Brookfield targets student accommodation in $500m-plus play

Canadian investment giant Brookfield is forging into the student accommodation sector in Australia, striking up a joint venture with property business Citiplan.

Brookfield believes that more students will start to return next semester and next year.

Canadian investment giant Brookfield is forging into the student accommodation sector in Australia, striking up a joint venture with property business Citiplan to acquire and develop more than $500m worth of student accommodation projects near major universities.

The move by the company which is already a big player in the country’s property and infrastructure markets is a bet on international students coming back in larger numbers.

From late November until early February, 56,000 students arrived in the country.

Brookfield believes that more students will start to return next semester and next year. Australia had the second highest-population of international students before the crisis.

The partners believe they can attract students willing to pay a premium for the best accommodation and will be bringing new buildings into the market at a time when few rivals are building any.

The pair will work together to build a platform of high-quality purpose-built student accommodation assets, to be run by Journal Student Living, which Citiplan set up. The business is aiming for the top end of the student accommodation market in key gateway cities around Australasia.

It has just bought a development site directly opposite the University of Melbourne, on Grattan and Bouverie Streets, where they will develop a complex that will be ready by 2025.

The venture is looking to build up a portfolio of about half a dozen student blocks that would be worth more than $500m.

It builds on Brookfield’s $US7.4bn global student accommodation business, with 197 assets containing more than 55,000 beds across Europe and the US, including businesses Scion and Student Roost.

Brookfield head of real estate investments Ruban Kaneshamoorthy said many factors were driving student housing as the country moved into a post-Covid environment.

“There has been significant growth in international student enrolments over the past 10 years, driven by a burgeoning Asian middle class who view Australia as an attractive studying location, and we expect growth to rebound in the coming years,” he said.

Before the pandemic, in 2019, Australia had limited high-quality purpose-built student accommodation in capital cities relative to other global education hubs.

“Given the headwinds the sector has faced through Covid-19, we see this as a highly favourable environment to aggregate sites that will only be delivered once the market has normalised,” Mr ­Kaneshamoorthy said.

The play signals Brookfield’s shift into alternative real estate assets in Australia after it acquired retirement business Aveo in 2019.

Brookfield is best known for ­developing the skylines of major cities around Australia but The Australian last year flagged it was keen to broaden its local property dealings into logistics and adaptations of heritage sites for technology companies.

Citiplan had been backed by South Africa’s Redefine when it set up the Journal business in 2017. Journal has two facilities in the Melbourne suburb of Carlton.

In mid-2020, German investment house Allianz bought these two student buildings for almost $460m. Journal still runs the two facilities, which had a total of 1391 beds when sold.

Data from real estate agency Savills shows that demand for Australian tertiary education remains strong, which supports the return of international students.

The agency said new student accommodation schemes were going through planning and ­development.

Since 2010, 45,900 new student beds have been delivered across Australia’s major markets. A further 15,240 beds are to be delivered between 2022 and the end of 2024.

But Savills warned that delivery would be scaled back over the next few years in comparison to the 2019-2021 when 20,431 beds were scheduled to be completed.

The agency said investors were focused on opportunities in Sydney and Melbourne, with about two-thirds of completions.