Assessing the impact of Covid-19 when valuing a UK-wide PBSA portfolio for HSBC

 

 

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student housing valuation

UK-wide 

PBSA portfolio of 5 operational assets

> £175m

  

Ambition

HSBC required JLL to carry out an updated valuation for loan review purposes of a Downing student housing portfolio, located across London and UK regions. Our client wished to understand the impact of the Covid-19 pandemic on the value of assets held as security, effective as of 31 March 2020.

Approach

Our Student Housing Valuation Advisory team assessed the impact of Covid-19 and government lockdown policies on occupancy, income and expenditure for each asset, for the remainder of the 2019/20 academic year, in addition to the potential impact on asset performance for the 2020/21 academic year, in the event this academic year was delayed.

The refund policy of Downing Students was considered, along with an increased focus on letting performance for the 2020/21 academic year, plus analysis of student demographics and catchment. This was then benchmarked against a wide range of other PBSA assets that the team were actively involved with, including the associated Covid-19 impact, and advice was sought from our Higher Education teams and Capital Markets teams, particularly with regard to the latest market sentiment, impact on yields, capital values, and higher education institutions.

Added value

The team drew upon JLL’s global reach, including the experience of JLL’s offices in China, Hong Kong and Singapore, who were at a more advanced stage in the pandemic, to better understand and forecast the likely impact and timing of Covid-19 on assets in the UK.

Challenges

The team was instructed by HSBC to provide valuations of the Downing portfolio during an unprecedented period of uncertainty, caused by the Covid-19 pandemic and the resultant lockdown. Quantifying the likely effects of the pandemic on the PBSA market presented complex challenges, unlike anything seen in the Higher Education and PBSA sectors before.

Achieved

A fully insightful valuation of the portfolio was provided, demonstrating the collaborative nature and depth of knowledge of JLL’s Student Housing and Higher Education teams. New modelling strategies and multiple scenarios were demonstrated, to highlight the potential impact of a range of Covid-19 risk factors on PBSA asset performance.

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