This property has been fully funded and is not currently available for investment. We are in the process of completing the purchase at which point it will move to our Resale market.
We are pleased to announce the launch of our next Purpose-Built Student Accommodation (PBSA) offering. PBSA is currently the UK’s strongest performing property sector. In the academic year ending August 2016, PBSA delivered a 10.2% total return, with a combination of 5.4% rental income and 4.8% capital growth according to CBRE. Click here to learn more about PBSA as an asset class.
Pitt Street is a PBSA block of 65 studios in Newcastle, home to both Newcastle University (part of the Russell Group) and Northumbria University. Between them, they have over 50,000 students. The property is fully tenanted for the 2017/2018 academic year and boasts a strong historic tenancy record with 98% occupancy over the past 2 years. It is extremely well located with Newcastle University Business School only a 2 minute walk away, and the City Campus of both Newcastle and Northumbria Universities under a mile from the property. Eldon Square Shopping Centre, the Central Rail station and Metro Station are all under 10 minutes walk away.
View a short video to hear from our Director of Property on why he selected this investment.
- The investment comprises a self-contained building of 65 purpose-built student studios. The studios are fitted to a high standard, and feature study desks & chairs, ensuite shower rooms, and integrated kitchenettes. In addition, the block contains a cycle store, laundry facility and a lift serving all floors
- Newcastle University is a member of the Russell Group which represents 24 leading research-intensive universities in the UK. In the most recent assessment of research quality in UK universities, 31% of Newcastle’s research was rated world-leading, with a further 48% rated internationally excellent
- Newcastle University is the recipient of a £100m development loan, which shall provide funding for a number of major projects over the coming years. These include the redevelopment of the £58m Urban Sciences Building scheduled to complete in Autumn 2017. Furthermore, the £40m National Ageing Science and Innovation Centre is set to open from 2020, which will be at the heart of Science Central - a new urban quarter in the center of Newcastle spanning 24 acres, set to attract leading edge scientific and technological organisations
- Our exit strategy is to sell the investment as a single holding to an investor. This will preserve its value as an income producing freehold block, and ensure an efficient and timely sale
- The property is mortgaged at 50% loan-to-value (LTV) of the purchase price. The mortgage gives enhanced exposure to property price movements, and the potential for amplified returns; though investors must note amplified negative returns if prices fall. For your information, we have chosen to offer this property on a mortgaged basis, because doing so increases the annual yield by 1.49% p.a
Investors will start accruing dividend income from the day they commit to investing in the property. Contracts are due to exchange in the next few days with completion scheduled 5 weeks later. The resale market for this investment will launch the following business day after completion.
Our investment comprises 65 purpose-built student studios, which we secured at a purchase price of £5,360,000.
The building will be managed by a specialist student management company and is fully occupied for the 2017/2018 academic year. The total rent forecast for the block is £430,268 per annum. For prudence, we have factored into our forecasts an annual void rate of 1.9% and have not included any growth in rental values.
At the forecasted level of rent, Gross Rental Yield would be 6.76% and the forecast Dividend Yield 6.13% (fully accounting for and after mortgage interest payments, purchase costs, furnishings, forecast maintenance, annual voids, corporate taxation and all fees). Since April 2016 UK taxpayers are entitled to a £5,000 annual dividend allowance. See our FAQs here for more information.
The mortgage will be provided by a major high street bank with an anticipated two-year fixed interest rate of approximately 3.71%. After this two-year period, the interest rate will switch to a variable rate based on the bank's base rate. At that point, we will assess the situation and either continue with the variable rate or fix the interest rate for an additional period if necessary. Please refer to our blog post on geared property for further details.
The block being acquired is in good condition. We have set aside a contingency of £30,000 for any issues that are identified after purchase. There is also a total provision of £24,375 for furnishings.
We are acquiring the Freehold block comprising 65 purpose-built student studios.
This transaction was approved by our RICS qualified Director of Property.
The investment comprises a modern five-storey development of 65 purpose-built student studios.
The studios are fitted to a high standard, and feature study desk & chair, ensuite shower rooms, and integrated kitchenette. In addition, the block contains a cycle store, laundry facility and a lift serving all floors.
We present here floorplans for 3 of the floors within the block.
- Share Valuation
- Rental Income Breakdown
- Funding Target
- Share Valuation
- Purchase Price
- Purchase Costs
- Stamp Duty
- Legal & Prof Fees
- Pre-let expenses
- Repairs Provision
- Mortgage Arrangement Fees
- - £2,706,800
- Funding Target
- Gross Rent per year (E)
- Service Charges
- - £67,743
- Gross Rental Revenue
- = £362,525
- Gross Rental Yield
- - £175,294
- Annual Interest Payment
- Letting and Management
- Property Insurance
- Allowance for possible voids
- Maintenance Allowance
- Corporation Tax
- Dividends per year
- = £187,231
- Dividend Yield
Note: UK taxpayers are currently entitled to a £5,000 annual dividend allowance. This means that the total income related tax you pay is no greater than if you were to own the property directly. Gross rent and dividends may be lower than estimated. Tax treatment depends on individual circumstances and may be subject to change in future. See FAQs for more information on taxation. The Dividend Yield assumes an investment at the Latest Valuation.
Pitt Street, NE4 5BF,