Tamela helps drive investment that meets critical social needs

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Tamela recently advised Growthpoint Properties Limited (“Growthpoint”)…

Tamela recently advised Growthpoint Properties Limited (“Growthpoint”), an international property company listed on the JSE, on raising capital for the acquisition of a niche property portfolio comprising seven Purpose-Built Student Accommodation (“PBSA”) properties located close to the Universities of Pretoria, Johannesburg and Witwatersrand. What makes the transaction special was that it combined investment with a real social cause, given that at least 60% of tenants in the initial portfolio are from low-income households and are supported by the National Student Financial Aid Scheme (“NSFAS”).

“Tamela has advised Growthpoint on raising capital to make an investment in a sector that is a catalyst for education and addresses the social needs of a majority of students in South Africa.”

It is recognised that in South Africa, education plays a significant role in alleviating poverty through the creation of security and income that allows graduates to provide for and improve the circumstances of their families and themselves. There are a number of building blocks required to enable students to achieve the outcomes of their educational investment, one of which is the accommodation they live in while completing their studies.

More about PBSA’s

There are several types of student accommodations available in the market, being university residences, landlord-tenanted residences, private flats or houses, private sector residences in the form of managed apartment blocks, and PBSA. PBSA is housing that is specifically built for tertiary students by private developers. This type of housing is different from traditional student housing because it has been designed and built specifically for tertiary students.

The area in which a PBSA is located (i.e., near a university, coffee shops, restaurants, and transport hubs) is an important factor in determining the success or otherwise of PBSA’s. PBSA’s also generally offer students a holistic student experience, with student-centred amenities, including student lifestyle programmes; wi-fi; recreational facilities; study and meeting rooms; laundry services; and excellent security.

The student lifestyle programmes offered by PBSA’s form an important role in attracting and retaining students. Students prefer to stay in dedicated student accommodation like PBSA’s as it allows them the opportunity to collaborate, innovate and socialise with their peers whilst developing their communication skills, emotional intelligence and networking skills – all of which are invaluable for post-university life.

South African students from mainly low-income households experience difficulties in terms of home study due to a lack of infrastructure such as electricity, internet connection and private space for study. PBSA’s are known to reduce the challenges experienced by students from low-income households by providing a conducive learning and living environment, which ultimately improves their education outcomes.

The South African private student housing market is still at an early stage of development, with the net demand gap estimated at c.500,000 beds, of which universities require c.240 000 and other tertiary education institutions the balance. Globally, student accommodation has become an important investment sub-sector of the property sector for pension funds and sovereign wealth funds due to its superior risk-adjusted performance and portfolio diversification benefits.

Property fund managers have become actively involved in the student accommodation space, investing in both listed and non-listed investment vehicles in a sector that is a catalyst for education and addresses the social needs of a majority of the students in South Africa.

In a joint mandate, Tamela raised equity of R1.1 billion from private investors and advised Growthpoint on the acquisition. Growthpoint, in partnership with fellow investors, will continue growing the portfolio through acquisitions and developments over the next few years.

According to George Muchanya, Growthpoint’s head of corporate finance and the interim head of the PBSA, Growthpoint expectes the portfolio to grow to at least 22,000 beds worth R10 billion to R20 billion in the next five to seven years and this will provide the right critical mass to consider a separate JSE listing.” Tamela helps drive investment that meets critical social needs

How can we help?

Tamela has implemented numerous capital raise transactions over the past 13 years. The team provides independent views while advising clients on the critical issues regarding capital raising, whether debt or equity, or accessing Tamela’s network of relationships with lenders and equity investors to deliver the optimal solution for our clients. Investments with a social impact have become critical for investors. Tamela’s holistic experience and ability to work closely with client management teams and shareholders enables Tamela to provide appropriate funding solutions to corporates while ensuring that other key outcomes (e.g., social impact) specific to clients are achieved.

For more information, please contact Tebogo Mohlola–Maphopha on 078 715 3998 /
tebogo@tamela.co.za