AfricanIcon, a Pan-African student housing company, is delivering on a $600 million development pipeline across the African continent.
I believe that this is a relatively small start to what will become one of the larger student housing providers in the world.
Africa is a market that has a massive supply and demand imbalance when it comes to housing in general, and student housing in particular. There are massive student housing funds in North America and Europe, where this asset class is already well established. Some of these funds have market capitalizations in excess of $8 billion, and have some 120,000-plus student beds under management. I believe that the demand for greenfield student developments in Africa over the next 10 years will create student funds that will dwarf these funds, not necessarily in market cap, but in number of beds to be created.
In Kenya, for example, there is believed to be a shortage of more than 350,000 beds annually, between public and private tertiary institutions. Kenya presents a stable investment destination from a sovereign risk perspective.
I believe that AfricanIcon’s experience within the South African student housing market is an invaluable commodity to take into its Pan-African student business. AfricanIcon has acquired The Aengus Group, a specialist in affordable housing and student housing provider in South Africa, to provide implementation and management expertise. Our approach is unique in that we identify an opportunity, mobilize the funding for the project, construct the student hostels, manage and administrate the properties and in some cases transfer the property back to the university after a period.
This Build, Operate and Transfer (B.O.T) model is very common within public-private partnerships, usually between state-owned enterprises and the private sector. However AfricanIcon is finding the greatest opportunities within the privately held universities that are rapidly expanding across the continent. A university may own land, but not necessarily have the expertise to construct and manage student housing projects. AfricanIcon will take this on, without the university having to outlay any capital, and then transfer the accommodation back to the university after an agreed-upon period.
AfricanIcon has focused its expansion on five geographies across the continent. Our primary focus at present is to ensure that its treasury function within the business matching its pipeline. We are constantly looking toward the development funding institutions (DFIs) and other commercial lenders internationally to assist with our growth. We believe that because we straddle affordable housing, education and Africa, we should provide a logical catchment area for this capital. Of course this is a commercial venture, with yields and returns being germane to measure our success, but we also happen to be making a discernable difference to the education of Africa’s youth. This for us is most important.
— James Huff is Group Head of African Projects for AfricanIcon. He can be reached at [email protected].