New competitor's "aggressive marketing" blamed by Cambridgeshire County Council for shortfall in income from £38m student housing block
PUBLISHED: 19:15 09 February 2020 | UPDATED: 09:34 10 February 2020
A new competitor's "aggressive marketing" has been blamed by Cambridgeshire County Council for not showing the early returns it expected on the £38 million purchase of a 251-bed student housing block in Cambridge.
They blamed it on a "new competitor's aggressive pricing strategy" and outlined brief details of the shortfall.
The commercial and investment committee, that had recommended the purchase a year earlier, was told that by the end of October 2019 an "under achievement" on Brunswick House was partially to blame for income dropping below budget,
A finance monitoring report presented to the committee showed that to the end of October the council - across all investments - was projecting an overall under achievement of £877,000.
"This was an increase of £335,000 from the previous forecast," the committee was told.
In part it was due to the property services' team forecast overspend of £322,000 and mainly due to "additional reactive maintenance required to corporate buildings".
But £180,000 of that shortfall was "mainly due to Brunswick House and delays in completing on an acquisition in South Cambridgeshire".
Minutes from the commercial and investment committee show that Chris Malyon, the deputy chief executive "briefly outlined the issues relating to this property and advised that he had committed to preparing a detailed briefing note on the Brunswick House issue".
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He promised he would circulate this to committee members before Christmas "and this would include the percentage return on income for that acquisition".
A more detailed report is to go before the committee's investment working group this month.
In January the commercial and investment committee was told that occupancy levels of Brunswick House were below target for the current academic year.
"There is a brand new competing property in the vicinity of Brunswick House, however, the council is confident the offer and location of Brunswick House overall will remain very appealing to students for the years ahead.
"Active/varied marketing activity is continuing via the operator of the accommodation. Additionally, a further commercial property investment
Brunswick House was bought from Apache Capital Partners who said at the time that the sale amount reflected a net initial yield of 4.76 per cent, a record in the UK for a direct-let asset student accommodation outside London/the M25.
Brunswick House, completed in July 2012 and comprising 231 en-suite cluster flats and 20 self-contained studio flats, is less than a 10-minute walk to Anglia Ruskin University's Cambridge campus.
Jamie Snary, asset management director of Apache Capital Partners, said: "This sale to Cambridgeshire County Council is a great example of a local authority investing back into their local community".
He said they had acquired "high-quality purpose-built student accommodation asset with its exceptionally strong occupancy track record and defensive income profile".