Student Accommodation: Growing Opportunities 2018 PFA Conference Tim Peel, CFO - April 2018
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Student Accommodation: Growing Opportunities
2018 PFA Conference
Tim Peel, CFO
April 2018
1
Outline
1. Global interest
2. The opportunity in Australia
3. What does Scape offer?
4. Impact on Melbourne social infrastructure
2
Global Purpose Built Student Accommodation (PBSA) sector
… not an alternative asset class
• Over the past decade, the global Global student accommodation investment activity (2007-2016)
PBSA market has become accepted
as a mainstream investment
category supported by some of the
largest institutional investors in the
world
• Investment in the US, UK and
Western Europe alone reached Source: Savills World Research (2017)
historical highs of $16.4 billion in
Largest PBSA transactions 2016/17
2016, with strong momentum from
Seller Price Destinatio
Deal Buyer Buyer nature Seller Date Origin
nature (USD) n
growing fundamentals Campus Crest
Harrison Street Private equity Campus Crest Public $1.9bn Mar 16 US US
Buyout
InvenTrust
Private equity / US /
• Deal flows are large driven by global Student
Housing
Scion Group,
CPPIB, GIC
Pension fund / InvenTrust Public $1.4bn Jun 16 Canada / US
SWF Singapore
Portfolio
institutional search for scale and Oaktree UK
Student Private equity / Oaktree UAE /
GSA, GIC Public $900m Sep 16 UK
Accommodatio SWF Capital Singapore
operating, income producing n
Avenue Private
Rose Portfolio Brookfield AM Private equity $580m Mar 16 Canada UK
assets in a low yield environment Capital Group equity
Union State Private
Source: CPPIB (2017)
Savills World Research Pension fund Blackstone $580m Apr 17 Canada UK
Portfolio equity
- 37% of investment was cross 3
Global Purpose Built Student Accommodation (PBSA)
Strongly supported by institutional investors
Most active global investors in student housing (2016/2017 rankings)
Total AUM
Rank Investor Type Origin
(US$)
1 GIC Sovereign Wealth Fund Singapore $100 bn
2 CPP Investment Board Pension Fund Canada $337 bn
3 Mapletree Investments Investor Singapore $30 bn
4 Scion Group Owner / Operator US $5 bn
5 GSA Group Developer / Owner / Operator UAE $8 bn
Source: Savills World Research (2017), company websites
Global Investors Australian Investors
4
Australia compared to the rest of the world
Australia enjoys an exceptional share of international students and benefits from proximity to Asia
• Australia enjoys the third largest number of Inbound international student rankings
international students globally (behind the US
Top 100
Country Rank
and UK) and is a preferred educational Universities
United States 1 41
destination for Chinese, Indian and South
United Kingdom 2 12
Korean students Australia 3 6
Germany 4 10
Canada 5 4
• Historical underinvestment in PBSA has led to
Source: Times Higher Education world university rankings (2017)
a continued shortage of beds for students in
Australia compared to its global peers
Beds / total
Beds / totalenrolled students
enrolled students Top outbound markets and destinations
100%
75%
50%
24%
25% 16% 15% 12% 11%
6% 6%
0%
UK Netherlands France USA Germany Australia Spain
Source: Savills World Research (2016) Source: Savills World Research (2016)
5
Australia as an international student destination
A globally relevant market with strong fundamentals
Record number of international students choose Australian institutions for a world-class tertiary education
Australia benefits from its proximity to fast-growing Asian countries
High living standards and a quality degree in Australia are major drawcards for international students
Education is Australia’s largest services export and 3rd largest export behind iron ore and coal
Scape’s key target markets in Australia remain significantly undersupplied
Securing prime PBSA locations and providing students with a premium offering will allow for ongoing rental
growth
Ongoing institutionalisation of the PBSA and the broader built-to-rent sector 6
Education is a mega trend sector with strong demand fundamentals
Record number of international students choose Australian institutions for a world-class tertiary education
~9% CAGR in total international
student enrolments since 1994
Note: Decline in enrolment observed during 2010 to 2012 primarily related to a short-term decline in Vocational Education enrolments – affected by (1) uncertainties in relation to Federal
Government’s Skilled Occupation List (which was under review in 2009/2010); selected vocational education colleges under investigation / shutting-down (abuse of student visa system);
(3) AUD appreciating to US$1.10 (note, in contrast, demand for Higher Education remained resilient)
7
World-class Australian universities and student cities
High living standards and a quality degree are major drawcards for international students
QS World University Rankings (2018) Ranking “The number of international students coming to Australia surged to
record levels last year and there are hopes the political instability
Australian National University 20 unleashed by Donald Trump and Brexit will help lure even more
foreign students to the country…”
University of Melbourne 41
5 Australian Sydney Morning Herald, 22 February 2017
University of New South Wales 45 universities
featured in
University of Queensland 47 QS Top 50
world “Almost three quarters (74%) of the 65,696 respondents said Australia
University of Sydney 50 rankings in was their first choice destination for overseas study…reputation of
2018 Australian qualifications was the top factor when deciding to study in
Monash University 60 the country, true for 95% of respondents…reputation of the education
system was a close second with 94%, while 93% of respondents cited
University of Western Australia 93 personal safety and security as a factor for choosing Australia.”
