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Munich-based student housing developer International Campus is mulling a follow-on student housing fund ‘for neighbouring countries’, following the launch of its inaugural student housing fund in Germany last week.

‘We are looking at a follow-up fund for neighbouring countries, such as Holland, or even central European markets,’ Horst Lieder, CEO of International Campus, told PropertyEU.

International Campus raised €50 mln in the first closing in September for its first student housing fund, a Luxembourg-based vehicle, Luxembourg International Campus Student Housing I. S.C.A. The capital was raised from a sole international but unnamed investor, Lieder said. ‘They liked the idea of supporting education,’ he added. ‘We are now talking to a range of investors for the next closing, from Middle Eastern to Danish investors.'

The developer now plans to raise an additional €200 mln to €250 mln within the next five years, Lieder said. The fund will then be geared to provide an investment volume of €800 mln, he added.

The German student housing market appeals to International Campus because of Germany’s ‘long-term debt structures and excellent financing conditions’, according to Lieder. ‘The student housing market has been awakening over the past one and a half years and it therefore seemed like a good time to launch our fund,’ he said.

Six projects, with a combined investment volume of €178 mln, some of which are already underway, will now be earmarked for the new fund, Lieder said. These include ‘The Fizz’ Berlin, which International campus is developing jointly with Berlin-based Gädeke & Sons. Construction has already started on the project, which will comprise 212 apartments. The first students are due to move in for the winter semester of 2014.

The Fizz Frankfurt
International Campus will also shortly start construction on its ‘The Fizz Frankfurt’ project in the Gallusviertel district, which will provide 382 student apartments. It is due to be completed in October next year. Typically, apartments are around 23 m2 and generate rents of between €500 and €700 a month (depending on city and location), with all utilities costs included. Once all ongoing projects are completed, International Campus will manage around 2,400 apartments in seven German cities.

International Campus now plans to develop properties within the fund over the next five-to-seven years and is aiming for attractive risk-adjusted returns, with a target IIR of 14%. ‘This is possible due to the excellent financing conditions here, as well as stable rents,’ Lieder said.

However, the student housing sector is still in its infancy, in terms of attraction institutional investors, although that is slowing changing. Until recently, it was largely viewed as an ‘alternative’ investment class, although as institutional investors show increased interest, it has moved more into the mainstream in the past year.

Also driving interest in student housing is the sharp rise in student numbers globally over the past decade: growth in student numbers worldwide increased from 98 million in 2000 to 165 million in 2011 and is projected to grow to over 263 million by 2025.

There are already some groups focusing purely on the student housing sector, such as the Unite Group in the UK, which is also listed on the London Stock Exchange. The UK tends to attract investment first, largely due to the size of its student population, both local and international. Over in Germany, the sector is only just starting to pique the interest of institutional investors, although players such as Youniq (in collaboration with Swiss-based private equity group Corestate) and International Campus are putting it on the map.