The partners acquired a portfolio of 13 assets from student housing platform Deutsche Real Estate Funds. Spread out across nine cities in Germany, including Berlin, Bremen and Stuttgart, the properties contain an estimated 2,100 units total. TPG and Round Hill declined to disclose financial terms and return targets.
The partners’ strategy will target primarily value-add and some core real estate properties that they intend to enhance through refurbishments and operational improvements. The partnership aims to bring the quality of the assets to a more institutional level by adding features such as faster WiFi throughout buildings, newly fitted out bathrooms and kitchens and upgraded communal areas. The two also plan to increase occupancy through Nido Student, Round Hill’s operational platform and brand for European student accommodation.
TPG and Round Hill also have plans to acquire additional student housing assets and participate in ground-up development in German university cities and towns where there is growing demand for high-quality student housing but continued supply constraints. Over the next few years, the partners plan to double the size of their German student accommodation portfolio.
The portfolio acquisition from Deutsche Real Estate Funds marks the firms’ first joint venture in Germany and their second in the student accommodation sector. In November 2018, the two investment managers created a separate venture and bought 419,793 square feet of land in central Lisbon, Portugal for student accommodation and residential apartment development.
TPG and Round Hill are increasing their exposure to European student housing at a time when student enrollment has been growing across most markets in the region. Germany and Austria each reported an 18 percent increase in student numbers over the last five years, the second-highest increase in Europe after Denmark, according to an October report from brokerage firm Savills. Denmark reported a 22 percent increase over the same period.
“The student population in Germany is one of the largest and fastest growing in Europe,” said Michael Abel, partner at TPG Real Estate. “Despite this, the country’s student housing sector is still underdeveloped, with few institutional operators of scale.”
Some European countries, including Germany, have encouraged both the formation of international student programs and enhanced marketing of universities to catch up with the UK and US, according to Savills Research. International students have been a major demand driver for purpose-built student accommodation, and Germany has already exceeded its target of 350,000 international students by 2020.
TPG Real Estate is the real estate platform of global alternative asset firm TPG, which holds more than $108 billion in assets under management. The platform supports real estate equity investments through TPG Real Estate Partners and debt acquisition and origination through TPG Real Estate Finance Trust. Across both real estate equity and debt businesses, TPG Real Estate manages around $11.5 billion in assets.
Round Hill Capital is a real estate development, management and investment firm with a 17-year track record of investing in Germany. The firm has acquired more than 110,000 residential and student housing units across Europe. Together with affiliates and local management partner Residea Immobilien Management, Round Hill owns more than 6,000 units in Germany.