Professionals in International Education News, 22 February 2017
QS Best Student Cities (2017) Ranking
Melbourne 5
Sydney 13 Australia is
home to 6 of “Overall satisfaction had climbed two percentage points since the survey
Brisbane 20 the top QS began…other main scores had also increased steadily since 2010, with
90 per cent satisfied with their living experiences and 88 per cent
Best Student
Canberra 22 with their study experiences — up six and four percentage points
Cities in the respectively…”
Adelaide 44 world in 2017
The Australian, 26 October 2016
Perth 50
Source: QS (2018), news websites
8
Education continues to be key to the Australian economy
Australia’s largest services export; 3rd largest export behind iron ore and coal
Top 5 Australian services exports (A$m) Top 5 Australian exports overall – 2017 (A$m)
• $32.2bn reflects student spending on tuition,
#1 accommodation, living expenses and domestic
travel during their studies
#3
63,147
32,163 • Deloitte further estimates an extra A$1bn in 57,124
spending – from short-term language studies
24,223 and visiting friends / relatives of international
students 32,163
25,612 24,223
10,199
7,589
4,264
Education Other Travel Business Transport Financial Iron ore Coal Education LNG Other Travel
Services Services
Source: ABS 2018 Source: Department of Foreign Affairs & Trade; ABS
Growth in Australia’s international education sector (A$m)
Contribution to Australian economy: A$32.2 billion 32,163
(2017)
10-year CAGR: ~9.6% 20,431
23,294
26,293
19,090 19,252 18,223 17,928
16,447 17,235
12,808
8,631 9,015 10,409
6,734 7,746
4,358 5,821
3,781
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2016 2017
Source: ABS 2018
“International education is Australia’s third-largest export earner, contributing many more than 130,000 jobs here in Australia…76% of our international
students chose Australia as their first preference destination, compared to 71% in 2014 or 70% in 2012. So, a pleasing indication that as the number of
students have grown, so too has the fact that Australia has been their first choice destination…” – Simon Birmingham (Australian Minister for
Education and Training)
9
Significant PBSA supply gap across Australia’s key education markets
Australia remains significantly undersupplied
PBSA supply (current & pipeline) as a % of total students by city – key target Australian markets vs the UK
Australia PBSA penetration levels UK PBSA market
remain significantly low compared
(Scape’s London / Bristol portfolio is 100% occupied)
to the mature UK market
68% 68%
65%
63%
54%
42%
39%
34%
31%
14%
11% 12%
5%
Perth Melbourne Sydney Brisbane Canberra London Bristol Edinburgh Manchester Cambridge Oxford Durham Liverpool
Source: Savills Market Report – Australia Student Accommodation (2016)
10Affordable tuition costs in Australia
Tuition fees for top Australian universities are affordable compared to global counterparts
Tuition fees per annum for top 8 universities for Australia / USA / United Kingdom (The Times Ra
nkings - 2018)
UK $26,00
$25,944 $40,00
$40,319
0 0
USA $40,00
$40,000 $49,00
$49,330
0 0
Australia $28,00
$27,975 $31,00
$30,960
0 0
Source: The Times Higher Education World University Rankings 2018, university websites
Note: Figures reflect 2018 academic year tuition fees (US$) and are predominantly for business degrees. Australian tuition fees converted to USD at 0.75 USD/AUD, UK
tuition fees converted to USD at 1.38 USD/GBP
11A brief history of PBSA in Australia
Entry into market driven by strong supply-demand fundamentals
PBSA in Australia – Market entry
• Scape Australia established in 2013
• JV1 equity commitments grown from
• Transitioned from • Entered Australia
managing general with ~700 bed
A$220m (2014) to A$615m (2017) • JSE-listed Redefine
• Secured commitment from Allianz in Apr Group chooses
accommodation to development in
2018 Melbourne for first
