With the growing number of students travelling for quality education, demand for student housing is growing every year.
While in many countries students can also rent residential apartments or stay as guests as is this case with exchange programmes, the industry we are referring to specifically caters to purpose-built student accommodation or PBSA
Next, we apply the appropriate cap rate for said properties. In the pie chart, we see that IQ’s facilities are majorly concentrated in London with a balance of 48% spread across other key Russell group cities
Using market cap rates we estimate the effective cap rate for the entire property portfolio of IQ as 4.1%. Applying the derived values we get a valuation of 4.1 million pounds.
This seems off from the announced transaction value, but keep in mind this is only for the portfolio of 28,015 beds. IQ also has 4 thousand beds under development which are not yielding income today. At the time of the transaction, 4,328 were under development.
We can assume the value of these non-operational beds as their asset values. Proportionately, we value the pipeline at 502 million pounds.
Adding both values we get approximately 4.6 bn which is in line with the announced deal value.