EXCLUSIVE: Distress Comes To Student Sector As 2 Schemes Go Into Administration
Companies that own two student accommodation schemes once valued at £35M have been put into administration as pressure mounts on owners and operators in a sector hit by the coronavirus pandemic.
Administrators from David Rubin & Partners have been appointed to companies that own two schemes totalling more than 600 rooms in Luton, Bisnow can reveal. They are the first significant schemes to go into administration or receivership since the beginning of the pandemic.
The student accommodation sector has seen income take a hit as a result of lockdowns, with many operators having to return rent to students who could not take up their places in the 2020 and 2021 academic years. Cushman & Wakefield estimated in March that private-sector student accommodation providers would relinquish about £385M in rent for the final part of the 2019/2020 academic year, and now the UK is back in another full lockdown, with students again moving to online learning and university halls essentially closed.
The two companies in administration are London Luton New Street Student Accommodation Ltd and London Luton Chapel Street Student Accommodation Ltd. Records at Companies House show that both companies are controlled by Steve Worboys and Jerald Solis, founders of residential investor and developer Opto Living.
A charge registered at Companies House shows Bank of London and the Middle East provided a loan secured against the properties in 2019. Opto and the administrators did not respond to requests for comment.
"the bank remains fully supportive of our client and we continue to work with them towards a conclusion of our contractual arrangements," a spokesman for BLME said.
Opto’s website shows that the companies own two schemes in Luton: Opto Village, which the website said was valued at £26M and comprises two phases completed in 2016 and 2017; and Chapel Street, which the website said was worth £9M and was completed in 2016.
Hotel operators in Luton had complained to the local council that the schemes had been used as hotels as well as student accommodation, a use outside of the planning consent granted to them, Luton Today reported.
Opto applied in July for a retrospective planning consent for use of the schemes as hotels and student accommodation, but it subsequently amended this application, seeking consent instead for permission to mix co-living and student use. Permission for this was granted in October, Luton Today reported.
Opto has also developed schemes in the student sector in Cardiff and Newcastle as well as build-to-rent and hotel schemes in Luton.
As a result of the pandemic, the value and income of student assets is diverging.
“Prime PBSA assets continue to trade at pre-pandemic yields,” Savills said in a report in September. “Secondary stock and assets in cities where institutions face greater financial pressure are seeing yields widen.”
The brokerage said it still expects investment interest in the sector to be strong in the medium term.
As an indication of how things are faring even at the top end, Unite, the biggest player in the UK sector, said in January that reservations for 2021/2022 stood at 57%, compared to 64% a year earlier, and that the value of the portfolio owned by its fund business dropped 1.8% in 2020.
UPDATE: FEB. 2, 3.30 P.M. UK: This story has been updated to include a comment from Bank of London and the Middle East.