developing PBSA Southbank
• ~5,500 PBSA beds under development asset
(Brisbane)
across 10 projects a significant PBSA
pipeline across Australia
1997 2002 2006 2008 2011 2013 2016 2017
• Created by
• Opened first private • The Pad Plenary Group
PBSA operations in established • Entered Australia • Launched first
with first asset
Sydney, Melbourne, • Scape Founders’ with acquisition of development
built in Sydney
and Brisbane majority share later 350 bed site in (~ 700 beds) in
(~100 beds,
• Property manager purchased by Blue Parkville, Brisbane
completed 2013)
only at this point Sky and Goldman Melbourne
Sachs and
rebranded to Atira
Source: Scape, publicly available information 12A brief history of PBSA in Australia
Entry into market driven by strong supply-demand fundamentals
PBSA in Australia – Historical and forecast PBSA supply
160,000 $1,600m
140,000 135,000 $1,400m
131,000
119,000
120,000 $1,200m
105,000
100,000 97,000 $1,000m
87,000
82,500
80,000 76,000 $800m
60,000 $600m
$557m
$530m
$475m
40,000 $400m
20,000 $200m
$87m
0 $0m
2014 2015 2016 2017* 2018 2019 2020 2021
Number of Beds [LHS] Value of Transactions [RHS]
* Year to September
Source: Scape, Savills (PBSA) Market Report 2017, publicly available information 13International yield comparison
Australian PBSA yields expected to reach 5.50% by 2020
• The Australian PBSA sector is classified as being in its Historical and forecast PBSA cap rates –
Australia
development phase
• Relative to core property sector yields, Australian
PBSA has offered attractive return premiums
throughout the early stages of the emerging sector
• Transactions of operational PBSA to date are limited, a
trend is emerging showing the sharpening of yields
Source: JLL
(2017)
to be more in line with core sector yields (expected
International yield comparison (current)
to reach 5.50% by 2020), similar to international 8.0%
markets 7.0%
6.0%
• Transactional volumes of stabilised PBSA assets is 5.0%
4.0%
expected to increase over the next ~3 years as
assets complete construction, commence operations
Source: JLL
(2017)
and stabilise occupancy
14Scape is the 2nd largest owner & operator of direct-let, off-campus
PBSA
Scape is a leading PBSA owner and operator in the Australian PBSA market
Strong alignment of interest (significant Founder ownership interest in operator and direct ownership in underlying
real estate)
• APG
• Washington State • Bouwinvest • Goldman Sachs / • Wee Hur • Redefine
• GIC • N/A • N/A • Valparaiso
Investors Investment Board • ICBCI Blue Sky • Listed on SGX • Listed on JSE
• Allianz
Scape
7,000 6,634 Founders own
90% of the
operator
6,000 5,501
5,000
3,854
4,000
3,366
3,125 3,113
3,000 2,585 2,500
2,000
1,304
1,000
0
Urbanest Scape Atira Iglu Wee Hur Student Housing GSA (Student Student One Redefine (Journal)
(UniLodge Australia Housing Co.)
managed)
Source: Scape, Savills (PBSA) Market Report 2017, publicly available information
Notes: Significant majority of UniLodge assets (~12,000 beds in total) are not purpose-built, only purpose-managed (typically comprises an existing residential building leased out to students
and managed by a student accommodation operator) – excluded in this chart. CLV assets are on-campus and not purpose-built – excluded in this chart.
15Scape Brand Video
https://www.dropbox.com/sh/s8foilxakesf78e/AACmFm1xJw3mZIXZ3FEedUd8a?dl=0
1617 17
Scape is changing the shape of
student
accommodation in three big ways…
…to shelter & shape the minds of
tomorrowScape are offering students a holistic, curated series of events which will ensure they are engaged socially, motivated in their studies
and inspired for life after uni. Understanding the student psyche and anticipating their needs has allowed us to create a solution broken
down into 3 main areas. These are the foundations allowing us to provide students an experience which will be unique to living at a
Scape building.
