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Aldgate UK Student Accommodation

Aldgate UK Student Accommodation

ukhousing

Seera completed a Shari’a compliant structured financing facility for a new purpose built student housing and commercial property in central London in August 2012.

The property is located in Zone 1 in London in close proximity to most key higher educational institutions. When completed in 2013, the property will offer 339 student rooms and 37,000 square feet of commercial space. Construction of the property, which is located near Aldgate East station in Central London and in close proximity to several higher educational institutions, is well underway with the first phase having been completed in the summer of 2012. 

This is Seera’s first investment in the attractive UK student housing sector. The strong underlying demand, the recession proof nature of demand for UK student accommodation in general and the strong position of the UK and London as a destination for higher education are some of the attractive features of this sector. The sector is also expected to continue to perform strongly given the persistent shortage of purpose built student accommodation in the UK. Even by 2016, less than 1 in 4 students in the UK is expected to be accommodated in purpose built student housing. This demand supply gap support a positive outlook for the sector in terms of both rental income and capital growth.  

The sector’s market fundamentals and its ability to provide robust yields along with this property’s prime location are augmented by the investment’s attractive economics. The investment is expected to provide Seera’s investors with an annual yield around 8.5% and an IRR between 13 and 14% in a relatively short tenure of two and half years.

Other attractive features of the deal include risk mitigation through deal structuring including quarterly yield payments secured through letters of credit from reputable UK banks.  Furthermore, investment return targets are expected to be achieved even at conservative sale prices for the property at the end of the two and half year term. Development risk is also considered to be low due to the strong track record of the lead contractor, Mace, a leading UK based developer, project manager and construction partner, in successfully completing similar projects on time and on budget.  

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