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Blackstone pays record £4.7bn for student housing firm iQ

by Nikki Dale -

Last month The Guardian Business reported a new record-deal in the private property sector.  The giant American private equity investor, Blackstone Group Inc. agreed to buy one of the UK’s largest owners and operators of student housing, iQ Student Accommodation for a staggering £4.7bn.

The largest-ever private property deal in the UK

Blackstone has struck the largest-ever private property deal in the UK by agreeing to acquire the UK student accommodation firm iQ in a £4.7bn deal.

The New York-based private equity firm is buying iQ from the US investment bank Goldman Sachs and the health research charity Wellcome Trust.

PBSA and the undersupply uncovered

The property firm is one of the main players in the rapidly growing UK student housing market. It owns and operates 67 student premises across the country, with more than 28,000 beds and plans to add a further 4,000.

Investors such as private equity firms and Goldman have been piling into purpose-built student housing in recent years, as demand continues to outstrip the number of beds provided by 30%.

Last year, 32,000 new beds were delivered across the UK of which nearly 90% were from private sector providers. A further 114,000 beds are in the pipeline.

Despite the increased investment, there were fewer than 650,000 student accommodation beds for 1.8 million undergraduates and postgraduates in the UK last year.

The short supply has been pushing up rents. Rents for en-suite accommodation have been at 16% above the rate of inflation since 2014, according to a recent report. High rent bills have led to student rent strikes in the past.

At iQ, rents start at £75 a week in Bradford, and £195 a week in London. An en-suite room in Bloomsbury in the centre of the capital costs £460 a week

Some of the iQ accommodation being built is vastly different from traditional student halls and includes studio flats or en-suite rooms, fast broadband, on-site gyms and cinemas.

The firm says its rent includes wifi, access to the gym and communal areas, alongside 24-hour security, insurance and utility bills.

More than half of the company’s portfolio is in London, where iQ is the largest owner of student accommodation. It also offers student digs in other leading university cities such as Manchester, Leeds, Sheffield, Edinburgh and Birmingham.

The firm was formed in 2006 with Wellcome as one of the founding investors, and merged with Goldman Sachs’ student housing business in 2016.

Blackstone’s first foray into luxury student dorms came in 2006 when it created Nido with the developer Generation Estates.

The first Nido tower, with 1,000 beds, was opened that year in King’s Cross, London, followed in 2010 by a 33-floor tower in Spitalfields, east London with a 24-hour gym and a pizza vending machine. Nido was sold to the property firm Round Hill Capital six years later.

Rob Roger, iQ’s chief executive, said he was looking forward to “working with a partner of Blackstone’s calibre, as we continue to deliver our ambitious growth plans”.

“With student numbers in the UK at an all-time high, and growth set to continue in the coming years, there has never been a more exciting time to be a leading player in the student accommodation sector.”

The number of full-time students in the UK has reached a record level. This is projected to grow by a further 461,000 by 2030 to more than 2.2 million, with international students expected to make up 45% of the total.

Companies own and operate 18% of purpose-built student accommodation currently, while universities account for a further 18% and private rentals make up 42%.

David Coates, MD of REW said.  “This deal is an endorsement of the British economy and pays testament to the shear strength of PBSA as a high-quality asset and business. 

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