Flood of student housing money continues

One of the country’s major players, Scape Student Living, which has 10 developments in Sydney, Melbourne and Brisbane, with studios being built and in planning, has backing from offshore and local lenders for its projects.

While many banks have tightened lending to apartment developers, forcing some to turn to private or non-traditional lenders, financiers appear to be backing student accommodation as a major asset class.

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“In our experience, debt providers are keen to get set to exposure in this sector with a focus on Melbourne and Sydney, but we have found the international banks are more supportive and more experienced to finance Brisbane assets where the residential apartment exposure of most of the big four banks is already considerable,” Scape director Craig Carracher says.

Scape, which last week in Brisbane unveiled Scape South Bank, housing for 788 students, has the support of international bank HSBC for the Vulture St property. Carracher says the lender understands student accommodation and has financed projects internationally.

An artist’s impression of one of Scape’s buildings in Melbourne.

He says HSBC has also committed to financing the group’s Tribune Street property for another 600 bedrooms, which connects to the Scape South Bank building. The former asset was bought by Scape this year and now has development approval, with the company planning to build that project next year.

HSBC also funded Scape’s smaller property on Abercrombie St in inner-city Darlington at the University of Sydney for $10 million.

Elsewhere in Brisbane, where rival players have flagged their concerns about oversupply, Scape’s Toowong Village property targeting UQ students is being financed by Singapore’s UOB.

Carracher notes the group’s existing international bank was interested also but was already backing the two large projects in South Bank, with lending of about $125 million, and UOB has committed about $65m for Toowong.

Scape Student Living has multiple accommodation buildings in Sydney.

In Melbourne, Scape has tapped local heavyweight the Commonwealth Bank for its Swanston Street tower for about $100 million and the bank has worked on earlier projects in the city. Scape last week launched the project, Scape Swanston, at 393 Swanston St in Melbourne opposite RMIT and the State ­Library.

Carracher notes that some Australian banks have limited experience in the purpose built student accommodation sector and were still trying to understand the exposure to the overall build-to-rent sector.

Two of the majors — Westpac and ANZ — are yet to lend to significant developments in the area but are investigating the build-to-rent industry.

“It’s clearly a different risk profile but in some respects does not have any completion or settlement risk because the demand profile for international students is so great,” Carracher says, noting that Scape projects are full when they open.

Scape has also won heavy equity commitments and has completed investing for its first fund. The group has now soft circled its $500 million of capital raising for its second fund that will deliver another 5000 student bedrooms to complement its existing 5500 bed holdings. The group has also secured its first site for the vehicle at the doorstep of the University of NSW at near-CBD Randwick.

This article originally appeared on www.theaustralian.com.au/property.