Mansion Student Accommodation Fund - The Mansion Group

Mansion Student
Accommodation Fund
“The sector has become a critical component of a balanced investment portfolio”
Source: Knight Frank 2011
1

Contents
• Mansion - Who, what and where
• The Student Market
• The Fund
• Summary
2

Mansion – Who are we
• Mansion was formed in Feb 2007 as a limited company in the UK
• The group is privately owned
• The senior management were brought together to create a team that had specialised in property, banking,
financial services and asset management
• Supported by a 90+ person organisation
• Turnover 2009/10 of £83M with operating profit of £5.1M
• Offices in London, Manchester and India
3

The Mansion Team
• Shankar Ramanathan – Chief Executive Officer
• Adam Davis - Director of Sales
• Andrew Freeth – Director of Fund Development and Administration
• Angela Dillon – Director of Finance and Strategic Projects
• Cyril Ogunmakin – Director of Asset Management
• Gregor Ritchie – Director of Operations
4

Mansion – What do we do
• We are property developers , asset managers and advisers that specialise in student accommodation
• As a developer ,we refurbish existing halls of residence
• As an asset manager, we manage and operate halls of residence for property funds and institutions
• As an adviser, we advise the Mansion Student accommodation Fund on the sector by offering market
intelligence and acquisition opportunities
• We also act as property adviser to a number of institutions
5

Progress
to date
• Mansion have redeveloped property in London, Colchester, Bristol, Birmingham, Liverpool, Newcastle,
Manchester, Nottingham, Oxford, Leicester and Edinburgh
• £230M of development value to date
• 3350 beds under management
• 7.3% average rental initial yield
• 100% occupancy
• 5,000 bed pipeline
6

Mansion Model
• Acquire sites from Universities, property funds
and private owners
• Refurbish to Mansion standard
• Let directly to post 1st year students
• Provide on site hospitality
• Maintenance of property
• Manage rental payments and chase arrears
• Provide security – 24/7 and CCTV
• Properties are sold to Institutions/Funds
7

The Mansion product
8

Questions on The Mansion Group
10

Growing
demand
• Student Applications rose by 34% in the five years to 2010
• 2010/11 saw full time students increase to a record 1,632,155
• London remains the region where demand is strongest
• Student numbers have increased in London by 18% over the last five years, 35% over the last decade
• UCAS are reporting a 22% increase in applications for this year 2011/2012
“According to UCAS, demand for courses is at an all-time high”
Source: Savills, Knight Frank, HESA
11

Lord Browne Review
Tuition Fees
• Government underwrites fees up to £6,000
• Fees above £6,000 subject to levy (increases with fees)
• Public investment continues at similar levels for priority subjects (£700 million pa)
Student Funding
• Students pay nothing until earning £21,000+
• Interest rates at inflation then at government costs
• Unpaid debt written off after 30 years (increase from current 25)
University System
• Four existing HE bodies merge and gain increased responsibility
• Universities charging more than £7,000 will face increased scrutiny
• New funding system will allow a 10% increase in university places over 3 years
Overall Effect
• Flight to Quality
• Top 30 Universities stand to increase places and attract student from lower quality universities
12

The foreign
student factor
• International students account for 30% of all students in London up 9% last year
• Compared to a national average of 20%
• Foreign student number increased by 10% between academic years ending Aug 2009 and Aug 2010
• The UK remains a destination of choice for students
• These students are more affluent and
often less price-sensitive that UK peers
• Many prefer to live in halls as opposed to
HMO
Source:HESA, UCAS, Times Higher Education World Uni rankings, Knight Frank, Savills
13

Theresa May Review
Aim of new regulation
• Reduce overall Net Immigration to the UK
When will it become effective
• Effective Date April 2012
• This will filter into the education calendar for the 2012/13 year
What will change/remain the same
• Must be Highly Trusted Sponsor (most universities fall into this category)
• Tighter English language requirements (CEFR up from “threshold” B1 to “intermediate” B2)
• Student at Universities will retain current work rights
• Overall time spent on student visa will be 3 and 5 years (level dependent)
• Graduates with offers of skilled jobs will be able to stay and work (£20,000+ pa)
Overall Effect
• Some poor quality institutions will close
• Top 30 Universities stand to increase places and attract student from lower quality universities
14

World university rankings by country – top 200
“A UK university education continues to be held in high esteem around the world and this demand is set to
expand exponentially in line with global wealth generation”
Source:Savills, Knight Frank
15

Postgraduates
• In 2005 post grads accounted for 21.6% of all students
• Over the following five years proportions increased to 23.2%
• This year (2011/2012) has seen an increase of 63% for people over 25 applying to universities
• These students are less price-sensitive
• Post graduates are much more likely to want to live in operated halls as opposed to HMO
Source:Times Higher Education World Uni rankings, Knight Frank, Savills
16

