Towards a sustainable purpose-built student accommodation

Friday, March 26th, 2021 00:00 |
Raghav Gandhi is the Managing Director, Acorn Investment Management Limited.

Milliam Murigi @millymur1

Briefly tell us who Acorn Investment Management Limited is.

Acorn Investment Management Limited is the investment management arm of Acorn Holdings Limited.

It received its license in November 2020 by the Capital Markets Authority to act as a Real Estate Investment Trust (REIT) manager and will be the appointed manager for the recently launched Acorn Student Accommodation REITs.

You have been in the student housing business for quite sometime. Why did you decide to venture into this niche market not yet fully tapped?

Acorn ventured into purpose-built student accommodation in 2015 when it focused strategically on the provision of affordable rental housing for the young people of Nairobi.

This strategic shift was not based on a gut-feel, but on data-driven research and statistical analysis, which pointed to the significant gap in the market between the inherent demand for student accommodation and the lack of institutional supply of the same.

Fundamentally, one can also understand the market opportunity —when there is a growing demand for education given that people appreciate that, in order to improve their living standard, they have to enhance their qualifications, and then there has to be a consequent demand for student accommodation.

Unfortunately, until now, many students have had to suffer through poor accommodation alternatives – with Acorn’s offering, they are able to have the choice of living in affordable, safe, secure, and vibrant living spaces.

What has been the success rate so far?

All our operational properties average over 90 per cent occupancy currently.

This is despite the current circumstances forced upon us by Covid-19. This exhibits the inherent resilience of the asset class, which again is driven by the demand for education as noted above.

What are some of the challenges that you have been facing in this sector and are there opportunities, which are yet to be exploited?

The challenges that are faced are typical of real estate development with ensuring clean title, timely attainment of statutory approvals, and management of service providers.

However, with our experienced team of real estate professionals, we are able to address these challenges head-on and ensure that the expectations of our investors are met.

Currently, our properties are under the Qwetu brand, which specifically targets the middle-income segment.

We have no properties available under our Qejani brand, which targets the more affordable customer segment.

Given the demographic profile and our mission to offer student accommodation to the underserved segments of the African society, we believe this to be a massive opportunity, which we are very excited to address.

What are the advantages and disadvantages of venturing into the student housing business?

The advantages are that you are truly providing an important need for society, because without good student accommodation alternatives, you will find that not all students will be able to travel to cities outside of their hometown, to attain the best education options.

This then limits the growth potential of any economy. By providing them a safe and secure environment, it is our endeavour to offer our residents a “home away from home”. 

And the community aspect that we have established means that our residents can also consider themselves as being part of a family.

There are no disadvantages as far as we are concerned, but in order to be able to provide students a safe and secure environment where they are a part of the community, it entails a very intense operational effort, which many student accommodation providers are not able to deliver.

For us, this is critical for success and that is why we are even developing our proprietary property management digital platform.

One of the hottest terms in real estate development at the moment is mixed-use developments. Have mixed-use developments impacted or are going to impact student housing in any way? 

As is evident globally, student accommodation properties are usually not mixed with other forms of real estate.

The type of offering and operations are very specific to student accommodation and so it would be difficult to mix with office tenants, for instance, in the same building.

However, to provide convenience and a holistic offering, we offer amenities, such as gym or cafeteria space and also tie-up with retailers so that our residents have everything that they need under one roof. 

The amenities that we offer are based on extensive surveys and feedback that we have gained from our residents.

You recently launched two REITs, the Acorn Student Accommodation Development Reit and the Acorn Student Accommodation Income Reit in the Kenyan market, tell us more about this move?

The two REITs are investment vehicles for fuelling further the growth of the student accommodation portfolio in Nairobi.

We see a massive demand-supply gap, which can only be addressed through additional capital. The REITs offer investors the opportunity to get into the lucrative student housing market.

The Acorn Student Accommodation D-REIT is the first of its kind globally and will focus on the development and stabilisation of student accommodation projects, while the Acorn Student Accommodation I-REIT will manage operational steady-state properties.

Investors will be offered attractive blended return through their investment in both REITs, which will be very attractive compared to other investment offerings in the Kenya capital markets.

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