UK Student Housing Fund Runs Out Of Cash

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Written By Saeed Maleki

housesStudent accommodation investors need to exercise a degree of caution as another big fund has suspended investment withdrawals.

Mansion Student Accommodation, based offshore in the Channel Islands, has called a halt on redeeming investments after running out of cash.

The £282 million fund managers explained a call on reserves had emptied the coffers and no more money is available to pay off investors leaving the fund.

As a result the fund has closed to current investors leaving and to new investors wanting to take a share in the company’s student housing portfolio.

Mansion runs five share classes in British pounds, US and Singapore dollars, Swiss francs and the euro.

The suspension has been backdated for sellers to October 1.

Refinance deal

“The suspension is quite simply explained,” said director Graham Basham. “Clients cashing in their investments have run down our cash reserves quicker than they are filling up.”

The fund held 10% of net asset value in cash in July.

Mansion is understood to be seeking a refinance deal to ease cash flow.

Another student housing firm with similar issues is £1 billion Brandeaux fund, based in Ireland, which runs Liberty Housing in the UK.

The firm suspended redemptions several weeks ago, citing the same reasons as Mansion.

Investors have waited to leave the fund for more than two years, but cannot get their cash back. In response, the fund managers suspended withdrawals.

Recently, they announced a 4% write-down on net asset value.

The main issue for student housing funds is the collapse of the Manchester-based Opal Group earlier in 2013.

Record investment

The group went into administration, dumping around 20,000 student rooms on the market. Such a huge number of rooms dramatically increased supply for investors, pushing down the price of some accommodation, leaving fund managers high and dry as they top up redemptions with cash from reserves.

Much of the Opal portfolio has since been sold to new owners, which should relieve the downward price pressure on the sector.

Meanwhile, property consultants are still talking up investment in student housing and this year has already seen corporate and institutional backing reach record levels with several billion pounds of deals.

However, many of the transactions involve refinancing or taking over of existing portfolios rather than new developments coming online.

Nevertheless, the biggest corporate student housing provider, Unite Group, has seen share prices rise, the start of new projects and record bookings for housing this year.