STUDENT ACCOMMODATION DEVELOPMENT WORLD 2017

Transcription

1 STUDENT ACCOMMODATION DEVELOPMENT WORLD 2017 NICK SINGLETON HEAD OF STUDENT ACCOMMODATION 15 August 2017

2 CONTENTS 01. PBSA Investment Structures 02. Build, Own, Operate, Transfer (BOOT) 03. Direct Let 04. Nomination / Marketing Agreement 05. Is there another alternative? 06. Every PBSA Market is Unique 07. Changing Revenue Streams

3 RISK RETURN 01. PBSA Investment Structures Build, Own, Operate, Transfer (BOOT) Providers partner with universities on a long term lease (generally years) to build, own and operate student accommodation with the facility being returned to the university at the end of the lease term. Is there another alternative????????????? Nomination / Marketing Agreement Universities partner with operators to provide some level of occupancy guarantee, generally for off-campus facilities. Marketing agreements involve the university marketing an operator as their preferred provider. Direct Let Student Accommodation providers build, own and operate the facility and market directly to students with no support from universities / tertiary providers. Page 1

4 02. Build, Own, Operate, Transfer (BOOT) Akin to a traditional infrastructure / PPP deals where providers partner with universities on a long term lease (generally years) to build, own and operate student accommodation with the facility being returned to the university at the end of the lease term. Advantages Security of cashflows Mitigated occupancy risk Universities can direct capital elsewhere (i.e. research) Leverage the experience of developers / operators Attracts lower cost of capital Attracts traditional senior lenders Disadvantages Refinance risk Limited market upside Loss of flexibility in pricing and services Suits large $$ projects Long lead time and complex documentation Page 2

5 03. Direct Let Student Accommodation providers build, own and operate the facility and market directly to students with no support from universities / tertiary providers. Advantages Increased pricing and service flexibility Speed to market Flexible location (i.e. close to public amenity) Ability to change with market conditions Scale of development Ability to integrate alternate uses Disadvantages Provider is exposed to demand risk Competitive operator market Stabilisation of cashflows Senior lender support can change Refinance risk Page 3

6 04. Nomination / Marketing Agreement Universities partner with operators to provide some level of occupancy guarantee, generally for off-campus facilities. Marketing agreements involve the university marketing an operator as their preferred provider. Advantages Access to University marketing channels / database Mitigated occupancy risk depending on the agreement No financial impost to the University Universities can get some certainty of accommodation Leverage the experience of developers / operators Disadvantages Potential limitation of pricing flexibility Potential limitation of service offering Operators are still exposed to some level of demand risk No long term certainty of accommodation for Universities Universities potentially limited influence over operator Page 4

7 05. Is there another alternative? A potential alternative is a shorter term lease or underwrite that can be extended at the universities discretion which incorporates market reviews for flexibility in pricing. Advantages Simplified documentation / structuring than BOOT Security of cashflows during critical ramp up period Universities have influence over operator Mitigated occupancy risk Leverage the experience of developers/operators Universities have certainty of accommodation Disadvantages Universities take on short term demand risk Operator has less flexibility in pricing than direct let 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% RAMP-UP PHASE GLOBAL INDUSTRY AVERAGE Yr-1 Yr-2 Yr-3 Yr-4 Yr-5 Yr-6 Yr-7 Yr-8 Yr-9 Yr-10 DIRECT LET MARKETING / NOMINATION AGREEMENT ALTERNATIVE? BUILD, OWN, OPERATE, TRANSFER (BOOT) Page 5

8 06. Every PBSA Market is Unique Victoria + New South Wales Students: 811,448 PBSA Supply: Medium Availability of Capital: High Queensland + South Australia Students: 339,483 PBSA Supply: High Availability of Capital: Low Western Australia Students: 140,452 PBSA Supply: Low Availability of Capital: Medium Tasmania + Northern Territory Students: 44,207 PBSA Supply: Low Availability of Capital: Low Page 6

9 07. Changing Revenue Streams Traditional Ancillary revenue derived from goods and services such as: laundry vending machines internet cleaning Commercial The leasing of ancillary floor space to uses such as: commercial retail co-working teaching Rental Income The major contributor to revenue has always been rental revenue, there is however increasing opportunities in other goods and services. What s Next? As the PBSA market continues to mature there is increasing opportunity for owners and operators to diversify their revenue streams. Page 7

10 STUDENT ACCOMMODATION DEVELOPMENT WORLD 2017 NICK SINGLETON HEAD OF STUDENT ACCOMMODATION 15 August 2017