From Creamer Media in Johannesburg, this is the Real Economy Report.

Sashnee Moodley:
Real estate investment trust Inkunzi Student Accommodation Fund (Isaf), which listed on the JSE in November, will acquire nine purpose-built, student accommodation assets valued at R1.7-billion. Anine Kilian has the story.

Anine Kilian:
The acquisition will be settled through a combination of debt financing, at 25% of the value, and from the proceeds raised through the company’s intended listing by way of private placement towards the end of the year.

The acquisitions are expected to complement Isaf’s existing portfolio of properties, which comprise established, purpose built, high-quality student accommodation with established relationships with their respective resident universities.

Speaking to Engineering News Online during a tour of the company’s Pretoria-based assets, Chief Investment Officer Owen Nkomo said the company’s focus was not only on the quality and distribution yield offered by these assets, but also on securing a robust pipeline of purpose-built buildings in key nodes going forward.

He added that there were several key aspects involved in selecting potential assets, such as proximity to campuses and security.

Chief Investment Officer Owen Nkomo:

Anine Kilian:
Nkomo noted that Isaf was planning to acquire more assets, pointing out that it wanted to be the leading brand for purpose-built student accommodation across the country.

“We are looking at growing our portfolio without compromising the yield for our investors,” he said.

He added, however, that the company’s short-term focus post listing would be on bedding down the assets and consolidating systems and procedures before looking at expanding the portfolio.

He explained that the company had decided to focus on student accommodation because South African investors want differentiated asset clusters and specialist companies.

Chief Investment Officer Owen Nkomo:

Anine Kilian:
He noted that high occupancy rates, fueled by increasing student enrolment rates, were not being matched by new accommodation supply.

Shorter lease agreements, normally 12 months, he said, provided an opportunity for more frequent, above-inflation rental increases.

Nkomo added that the multitenant nature of quality student accommodation, backed by university leases, bursary providers and parental financial guarantees translated into a low-risk default profile.

He pointed out that the #Feesmustfall movement, which directly affected the student accommodation sector, was a catalyst for additional funding to the National Student Financial Aid Scheme, underpinned by government and the private sector, with focused attention at national government level to avoid a repeat of the protests.

Chief Investment Officer Owen Nkomo:

Sashnee Moodley:
That’s Creamer Media’s Real Economy Report. Join us again next week for more news and insight into South Africa’s real economy.