Blackstone Bets Big on U.K. Student Housing, Acquiring IQ for $3.6 Billion

By Ben Dummett 

Blackstone Group Inc. agreed Wednesday to acquire IQ Student Accommodation from a group led by Goldman Sachs Group Inc. for GBP4.66 billion ($3.60 billion) including debt, the latest bet by the U.S. buyout giant on the growth of student housing in the U.K.

More generally, the deal is an endorsement of Britain's economy as its government faces the challenge of reaching a new trade deal with the European Union by the end of the year following the U.K.'s split from the bloc last month. It is also an early but significant sign of a rebound in European deal-making this year despite a global slowdown.

Following 2019's steep decline in activity against a backdrop of political uncertainty and worries over economic growth, deal activity in Europe so far this year is up 16% to $94 billion, compared with a 40% drop globally to $359.3 billion, according to Dealogic.

IQ is one of the U.K.'s largest owners of student housing, overseeing more than 28,000 beds in facilities located in some of the country's major university cities, including London, where the portfolio is concentrated, Manchester, Leeds, Sheffield, Edinburgh and Birmingham.

Britain's education system is already among the country's most lucrative sources of revenue and Blackstone's deal for IQ is a bet on that growth continuing.

U.K. revenue from international students and other education-related services totaled about GBP21.4 billion in 2017, the bulk of which was generated by higher education, according to a 2019 report from the U.K. Department for Education. The total was up 7.2% from the prior year and had gained 34.7% since 2010, measured in current prices.

"There is very significant demand for British higher education, both from domestic and international students, and that is translating and should continue to translate into increasing requirements for student housing," said James Seppala, Blackstone's head of real estate for Europe.

Blackstone already knows the U.K. student housing market. In 2005, the New York-based firm launched the Nido student business in London, subsequently selling it in 2012. Then, in 2017, Blackstone sold its London-based Victoria Hall student-housing business.

Blackstone is acquiring IQ from Goldman Sachs' merchant bank division, which owns 72% of the operation and its partner Wellcome Trust, a London-based charitable foundation, owner of the remaining stake.

Write to Ben Dummett at [e-mail]

(END) Dow Jones Newswires

February 26, 2020 07:44 ET (12:44 GMT)

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