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Published on: Investment

Student Investment Portfolio in Leicester

Things move very fast at the moment. Anything you say today can look stupid a week later as lockdown levels, rules and regulations change. Two metres or one? Free school meals or not? Quarantine on arrival – it looks voluntary to me.

You can understand the uncertainty. There is no rule book for this and balancing decisions between health and the economy must be similar to a tight-rope walker in the half-way across a gossamer thread 100ft above an active volcano. Even if you do make it across, there are unexploded bombs at either end – or worse – Channel 4 news.

Thankfully we don’t have to make such national decisions, but we still have to make crucial calls for clients on how best to navigate through the impact of the lockdown and how the market may behave as we emerge from it.

The marketing of land for promotion in Stoke Golding, launched the day after lockdown and concluded four weeks later, was a resounding success. Solicitors are now instructed.

You can understand why the market for long term development land would remain unaffected – it will be a couple of years before planning is granted and another year before houses are sold on that site.

However, we were surprised by the number of strategic land teams that were furloughed – that created an opportunity gratefully accepted by those who remained working.

The situation for student investment is very different. We have recently been instructed to market a 94-bed student investment portfolio in Leicester.

It is made up of five individual properties centred around De Montfort University and produces a current gross income of £557,840 with rent for the 2020/21 academic year expected to be £631,500.

The client wanted to know if now is the time to market? Well we hope so because we’ve just launched it.

But not on a wing and a prayer. We had to carefully consider the market appetite for this type of investment in the current climate.

The student letting market is difficult to gauge.

  1. How many students will return to university for the next academic year?
  2. How much of the market is made up of overseas students who are said to be less likely to return? Will the universities be fully open, or open at all?
  3. How do you manage social distancing in student cluster flats? (See – Government Guidance)

Then, we have to consider potential buyers. Do they want to part with £8.5m with short-term horizon shrouded in a fog of uncertainty?

Several factors have given us the confidence to advise our client to proceed to market.

  1. De Montfort University has announced it will re-open as normal on October 5th. Large scale lectures will be remote for the time being, but otherwise the university will function as normal.
  2. By the end of May 2020, 75% of the units were let for the 2020/2021 academic year. This at the rents that will provide the expected rental value of £631,500.
  3. Bank interest rates are likely to stay at their historically low levels for some time to come. Where does an investor find a safe home for capital in that environment?

So, we have just introduced this student investment portfolio in Leicester to the market and are delighted (and just a little smug) at the positive interest that has been received.

Further details on the portfolio is available on the website.

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