8 April 2021 |

Last month, Patron Capital made its entrance into the PBSA market with the acquisition of Beech House, a Unite building in Birmingham, in partnership with Curation Capital. The deal was the first for the joint venture, which aims to build a £100m student portfolio in the next five years.

Patron partner Irina Stamate-Rocha talks to Property Week about the deal and Patron’s plans for the sector.

Why did Patron choose this deal for its PBSA debut?

Student housing has been a market we have been looking at for a long time in the UK, mainly new development opportunities to begin with.

But over the years, with the increase in land prices and construction costs, we became a bit concerned about creating new developments that are aimed at the highest price-range in the market.

We liked the pitch we got from Curation, which already has 1,000 PBSA beds under management and around 600 in HMOs. What they’re

trying to do is create a PBSA product that is comparable in terms of pricing with the HMO market.

To do this, we are looking at buying 1990s/early 2000s stock that hasn’t been refurbished in a while, and where we think we can achieve good occupation.

What demographic are you targeting in this market?

Mainly domestic, I would say. We of course like new developments — shiny new buildings are fantastic and there’s big demand for that. But to make them stack up you need to target the top 20% of demand by price, a big segment of which is international students.

We feel there is more volatility there. Both London and regional markets have been impacted by the Covid restrictions on travel in the past year, so now there is more volatility associated with that. We think it’s a business model that, albeit quite attractive, carries a lot of risk.

Other than the impact on international students, how has Covid affected your PBSA ambitions?

We actually think it’s a good opportunity to buy. Investors that have invested for a long time in the sector are still committed to it, which we have been tracking. And because our acquisitions involve quite intensive asset management – sometimes we want to take the properties offline for a year or half a year – having a short-term reduction in occupancy is not that problematic.

We actually need empty properties to be able to refurbish and get the product to the quality we want.

How many beds will you have online in five years’ time?

It depends on pricing, but at least 1,000 to 1,400 beds. We don’t want very large buildings, as the skill of our asset manager is mainly focused on smaller properties, and we really want to create that community feel for students. We have around 10 properties that we are reviewing at the moment.

What acquisition pricing are you targeting?

We are trying to target quite a high yield on cost, I would say 6% to 8% if we can. A lot of them will need refurbishment and a push to get occupancy, so they will need new management and a push for occupiers to ultimately achieve the yields we are after.