A large student accommodation property in central Wellington has been sold in a cross-border deal brokered by Savills.

‘222 Willis’, a 280-bed apartment building at 222-232 Willis St, has been sold by global real estate investment and asset management firm Forum Partners to Hong Kong-based asset manager Value Partners Group for NZ$28.3m.

The deal was negotiated by Savills Student Accommodation Director Conal Newland and Auckland Managing Director Tom McAlister. The student accommodation is leased to Weltec with a local café operator occupying a ground floor retail tenancy.

The deal provides further evidence of the attractiveness of student accommodation property in New Zealand to offshore investors, says McAlister.

“222 Willis was viewed as a superior opportunity for foreign investors looking to allocate capital to the student accommodation sector. It provides a low-maintenance investment in a stable and transparent regulatory environment,” he says.

“In addition, the property represents both a strategic freehold land holding in central Wellington, as well as the excellent tenant covenant of a major tertiary education provider.”

Global institutional investors looking to allocate funds to the student accommodation property sector have New Zealand firmly in their sights, in part due to our large and strong-performing international education sector, McAlister adds.

The New Zealand international education sector is now New Zealand’s fourth biggest export industry, according to Stats NZ. Government studies value the economic value of the international education sector in New Zealand at $4.5 billion and the sector supports more than 33,000 jobs.

“The high performance of our international education sector is driven by several factors including demand for quality education from Asian countries, and the fact that the traditional education markets of the US and UK are harder to access in terms of cost and travel distance for many Asian students,” says McAlister.

Conal Newland says regulatory factors in New Zealand’s education sector give student accommodation property here an investment advantage when compared with many other developed nations.

“Universities in New Zealand are required to provide pastoral care to students. Because of this, they lease properties to provide student accommodation themselves, rather than contracting out the running of halls of residence to a third party operator,” he says.

This model reduces operational risk and also means New Zealand student accommodation property has investment characteristics that are similar to commercial property, says Newland.

“Tertiary institutions are also treated as government entities for the purposes of financial reporting, so they are considered to be very low-risk tenants,” he says.

In addition, the demand for student accommodation remains strong, but the financial feasibility of delivering new accommodation developments is challenging given increasing rental levels and high construction costs.

This is restricting the upcoming supply of new accommodation developments in the major cities in New Zealand.

As a result of these fundamentals, student halls of residence in New Zealand are highly sought after among investors globally, with demand exceeding supply, says Newland.

“Student accommodation assets in New Zealand are held in high regard for their stable, counter-cyclical income streams. They are therefore tightly held among a small number of mainly institutional owners and they rarely become available for sale.”

McAlister says student apartments are in demand among the thousands of students coming to Wellington to study every year, as they provide affordable and convenient accommodation.

“Student apartment buildings are popular among students looking for private and centrally-located accommodation. As such, they have a captive market and generally operate at full capacity year after year.”

222 Willis

222 Willis is one the newest student accommodation developments in Wellington, having opened in January 2014 following an $18m redevelopment during which the building was seismically upgraded and completely refurbished.

The building offers some of the most modern and well-appointed student accommodation in Wellington. Each apartment is furnished and has its own bathroom and kitchen. The property is situated within an easy walk of Victoria University of Wellington, Weltec and Wellington’s central business district.

Levels: 6
Floor area: 6065sq m
Land area: 2187sq m
Beds: 280 (split between studios, 2 bedroom and 4 bedroom apartments)
Tenant: Weltec