Since its foundation in 2018, Studentbostäder i Norden (SBS) has grown its portfolio to ~SEK 5.6bn as of Q4’21, distributed across 14 locations in Sweden as well as relatively new entries into Norway and Denmark. SBS is purely focused on student housing, with ~99% of the property value stemming from this niche segment, and we note that registered students remain ~4-8x higher than the number of student apartments in Sweden, Norway and Denmark. Moreover, interest in higher education is contracyclical, as the number of applications in financial downturns increases. In addition, residential rents have historically outgrown CPI, with a 3.5% CAGR from 1990-2020 vs. CPI at 1.6%.
Growth driven by large project pipeline and acquisitions
SBS intends to grow through acquisitions and new construction projects, and aims to take a holistic approach towards digitalisation. The current ongoing and planned project portfolio consists of ~3,000 apartments, with the largest project (~30% of project portfolio) being in Stockholm where ~9x more students are registered for higher education than there are student apartments. We estimate healthy returns, i.e. yield-on-cost of ~4.9%, and even though we are more cautious than SBS’ project schedule, we model ~2,500 completed units during our forecast period. The target is to grow the portfolio to 10,000 student apartments by 2025 (4,605 units as of Q4 2021), and if we include signed but not yet completed acquisitions, the theoretical gap is ~2,200 units; as such, we expect M&A to be an important growth driver in the coming years.
Forecast to outgrow peers and trading at a discount to NAV
SBS is coming from a low base and major acquisitions in 2021 alongside project completions are boosting the cash earnings growth for 2022-24e. For 2023e, the share is ...
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