AMP Capital prepares new fundraising following Canberra student accommodation win

Diversified Infrastructure Trust to return to the market for funds after increasing its student accommodation portfolio to more than 5,000 beds.

AMP Capital is to use the momentum from its victory in the race for a student accommodation portfolio in Canberra to raise new funds for its Diversified Infrastructure Trust (ADIT).

The Sydney-based fund manager announced  on Monday it had purchased the Australian National University’s on-campus accommodation portfolio in the Australian capital from investors managed by Morrison & Co for more than A$700 million ($498 million; €444 million).

AMP Capital has acquired a 100 percent equity stake in the portfolio. ADIT is to hold 85 percent and the remainder will be held in AMP’s Core Infrastructure Fund.

Infratil, the listed infrastructure investor whose investments are managed by Morrison & Co, owned 50 percent of the portfolio. Commonwealth Superannuation Corporation owned the other 50 percent in a Morrison-managed mandate.

Infratil said it expected to receive A$162 million in cash from the transaction, adjusted for normal working capital. The transaction is expected to close in mid-April.

The student accommodation concession is for 34 years and covers 4,184 beds across 10 existing residences on ANU’s campus.

The concession was established in 2016, and Infratil paid A$82.5 million for its stake in August of that year. Infrastructure Investor understands that AMP Capital was the underbidder when Infratil and CSC acquired the portfolio in 2016.

ADIT portfolio manager Brad Williams told Infrastructure Investor that AMP Capital viewed the concession as the “premier portfolio of student accommodation in Australia” because of its size and the reputation of ANU, which is generally ranked the top university in the country.

“ANU also has a very clear on-campus strategy, supported by [the opening of] the A$260 million Kanbri precinct,” he said. “For the student accommodation portfolio, that on-campus strategy means it’s more likely to be full – and in fact it has a long track record of occupancy already – and it acts as a natural deterrent to third-party competitors. So there are really good natural protections for the portfolio.”

Williams said that AMP Capital would now return to the market to raise further capital for the open-ended ADIT fund, which now manages A$1.6 billion of assets following the ANU transaction. The firm would not disclose a timeline or any potential fundraising targets. However, a spokeswoman for the firm said that while it already had enough funds to invest in the ANU portfolio it was “always looking for ways for our investors to invest in ADIT”.

“We’ll use this opportunity to go back to our investors and fundraise off the back of it,” said Williams. “The ADIT fund has had a significantly high rate of return over the last few years and we can use that momentum to fundraise further.”

Infrastructure Investor understands that AMP Capital fought off competition from Plenary Group in the final stage of bidding for the portfolio. Williams acknowledged that price would have been a factor in being selected as preferred bidder, but said the firm’s experience in the sector also helped in winning the auction.

Head of the class

ADIT in late 2018 secured a 40-year concession covering 984 beds at the University of Melbourne for approximately A$300 million. It has held a similar concession at the University of Sydney, covering 650 beds, since 2003.

“The operator of our Melbourne asset, which closed in November, is Unilodge and our [facilities management] partner is Spotless,” said Williams. “The ANU [concession] is part-operated by Unilodge under a subcontract from the university and Spotless is the third-party provider, so there are some pretty good synergies with the same providers there.

“We’ve been able to get some early insights into some of the trends that are happening across the sector in Australia. Now we’re in Australia’s number one, two and three ranked universities, we can bring that experience to other assets.”

Student accommodation now accounts for around 20 percent of ADIT’s portfolio by value and Williams said the fund has the “appetite to increase it further”. In November 2018, he told Infrastructure Investor that the fund was looking to increase its exposure to the sector to around 20-25 percent of the portfolio.

Morrison & Co chief executive Mark Mudie said in a statement to the Australian Securities Exchange on behalf of Infratil that the ANU concession was the “standout portfolio” of on-campus student accommodation in Australia. He added that Morrison & Co had decided to sell because Infratil had not gone through with its original plan to develop a broader platform of which the ANU portfolio would have formed a cornerstone.