In each of these areas, we are celebrating our buildings as the hero: Scape South Bank, Scape Swanston and Scape Abercrombie
are galleries in their own right – bringing the Scene, Balance and Horizons into our students homes.Scape’s PBSA is superior to all other student accommodation options
Scape’s PBSA product is the most attractive accommodation solution for students (international and domestic)
Residential On-campus Non-Scape Scape
Services & amenities Homestay
units options PBSA PBSA
Prime location within walking distance to university ?
Convenient access to public transport links ? ?
Institutional ownership (safe landlord)
Premium / best-in-class design
Purpose-built living / communal spaces for students
Online booking journey (paperless / accepts foreign
currency)
All-inclusive base rent
In-house operational / cleaning team (all Scape
employees)
Pastoral care (student resident advisor)
24 / 7 concierge and security
Industry networks (start-up ecoystem / WeWork
connectivity)
Exclusive retail discounts
International students will increasingly gravitate towards purpose-built student accommodation solutions as
the Australian market continues to mature (in line with overseas PBSA markets)
23Branded vs White Label operators
Strong management will be key to success
• Having innovative spaces and modern
facilities that are specifically designed
for students is the key difference
between different operators in the
Australian and international market
• As the sector attracts more investment,
strong management and Scape Swanston
differentiated products will begin to
segment the market
• Ensuring students not only have a
suitable alternative to standard rentals,
but a good experience is critical for
sustainable institutional investment in the
Scape Southbank Scape Abercrombie
sector
24Scape Swanston – site photos
25Scape Swanston – student events
26Scape South Bank – site photos
27Scape South Bank – student events
Melbourne CBD hosts the highest number of total students across
Australia
Melbourne CBD is the leading city in Australia for tertiary education
No. 1 in total full-time student numbers across key Australian gateway cities (CBD only)
International students contribute
Melbourne significantly to Melbourne and Victoria
CBD is #1 in
Australia
(total full-time
~40,000 ~$65,000
students) average
112,029
full-time
spend /
jobs
year
created
77,760
studying in
(Victoria)
64,807
Melbourne
39,428 37,742
24,174
Melbourne Sydney Brisbane Perth Adelaide Canberra
Source: Savills Market Report – Australia Student Accommodation (2016), Melbourne City Council – “A Great Place to Study: International Student Strategy 2013-2017” (jobs created),
University of Melbourne International Student website (average spend)
29Example: Central location of Scape’s Melbourne assets – All will add to core CBD infrastructure (including co-living, co-working and retail)
University of Melbourne Central
1 1 9 Shopping Centre &
Melbourne, Main
Campus Train Station
University of 10 State Library of
2 Melbourne, Victoria
2 Economics Building
11 QV Shopping
University of Centre
4 3
3 Melbourne, Business S
School Scape Swanston
C
University of Scape Carlton
4 Melbourne, Law F
School Scape Franklin
5
RMIT City Campus.
C
6
7 RMIT, Business
School & Sports
8 Centre
7
RMIT, Architecture &
8 Design School
5
F RMIT, Design School
S
6
10
9
11
200m
30Scape’s asset portfolio is a significant contributor to Melbourne CBD
Melbourne CBD is deserving of the highest-quality PBSA solutions to be delivered by Scape
Melbourne is Australia’s leading city for world-class education and domestic / international students
Scape’s world-class building designs are a key contributor to Melbourne’s iconic cityscape / skyline
Trophy assets provide best-in-class living and learning solutions to domestic / international students in Melbourne
Significant employment opportunities (~40,000 jobs) generated during building construction and ongoing building management upon completion
Premium mixed-use buildings delivering signature student communal areas encouraging innovation and collaboration
Existing global partnership with WeWork – giving our students unique start-up employment opportunities
Singular ownership of all Scape buildings (not strata) with premium rooms built entirely for rent (not for sale)
Increasing residential housing / rental availability (for non-student population) and improving affordability for the broader rental market in Melbourne
CBD
31The future of PBSA
Strong fundamentals to drive yield compression
Continued institutional involvement will increase capital flows into PBSA in Australia and
globally
Likely institutionalisation – not forever an alternative sector in Australia
Quality operators with a differentiated offering will succeed
Winners will offer strong management and differentiated products (including Co-Living)
Yield compression will occur as the market matures
PBSA will continue to add to core CBD infrastructure
32Thank you
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