Blue Sky forms joint venture to invest in the world’s biggest student market

Fabian Roche

The North American arm of Australia’s Blue Sky Alternative Investments (ASX:BLA) has formed a joint venture (JV) with the team behind Student Quarters, a specialist independent student housing investment manager with approximately 5,000 beds under management.

Atlanta-headquartered Student Quarters focuses on investing in properties that are within walking distance from large public university campuses in markets with strong enrolment and demographic trends.

The US is the world’s top destination for foreign students, closely followed by the UK, then Australia. JLL reports global tertiary enrolments are expected to rise rapidly to around 263 million by 2025 – up from 165 million in 2011.

With an estimated 2.4 million purpose built student housing beds for more than 20 million students, the US student housing market is still highly fragmented – with the top ten players owning approximately 10 per cent of the off-campus stock.

Blue Sky Alternative Investments US investment director Fabian Roche said student accommodation in the US was a highly attractive asset class with the potential for large portfolio transactions.

“The market’s fragmentation provides a great opportunity for aggregation, with strong yield opportunities along the way. We think the risk profile of student housing is highly attractive and remains underpriced,” Mr Roche said.

“Student housing is a resilient asset class as demonstrated by relatively steady occupancy and rental rates through the last recession. The long term fundamentals of college enrolment should provide a durable tailwind for the sector.

“We were very impressed with the entrepreneurialism and track record of the Student Quarters team. Their expertise and long-held relationships will be critical to finding high quality deals, and we felt they were a great fit for Blue Sky culturally.”

Student Quarters president Andy Feinour said the JV would build on the team’s considerable experience across development, core and value-add segments.

“Blue Sky has built a successful student accommodation platform in Australia and we look forward to drawing on our collective expertise over here in the US,” Mr Feinour said.

“Student Quarters is actively on the hunt for quality assets, but will continue to be quite selective. We know the markets we like and where we can add value – whether through repositioning, property upgrades or improved asset management.”

In Australia, Blue Sky launched its student accommodation division in 2015, opening its first site in Brisbane in July 2016. Earlier this year, the group formed a JV with Goldman Sachs to continue to develop quality student accommodation sites in Australia, with the JV subsequently acquiring a majority stake in leading Australian student accommodation operator The PAD.

In 2015, Blue Sky also launched Cove Property Group, a JV with US property investor Kevin Hoo, in order to acquire institutional-quality commercial property assets in New York.