CPPIB Sells Liberty Living to Unite Group

Benefits Canada reports the Canada Pension Plan Investment Board (CPPIB) is selling its student accommodation business Liberty Living to London Stock Exchange-listed Unite Group for about $1.3 billion:

The CPPIB will keep a 20 per cent stake in the newly combined company and one seat on its board. When the deal is complete, Unite Students’ assets will total more than 73,000 beds across 173 properties in 27 cities in the U.K.

“Through this transaction, we are able to continue our investment in the student housing sector within the U.K. across a broader, more diverse and stable portfolio and with additional development exposure, which fits well within our global real estate strategy,” said Thomas Jackson, the CPPIB’s managing director of real estate investments, in a press release.

“We look forward to working with Unite Students in combining these two excellent businesses to continue to provide affordable, high-quality student accommodation across the U.K. and maintain strategic relationships with educational institutions.”

As of March 31, 2019, the CPPIB had $22.1 billion invested in the U.K. across all asset classes, with a total of $47.5 billion invested in real estate holdings globally.

You can read CPPIB's press release here.

Student housing is very popular at Canada's large pensions. Two years ago, CPPIB and Singapore's GIC did a $1.6 billion joint venture with Scion Group to invest in US college housing.

Last year, PSP Investments, Greystar and Allianz invested in a £1.5 billion joint venture partnership to grow Chapter, London’s leading student accommodation brand.

What is the attraction to student housing? It's relatively recession proof, especially in a global city like London known for its great universities, and it has great demographics, as younger generations will flock to top universities all over the world in search of a great education.

We live in a hyper competitive world, there will always be a premium for great education, which is why the student housing business has taken off over the last decade, but some countries like Canada, lag others (see this older post of mine).

Anyway, in the deal above, CPPIB is still keeping a 20% stake in the enhanced business with a total gross asset value in excess of £5 billion:

We have combined Liberty Living, our UK student housing platform, with Unite Students to form a leading operator of scale, retaining a 20% stake in the enhanced business. https://t.co/yea5aEh8UP

— CPPIB (@cppib) July 3, 2019

Great move, one that will ensure CPPIB will continue to reap the gains from a growing secular trend in the UK's student housing market.

In related news, CPPIB and OMERS upped their stake in Indian toll roads:

Indian-based infrastructure conglomerate IndInfravit Trust, whose owners include the Canada Pension Plan Investment Board and the infrastructure investment arm of the Ontario Municipal Employees’ Retirement Plan, is buying nine operational road projects from Sadbhav Infrastructure Project Ltd.

The portfolio of roads, which was valued at more that $66 million rupees, or about $1.2 billion, includes seven toll roads and two annuity roads, totalling 2,619 kilometres through five Indian states. Subject to customary regulatory approvals, IndInfravit will pay for the portfolio with both cash and units of its trust, with the caveat that the number of units can’t result in Sadbhav owning in excess of 10 per cent of the trust.

“We are proud to support this further growth of the IndInfravit platform, and look forward to working with our fellow unit-holders and Sadbhav to create additional value together,” said Ralph Berg, executive vice-president and global head of OMERS Infrastructure, in a press release.

The CPPIB noted it anticipates its financial commitment to the transactions to be up to $220 million. “Our investment in IndInfravit Trust reflects our long-term confidence in the Indian infrastructure market and our belief in the ability of these toll roads to deliver strong risk-adjusted returns,” said Scott Lawrence, managing director and head of infrastructure at the CPPIB.

I've already covered why CPPIB and others are eyeing Indian projects here. Like Scott Lawrence states, the IndInfravit Trust reflects CPPIB's long-term confidence in the Indian infrastructure market and their belief in the ability of these toll roads to deliver strong risk-adjusted returns.

Just don't try explaining any of this to Andrew Coyne, he still doesn't get it.

Below, follow students as they give you their guide to student life at Liberty Living: Liberty House, London - St John Street, London. I also embedded a promotional clip from UNITE, the UK’s leading operator of purpose-built student accommodation.

And in 2015, Philips Lighting provided an LED lighting and services package to UNITE, to help improve lighting quality while reducing life cycle costs across 130 student properties in 23 UK University towns and cities, having an impact on over 43,000 students.

Lastly, to thrive in an era of disruption, industry leaders must share their insights and learn from one another. Listen to CPPIB CEO, Mark Machin, converse with with Max Levchin, co-founder of PayPal, and co-founder and CEO of Affirm. Great insights, kudos to Mark for doing these conversations.