Luxembourg-based manager Stoneshield Capital has held a closing for its open-end fund focused on purpose-built student accommodation assets across Southern Europe. The firm has now raised more than €600 million for its European Student Accommodation Core Fund, which was launched in March last year.
The manager raised around €100 million in equity commitments for the fund in April. According to Juan Pepa, Stoneshield co-founder, the long-term objective for the ESAF fund is to exceed €2 billion in total commitments.
Investors in the fund include pension funds, insurance companies, sovereign wealth funds and asset managers from Europe, North America and Asia. The firm targets a core-plus return for the fund’s investments of 10 percent IRR and a loan-to-value ratio of 30 percent.
ESAF’s portfolio, which comprises 46 PBSA assets representing around 10,000 beds across 18 different locations in Spain and Portugal, has a gross asset value of more than €1 billion. Assets are operated by MiCampus, a PBSA operating platform backed by Stoneshield.
“Our bread and butter is to create private equity companies backed by hard assets. Operational real estate investments offer a higher return premium” - Juan Pepa.
Recent single-asset acquisitions for the fund have ranged between €20 million and €30 million in size. Most recently, the firm acquired two new, fully occupied student residences in the Asprela Campus in Porto in a deal valued at €50 million.
“Southern Europe PBSA is a deeply undersupplied market in the same way the UK market was in terms of provision ratios 20 years ago, requiring extensive long-term capital investment to meet the excess demand,” said Juan Pepa, explaining why an evergreen core-plus fund was deemed best suited to investing in this particular market.
The European residential sector is benefiting from clear tailwinds, explained Pepa regarding the fund’s ability to attract capital in this challenging environment. “Regulated markets across Europe are mitigating the inflation protection of traditional residential markets, whereas ESAF is offering our investors very stable, inflation-protected yield in a non-regulated market,” he added.
Felipe Morenés, the firm’s co-founder, said: “ESAF was also formed in this new, higher rate environment. This is a clear differentiation versus legacy core funds that have to adjust valuations to reflect the higher rates scenario.” Pricing in the PBSA market in Southern Europe has remained resilient, he added, with double-digit net rental growth offsetting cap rate expansion across most markets.
ESAF’s investments are backed by Morgan Stanley and local Spanish and Portuguese banks. “The stronger macroeconomic outlook for southern Europe when compared to the rest of Europe – double the GDP growth, half the inflation levels, the independence from Russian gas – and the clean balance sheet of the local banks is a completely different picture to what it was post-global financial crisis. At the time, these countries were referred to as the PIGS [Portugal, Italy, Greece and Spain]. Now, PIGS can fly.”
UBS Investment Bank’s real estate private funds group acted as lead financial adviser and placement agent for the ESAF fund. PJT Parkhill acted as placement agent and Eastdil Secured acted as real estate and financing adviser. Linklaters and Maples Luxembourg acted as legal advisors to Stoneshield.