Insufficient
supply
• Nationally, student numbers are increasing at the rate of 10 times the supply, 15 in London
• Just 19% of the 267,800 full-time students in London can access purpose-built bed space
• Only 2,490 new bed spaces completed in London in 2009/10 and only 4,078 in development
• UK average which can still only provide for 65% of Students
• Much existing purpose-built stock is in need of refurbishment
• 70% of purpose built student housing is owned by universities equal
• Quality of stock in university sector is old and un-modernised
Source: Knight Frank, Savills, Drivers Jonas 2010
17

University funding
• Universities will see their funding cut by £449M (6%)in the next academic year
• As universities see funding cut, they will be need to pursue other methods of funding
• Disposal of assets
• The HEFCE have said “The majority of universities have a high proportion of stock which is dated and in
need of investment”
• Law, Architecture and Property related degrees will see decline and funding cuts
• Institutions offering STEM (Science, Technology, Engineering and Maths) will see the strongest demand
and are less likely to suffer from funding cuts
Source: Knight Frank, Savills,HEFCE
18

Top 15 Universities offering STEM
Source: Savills 2010
19

Rental growth
resilience
• 2010/11 average weekly student accommodation rental cost stands at £98 (£192 London)
• 12% increase since 2007/08
• There remains an incredibly low supply ratio
• As a result rental growth is still consistently strong
• Outperforming RPI and other property sectors
Mansion has achieved 9.8% growth and 100% occupancy across its managed sites in 2009/10
Source: Savills 2010
20

Average rental growth
over last 2 years
Source: Savills 2010
21

Annual property sector rental growth
%
Source: CBRE
22

Knight Frank Student Accommodation Index
23

Questions on the Student Accommodation
Sector
24

Mansion Student
Accommodation Fund
• Sub cell of protected cell company
• Guernsey based OEIC
• Listed on Channel Islands Stock Exchange
• Authorised by the Guernsey Financial Services Commission
• Monthly dealing and redemption
• Priced at NAV in £, $ and €
• Initial charge and rear end charge available
25

Mansion Student
Accommodation Fund
Objective
• To provide investors with exposure to the UK private student accommodation market
Strategy
• To concentrate on purpose-built halls of residence in the UK’s top 30 student towns and cities. To achieve
capital gains by focusing on sites where a combination of location, supply/demand imbalance and rental
potential is greatest
Put simply…
• The fund offers the opportunity for your clients to diversify away from traditional asset classes such as
equities, bonds, commercial property or commodities; or for investors with a pessimistic view of these
asset classes to achieve a higher return than cash.
26

How does the fund grow
• Jones Lang LaSalle value each acquisition on behalf of the fund
• The fund pays 90% of the valuation, thus creating a profit each time the fund purchases property
• The fund is geared up to 50%, but each property does produce net rental income
• The net rental income is rolled up within the fund and this adds to the NAV
• As rental agreements are secured for the following academic year, the valuer will re-calculate the valuation
of each asset on a monthly basis
• Where possible, the property adviser will seek to add additional bed spaces to existing sites
• This will be achieved by way of new build extension to the existing properties, thus adding additional
revenue to the fund and increasing the NAV
NOTE: A recent analysis showed that the fund would have produced a return of above 10% over 2010
even disregarding profits made directly via property acquisitions.
27

Valuation Techniques
Valuation process:
• Rent levels are based on market comparables
• Valuations are based on rental income from the properties in the portfolio
• Income is capitalized to give the individual property value
• Mark to Market Valuation
28

Liquidity Measures
MSAF has various liquidity measures build in:
• 10% of subscriptions is retained
• 66 days redemption request period
• Net inflows
• Ability to sell individual apartments
29

Performance to date

Professional
advisors
• Custodian BNP Paribas (AA Rated)
• Administrator Active Fund Services
• Tax /Auditor Price Waterhouse Cooper
• Valuation agent Jones Lang LaSalle
• Property adviser Mansion Property Management
• Investment adviser Dartmoor Capital Management
31

Fund facts
MSAF Euro, Dollar and Sterling – Rear end charge structure
• 100% allocation
• Exit penalty of 5,4,3,2,1% over 5 years
• 7.5% of the original investment can be taken out annually without penalty
• AMC - 1.5% of NAV
• Minimum subscription - £10K with £3K additional subscriptions
- €10K with €3K additional subscriptions
- $10K with $3K additional subscriptions
• Monthly dealing on the last business day of the month
• Applications must be received by the 27 th
32

Fund facts
MSAF GBP initial charge structure
• Initial charge – 2%of the original investment – 98% allocation
• AMC - 1.5% of NAV
• Minimum subscription - £10K with £3K additional subscriptions
• Monthly dealing on the last business day of the month
• Applications must be received by the 28 th
33

Platforms which
accept the Fund
Wrap providers
Offshore Bond providers
34

Q & A - General
35

Contacts
Website: www.themansiongroup.co.uk
Email:
sales@themansiongroup.co.uk
Telephone: +44 (0) 161 828 0580
Manchester Office Address
1 Oakwood Square,
Cheadle Royal Business Park, Cheadle,
Cheshire.
SK8 3SB
London Office Address
1st Floor,
Berkeley Sq. House,
London W1J 6BD
36