Eris Property Group has announced its successful raise of an additional R365m investment into its social impact student accommodation company, SA Student Accommodation Impact Investments (SASAII).
This sizeable investment comes from a consortium of domestic and international investors including Momentum Metropolitan Life, the Eskom Pension & Provident Fund, the International Finance Corporation (IFC), and the Danish Sustainable Development Goals Investment Fund (DSDG), which is managed by IFU. DSDG has committed to deploying R215 million as an initial tranche, but it has indicated a willingness to deploy more at a later stage.
Several other investors have also expressed an interest in participating and they are at various levels of obtaining approval. Eris is still aiming to raise up to R2 billion towards student accommodation.
“Eris has been leveraging its property development and management skills to address student accommodation shortages in South Africa. Our RISE Student Living property management service is completely tech-driven, and the entire leasing process happens digitally, from start to finish” says Johan van Vuuren, Executive Head of Student Accommodation at Eris.
Speaking on their investment in SASAII, Sonja Saunderson, Chief Investment Officer for Momentum Alternative Investments, says “Our Units on Park investment is part of Momentum’s responsible investing initiative, which aims to provide quality, purpose-built student accommodation around South Africa. This investment fully demonstrates the tangible effect our investments can have on real people and their lives, in a way that positions them for future success.”
The platform’s first investment was Units on Park in Hatfield, a 988-bed student accommodation property developed and managed by Eris Property Group that was completed in November 2019. Units on Park has been performing well since its first intake in 2020.
“During the height of lockdown in South Africa, when inter-provincial travel was allowed, our Units on Park building had a 60% occupancy rate, even though all universities were either closed or operating remotely at the time. Having accommodation designed to facilitate studying made a huge difference to students, as they knew that they would be in a safe environment, with constant access to Wi-Fi and electricity, which some do not have at home. As a result, they could continue their studies uninterrupted and focus on getting to grips with online learning in a secure environment”.
Eris’s approach to private student accommodation endeavours to facilitate projects that house a minimum of 70% of beds at or below NSFAS (National Student Financial Aid Scheme) rates, ensuring that accommodated students receive Wi-Fi, water, electricity, laundry as an all-inclusive rental, leaving them able to concentrate on that which matters most at that point in their lives: their studies.
Several new projects are underway, including Units on Jorissen in Braamfontein, which is targeting Wits University students with 998 beds (and has the potential to increase this to 1 071, subject to City Council approval), and Units on Station Square in the Cape Town CBD, which is geared towards students at the Cape Peninsula University of Technology and surrounding academic institutions, with 3 085 beds.
“We have significant success attracting international investors because of the platform’s compelling investment return profile,” comments Vuyani Bekwa, Eris Property Group’s Executive Head of Investments and Fund Management.
“We have received strong support from local investors, but we would like to receive even more, especially from those who want to invest in the leaders of tomorrow. With four existing international and local investors, another two or three substantial local investors would complete the picture. Our minimum investment amount is R50 million, but in fact, the lowest investment amount we have received so far is R150 million from an investor. The platform is targeting a minimum internal rate of return (IRR) of 16%, after fees and taxes.”
The company’s structure means that fees are only applicable to drawn capital during the deployment period, rather than all capital committed, ensuring that investors receive value for any fees charged by the manager. “We intend to add to the number of beds available in the market, not to acquire existing projects. But this will of course be dependent on the ability to deploy the funds, which we have been working on for the past three years” says Bekwa.
The platform will be converted into a REIT when it is listed or when regulations allow, adding to the number of listed companies on the JSE at a time when some companies are de-listing. This liquidity event releases any capital that these investors would have pumped into the platform.
