial $108m

The Red Queen, situated north of the University of Warwick, comprises new student accommodation of approximately 210 en-suite beds over five floors.
The Red Queen, situated north of the University of Warwick, comprises new student accommodation of approximately 210 en-suite beds over five floors.PHOTO: METRO HOLDINGS

SINGAPORE (THE BUSINESS TIMES) - Property group Metro Holdings has set up a new student accommodation fund named Paideia Capital UK Trust with property player Lee Kim Tah Holdings and construction and engineering group Woh Hup Holdings to acquire properties in the UK.

The fund, which has a first close of £60 million (S$108 million), will acquire its first purpose-built student accommodation (PBSA) seed property known as Red Queen, Warwick for £21.5 million, Metro said in a bourse filing on Monday (Dec 21).

Metro's wholly-owned subsidiary Sun Capital Assets entered into a joint venture with Lee Kim Tah and Woh Hup's wholly-owned subsidiary Aurum Investments to set up the fund, which has a potential asset portfolio size of £150 million.

The three partners each contributed £18 million to the initial aggregate committed capital of £60 million for the fund, while third-party investors contributed the remaining £6 million.

Sun Capital, Lee Kim Tah and Aurum will each hold a 33.33 per cent stake in Paideia Capital UK Trust's fund manager and trustee. The trustee has incorporated Paideia Capital, which will acquire PBSA properties in the UK via special-purpose vehicles.

The Red Queen, Warwick has a committed occupancy rate of about 90 per cent. It is 1.6km north from the main campus of the University of Warwick, which has around 22,000 full-time students.

The property, completed in September 2020, has about 210 en-suite beds over five floors and around 26 car parking spaces, secured bike storage and laundry facilities. It also has several communal spaces, including a study area, gym, cinema and lounge.

Metro chairman Winston Choo said the investment represents an "excellent proposition" to further diversify the group's investments through the acquisition of suitable PBSA assets. It will position Metro favourably amid the rising demand for PBSA in the UK, he noted.

"This will further enhance the quality, diversity and income profile of Metro's investment portfolio and at the same time generate a stable and recurring income stream for the group immediately," Mr Choo said.

With low correlation to traditional real estate asset classes, the PBSA asset class is ideal for portfolio diversification where it is less susceptible to economic volatility, Metro said.