Aus & NZ: Uni of Melbourne accommodation deal attracts “limited demand”

10 July 2018 - 12:00 am UTC

EOIs are in for the University of Melbourne student accommodation concession, with some usual suspects sitting out the deal, Inframation has learned.

The circa 1,000-bed student accommodation portfolio is a long-term concession at one of the country’s largest universities. Bidders are now awaiting the nod from advisors Flagstaff Partners and Ashurst on whether they are through to the next round, sources familiar said.

Almost identical in structure to the Australian National University Canberra 30-year concession for campus residences, the contract will manage existing student buildings and develop future new accommodation, sources said.  

However, the Melbourne deal may differ in one crucial way – fewer players are believed to be interested, two sources suggested.  

Dutch fund DIF and AMP Capital – both bidders on ANU Canberra – are thought to be in the race, but John Laing is passing, sources familiar said. Infratil has been looking at the deal, Inframationunderstands, although it is unclear whether it submitted an EOI.

DIF is thought to be pairing up with Tetris Capital. The duo successfully netted University of Tasmania’s student accommodation assets on a 30-year licence in 2017.

“There is limited demand….the market’s just not the same [as it was],” one source said.

Four consortia battled it out for the ANU contract in 2016 – DIF with Brookfield Global Integrated Solutions; InfraRed Capital Partners with Balfour Beatty; and AMP Capital, which all lost out to Infratil and Commonwealth Superannuation Corporation. The winners now manage a 3,700-bed portfolio of student accommodation and provide hard management services including lifecycle replacement, in return for rental payments from students.

The lack of major greenfield opportunity and profit for developers plus the need to take on demand risk [for student numbers] are among factors dissuading potential suitors, two sources said. Student accommodation is “a good sector but we don’t want to buy existing assets… [the deal] didn’t have enough greenfield opportunity,” said one.

The University of Melbourne declined comment.

Australian universities are expanding fast with increased demand from fee-paying domestic population plus a spike in international students, who pay higher fees.

But funding sources are being cut, straining existing infrastructure and creating a need for private finance, one source explained.

Last year, the University of Melbourne awarded a Lend Lease led consortium a 42-year contract to design, construct and maintain its new Carlton Connect Innovation Precinct, which includes 450 beds as well as R&D, community and retail buildings.

Macquarie opportunity
Other universities are following suit, partnering with the private sector on student accommodation.

Macquarie University is seeking EOIs for the Central Courtyard project, part of a broader campus development plan that includes student accommodation, a spokesperson said.

The University of Newcastle in New South Wales and Monash University in Victoria are also tipped to be on the lookout for private finance, sources indicated.

Melbourne