Kumpulan Wang Persaraan (KWAP), Malaysia’s second largest pension fund, has acquired two purpose-built student accommodations in the UK for £39.75 million (US$51.73 million) in a move to raise its exposure to foreign real estate.
The properties, 800 Bristol Road in Birmingham and The Mill House in Edinburgh, were purchased from IP Investment Management (HK) Ltd and Vancouver-based private equity firm Mavan Capital Partners, respectively.
KWAP paid £14.62 million for 800 Bristol Road and £25.13 million for The Mill House.
The estimated average net yield of the properties is 5.08% per annum, the pension fund says in a statement on August 30.
According to KWAP Chief Executive Officer Wan Kamaruzaman Wan Ahmad, the fund is “pleased to add the two properties to our portfolio in the UK market as the acquisition aligns with KWAP’s aspirations to increase its international property exposure”.
“We will continue to grow our presence in foreign markets without compromising on our risk appetite, in line with our mission to serve the pensioners of Malaysia,” he says in the statement.
The new acquisitions raise the total number of properties owned or co-owned by KWAP to 14, located in Australia, UK and Germany.
The pension fund says the property purchases are driven by its strategic asset allocation which is currently 40% fixed income, 45% equities, and 15% alternative investments.
Property investments account for over half, or 9%, of the allocation to alternatives. As at end-2017, three-quarters were foreign property and one-quarter local.
Of the remaining allocation to alternatives, 4% is in private equity and 2% in infrastructure, KWAP says.
Pension funds and sovereign wealth funds globally have been actively investing in student accommodation as they search for higher yields in a low interest rate environment.
In Malaysia, for example, the yield on ten-year government securities is currently around 4.04% per annum, more than one-percentage-point lower than the expected yield from the newly acquired UK properties.
Singapore sovereign wealth fund GIC and the Canada Pension Plan Investment Board have teamed up twice since last year to acquire US$2.7 billion worth of student housing portfolios in the US.
GIC also partnered with Unite Students, a UK-based manager and developer of student accommodation, in a 50:50 joint venture to acquire the Aston Student Village for £227 million in February 2017.
KWAP, which manages the retirement savings of Malaysian civil servants, had 140.8 billion ringgit (US$33.93 billion) of assets under management at the end of 2017.
