As in other countries, remote learning swiftly became the norm at universities in Australia and New Zealand. However, low levels of the coronavirus in the former and the near-elimination of it in the latter have enabled returns to on-campus learning.

Lockdowns ensured that many students returned home. This exposed private owners of student accommodation to significant risk if they were dependent on occupancy rates remaining high.

Steven Proctor, executive director of Morrison & Co’s PIP Funds, which invest in social infrastructure public-private partnership assets in Australia and New Zealand, does not think covid-19 has fundamentally changed the sector.

“The risk profile hasn’t changed – it’s the same,” he says. “I guess people just appreciate now that the risk was higher than they expected when they went in.”

Revenues protected
Proctor says Morrison & Co has always been “very circumspect” when it comes to student accommodation. It invested in student housing for the University of Wollongong in New South Wales through PIP Fund I and in Akoranga Student Village for Auckland University of Technology through PIP Fund II.

“The majority of student accommodation assets we’ve had on our books have had levels of underwriting,” he says. “So, if usage falls away to zero, we still receive returns. That means we wouldn’t worry that we couldn’t service our debt.” This effectively ensures the assets have contracted revenues, as you would often expect to see from a PPP.

“Other assets that we’ve had have either been with top-tier universities, or the accommodation itself has been advantaged because it’s been on-campus, so the students select it preferentially.

“I’m sure there are investors who’ve made investments in less well-located accommodation, or assets that are tired, where students will make other selections because they have lots of opportunities. Those investors might be sitting now wondering whether they assessed the risk properly. We haven’t had any of that, thankfully.”

Proctor believes the firm’s experience with Akoranga Student Village has reinforced the positive perception most students still have of on-campus learning.

“We had our ultra-strong Level Four lockdown here in New Zealand. The students left AUT and our accommodation went from being full to around 30-40 percent usage. Then when lockdown lifted, all the students came back very quickly. They really do value being among their peers and being close to where they’re learning. The longer learning away from university goes on, the more the students might start to like that learning experience – but it takes time for people to learn and adjust.

Loss of appetite
“The question for investors is: if lockdowns happen on and off to keep the pandemic under control, what does it mean for the investments you have? I think people will have to reassess the value of some of their investments in this sector. I’m sure they will always have some value because of the importance that education has in our economy now – but some assets will fare better than others.”

Proctor does not believe the pandemic will affect the firm’s appetite for further student accommodation.

“We’ll just follow our standard process. Some assets we’ll still say ‘no’ to. Others will look great but maybe the price will need to be lower to get the required returns. And some might not be affected at all.”