Goldman plots float for £3.5bn student housing group IQSA

Goldman Sachs and Britain’s biggest medical research charity are drawing up plans to float one of the country’s largest providers of student housing in deal likely to value it at well over £3.5bn.

Sky News has learnt that the owners of iQ Student Accommodation (IQSA) are close to hiring banks to oversee an initial public offering (IPO) in London.

City sources said this weekend that the plan was likely to attract significant interest from institutional investors given the growing appetite to back the corner of the real estate sector that IQSA operates in.

However, a decision to go public would also draw intense scrutiny in the City of the company’s board.

IQSA has been chaired since last year by Penny Hughes, a serial non-executive director who also chairs the luxury car-maker Aston Martin.

The automotive group has turned into one of the worst-performing IPOs that the London stock market has seen for years, with its shares down by close to 75% since their debut last year.

Ms Hughes joined to steer Aston Martin through its float, and had no prior involvement with the company.

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She is highly regarded in senior business circles, having held challenging jobs such as chairing the remuneration committee at state-backed Royal Bank of Scotland.

Other companies where she has served on the board include the supermarket group Wm Morrison, Vodafone and Superdry.

Taking IQSA public would also be challenging for Ms Hughes in light of the fact that she has two existing listed company chairmanships.

As well as Aston Martin, she has chaired The Gym Group since it floated in 2015.

Corporate governance guidelines stipulate that an individual should hold – at most – two such roles, meaning she would be obliged to step down from IQSA or relinquish one of her other posts if the student accommodation provider goes public.

Sources close to IQSA confirmed on Sunday that investment banks were in the process of being appointed to work on a listing, but they confirmed that other options were also likely to be examined, including a private sale.

Property-backed companies in the UK are continuing to draw significant overseas interest, most notably with the impending takeover of pubs operator Green King by a vehicle owned by Hong Kong’s Li family.

IQSA is among the largest providers of purpose-built student accommodation in the UK, with a portfolio value of £3.5bn last September 2018.

Calculating a specific valuation for the company on the markets is difficult because IQSA declines to say how much debt it is carrying, but one property industry source estimated that its equity would be worth at least £2bn.

The business is roughly 70%-owned by Goldman Sachs, with Wellcome Trust holding another 28%.

A third shareholder, Greystar, owns a small stake by virtue of its previous ownership with Goldman of Prodigy Living, which merged with IQ in 2016.

IQSA operates from 67 sites across 27 towns and cities across the UK, providing accommodation for more than 28,000 students.

In 2017-18, the last year for which results have been disclosed, the company reported revenue of £200m, an increase of 29% on a year earlier.

By comparison, Unite Group, the industry’s biggest player with a market value of just over £3bn, has just acquired Liberty Living to create a company with a gross asset value of £7bn and accommodation for 75,000 students.

IQSA and Goldman Sachs declined to comment.

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