Student accommodation specialist, Aengus Investment Properties is expanding into six African countries as demand for safe, affordable, modern student accommodation takes off.
“Urbanisation, combined with a focus by African decision makers on education across the continent has driven the huge increase in the number of students studying at both public and private institutions – often away from home,” says James Huff, manager of Africa projects at Aengus Investment Properties.
The niche commercial property player started buying up buildings and converting them to student accommodation in South Africa about six years ago. It already manages nearly 7 000 beds in the South African market. The company plans to invest $300m (R3b) in student property developments in Africa over the next five years in Botswana, Kenya, Zambia, Lesotho, Ghana and Uganda.
Huff says while it is difficult to calculate accurate numbers of students needing accommodation, in Kenya alone there is a shortfall of about 350 000 student beds.
“Universities in Africa often have the land, but they have neither the funding nor the expertise to build and manage student accommodation,” says Huff. “Many of these institutions are realising that being able to provide decent accommodation to their students is a competitive edge.”
The company’s strategy is to source opportunities for both Greenfield and Brownfield developments. Huff says because the property market in most African markets is not yet sophisticated, there are few opportunities to buy up old buildings and retrofit them as they have done in South Africa, making building from scratch an attractive proposition.
“Our model has evolved to ‘build, operate, and transfer’,” says Huff. “Over a lease period of 25 years, we will then be able to transfer skills to the education institution for which we build accommodation and it will then be able to take over both ownership and management of the building.”
Affordable and modern Over the past six years, the company has gained first-hand experience in both the design as well as management of student accommodation. It plans to use this during its African expansion drive: rentals will include fully furnished apartments or single rooms with all the mod-cons, including free access to broadband internet, high-tech security features, as well as communal areas, for both leisure and study and services such as laundries and canteens. Ablution facilities ratios have been designed to accommodate about five students per shower and toilet. This will make a welcome change from the current situation, with reports of up to 30 students sharing one toilet and shower in some African cities.
The company has partnered with South African modular construction company, DV8, which specialises in using Alternate Building Technologies (ABTs). Huff expects the turnaround time from order to opening a building to be six to eight months. “We will use local contractors and labour, therefore facilitating skills transfers and as much as possible source basic building materials, such as cement and steel for the steel frame structure locally too,” says Huff.
“ABT’s make it possible for Aengus to construct new accommodation more quickly, cost effectively and robustly than conventional building methods.”
The ABT buildings have been shown to be three times stronger, and at least twice as energy efficient as conventional construction, mitigating long term operational risks for Aengus, such as unpredictable increases in electricity tariffs and rising costs of building maintenance. The buildings also use solar heating and rain harvesting to keep operating costs low.
Having grown in South Africa, where the political and economic landscape is constantly changing, the company is well placed to manage political risk too.
“We mitigated political risk through long term agreements with universities,” says Huff. “Build, operate and transfers leases of 25 years as well as long term head lease from institutions form an important foundation for our business as we expand up the continent.”
Aengus is currently bidding for 15 000 beds at two different public universities in Kenya as well as being in the feasibility stage of a 3 000 bed facility for a private institution in Zambia. By 2014, the company will have 20 000 beds in African countries outside of South Africa – the company already has 60 000 beds in its order book, which it plans to build over the next five years.
“Within five years we will have ten times more beds in Africa than we do in South Africa,” adds Huff. “Demand for decent student accommodation at an affordable price in Africa looks to be insatiable.”