Real estate investment trust (Reit) Growthpoint Properties’ subsidiary, Growthpoint Student Accommodation, has highlighted, during a tour of some of its university student residences, that it is focusing on ensuring high-quality amenities are available to all students living in the residences to provide them with the best opportunities during their tertiary education.

Its 7 157-bed student accommodation portfolio is 94% occupied for the 2023 academic year, and all of its residences have student life managers living in the buildings to support students and provide them with an environment that enables them to make the most of their student life.

All the buildings have quiet areas and study centres, with many also having computer laboratories, as well as collaboration areas for students to study or work in groups. Further, the residences also have sports and exercise facilities, as well as communal and social areas.

“All of our student residence buildings have backup power generators and enough backup water for three days. However, although we are implementing some rooftop solar photovoltaic systems, we are typically limited because we use the roof spaces to provide social areas for students,” Growthpoint Investment Partners head George Muchanya told the media on August 15.

The aim is to provide students with a rich, fulfilling student life experience, with support and encouragement provided to help them to excel at their academic work, meet new friends and colleagues and expand their social networks, and to have a healthy lifestyle.

Further, the Festival's Edge residence, on Festival street – one block away from the University of Pretoria – has a community garden at its foot and the university's charity also bakes bread for the needy in a corner of the garden.

The student life managers encourage students to participate in charity events, to give back to the community, inculcate a sense of charity and become a part of their community at university. These are valuable attributes that they take with them throughout their careers and back to their home communities, said Growthpoint Student Accommodation fund manager Amogelang Mocumi.

Further, the residences have a mix of students in them, with students from lower-income and higher-income households living in the same residence. This is purposefully done to ensure that all students have a fair opportunity to excel and to make friends, and high-quality amenities available to all students enable this, he noted.

There are differences in the layout of the rooms, with prices varying based on factors such as single rooms with common shared areas, or larger rooms without sharing, among others.

“Supportive environments boost academic success and graduation rates. Investing in student accommodation leads to more graduates, positively impacting the economy and society,” Mocumi added.

“The sector is being driven by strong fundamentals in which demand exceeds supply. We aim to maintain consistent growth in the coming years, expand our assets and investor base as we grow. Ultimately, our target is to grow the portfolio to R12-billion worth of assets and achieve a JSE listing within the next seven years,” said Muchanya.

Its newly opened Apex Studios, in Braamfontein, Johannesburg, is 100% occupied, and Peak Studios, in Observatory, Cape Town, has a 98% occupancy rate, while the newly acquired Brooklyn Studios, in Pretoria, is 97% occupied.

Further, Growthpoint Student Accommodation has two new developments under way that will be completed in time for the 2024 academic year, which will add a further 1 610 beds to its portfolio.

Fountains View will provide 810 beds optimally located for Tshwane University of Technology students in Pretoria. Horizon Heights is an 800-bed property in Johannesburg that is perfectly positioned for University of Johannesburg students, he noted.

“We have already identified nearly R1-billion worth of property development projects for the 2025 and 2026 academic years,” he added.

The unlisted student accommodation Reit aims for total returns of 13% to 16% in long-term returns, even if it falls short of this in the current high interest rate climate.

Its portfolio is subject to excellent governance and sustainability oversight frameworks, and also benefits from Growthpoint’s green building expertise to create healthy, sustainable environments and operate with a social consciousness that adds value to communities.

“Fashioning vibrant campus communities aligns with Growthpoint’s environmental, social and governance goals,” he said.

However, the unexpected and unilateral cap on student accommodation fees by the National Student Financial Aid Scheme (NSFAS) introduced uncertainty and disrupted students who had already moved into their rooms, as well as students who had to suddenly secure alternative accommodation within the R45 000-a-year cap.

About 60% of Growthpoint Student Accommodation's portfolio is exposed to NSFAS students, with private students having a variety of accommodation available at different rates.

“We are taking the hit this year, but the current capped rates are unsustainable. We urge NSFAS to come and see our student accommodation and the supporting amenities we provide to students, which adds significant value to their tertiary education and student life.”

High interest rates and the unilateral cap on student accommodation funding have increased the company's cost-to-income ratio from about 30% to above 50%, which is unsustainable, Muchanya noted.

Along with its industry peers and through the Private Student Housing Association, the company is engaging with NSFAS to adopt a higher cap from the 2024 academic year, which reflects the costs to build new accommodation or the capital already invested in existing assets.

“We are also awaiting the outcome of discussions between universities and NSFAS on the grading of properties, as this will alleviate the one-rate-fits-all challenge.

“The NSFAS cap has added uncertainty to the subsector and is significantly eroding the margins to unsustainable levels, given the rising municipal and utility costs.

“Sustainable solutions need to be found ahead of the 2024 academic year to encourage investment capital for NSFAS-focused student accommodation, which is for the neediest and most vulnerable portions of the student population,” said Muchanya.

Despite the challenges, demand for specialised student accommodation in South Africa far outstrips supply, and the sector holds attractive investment opportunities, he concluded.