The Yield welcomes Alex Bellingham, Head of Sales at Q Investment Partners (QIP). He talks to us about student housing in the UK and their latest product offering.
Hi Alex, tell us about yourself and Q Investment Partners…
My name is Alex and I am the Head of Sales at Q Investment Partners. We are a Singapore-based private equity real estate firm. We raise capital globally and deploy it in developed markets such as the UK and the USA. We are also looking to invest capital opportunistically in APAC in places such as Australia.
Essentially, we invest in alternative real estate, specifically the living sectors. This refers to property utilised across your life cycle from cradle to grave i.e. student housing, co-living, multi family, and senior living: basically anything with a bed.
We have two live investment strategies. The first is in UK student housing, where we look to partner with local partners to develop and stabilise institutional grade student buildings. We look to hold the assets over the medium term, ideally around 3-5 years. The second investment strategy is in US co-living, where we also look to develop and stabilise assets with a medium-term investment horizon.
Let’s look at student housing in the UK… where do you like to invest?
This is best discussed through a “pre-COVID” and “post-COVID” lens.
We targeted pre-COVID investments in 15 out of a potential 77 UK student markets and looked at key fundamental investment indicators such as the strength of the university (the Russell Group of Universities is probably the best example of one such metric), supply of student beds and demand from students.
The advent of COVID-19 does not mean that we have radically changed our investment criteria, but we have started to re-imagine what the new norm will be, and respond accordingly. The pandemic has opened our minds to a broader investment approach – in both our investment principles and strategy.
In relation to investment principles, for example, some of the oldest, most well-established universities and the cities they operate in are being stress tested. Those that do well in adapting to change will naturally attract further capital investment often described as a “Flight to Quality”.
We are now going back to first principles to help us reassess our investment underwriting. Fortunately, in the markets where we have capital deployed, we have seen positive responses from the universities and local governments in their approach to managing COVID-19.
As we look forward to the 2020 academic year, it will be important to observe additional quantitative factors such as financial stability of all universities, and qualitative factors such as individual universities’ capability in diversifying their curriculum to both online and in person. We will also assess the quality and appeal for their courses in “need-based” sectors such as healthcare and education. We are keeping an eye on accommodation bookings between July and September to gain greater insight.
Anecdotally, we have seen a well-known UK university respond to the pandemic by making their domestic and international students feel very unwelcome, such that many of them returned home with a 10-day notice period. As a result, the university told the student accommodation provider to refund the students as they would not be attending. That market is now off our target list.
The new norm will not mean a revolution in investing in UK student housing, but there will certainly be an evolution. How this evolution will unfold will be seen over the next 3-24 months. We are constantly monitoring the situation and waiting to validate interdependences between quantitative and qualitive factors. Fortunately, we are in a good position to manage the impact of the change. Our investment strategy is dynamic, and we are raising capital shortly to exploit dislocation opportunities in equity and debt across the real estate life cycle.
Staying in the UK, how are you finding the impact from Brexit?
The election result and ‘completion’ of Brexit gave us political clarity. In its immediate aftermath, we found the demand for student housing to be at the highest that we have experienced before the pandemic became an issue. We had many investors chasing us for student housing opportunities. This is testament to the sector’s growth into a core investment class and this clarity only reaffirmed this for our investors.
We are also now looking into adjacent sectors such as UK care homes. We are still confident, but naturally we are monitoring each operator closely on how they respond to COVID-19.
Tell us about your product offering.
We have the benefit of forming our investment principles through our GFC experience between 2009-2012. Despite the very negative economic situation at the time, we consistently produced returns of 20% per annum, which is also testament to the resiliency of the sector.
COVID-19 isn’t the same as the GFC but we are observing many opportunities coming through in the sector. Real estate as an asset class is relatively illiquid compared to financial assets such as equities and bonds. Therefore, the knock-on market dislocations will take some time to filter through.
In this respect, we expect dislocation opportunities to arise in the next 6-18 months, and I am excited at the prospect of the upcoming opportunities. However, capitalising on these opportunities is going to require ready cash and an established network of local relationships to allow us to move quickly. To date we have a pipeline of deals we expect to be distressed, and having gone through previous crises, we are confident in our ability to execute once they are ready to be transacted. Hence, we are looking to raise for an opportunistic fund in order for us to be nimble and prepared with ready capital.
Our new product offering will adopt a flexible investment strategy to take advantage of the market dislocations. It will encompass opportunities from the ground up, across the entire real estate life cycle and across the whole spectrum of debt and equity. Throughout our strategy, we will be optimising our investment principles for the new norm as well.
Who are you looking to reach for this product offering?
Our capital comprises the entire investor spectrum from professional investors, family offices and institutional investors. For this offering, we are also looking to partner with existing investors who are looking to re-invest. We also work extensively with intermediaries who provide access to the above capital.
We are looking to work with any capital providers who seek an opportunistic real estate allocation in a resilient asset class.
And as I alluded to earlier, the opportunities in the student sector are going to be extensive… we will possibly see once in a lifetime buying opportunities over the next 6-18 months. For those who are prepared with ready capital, there will be a definite advantage in allowing investors to exploit the situation.
For more information on QIP and their products, please contact firstname.lastname@example.org