ANALYSIS: Xior buys Basecamp for strategic growth

Earlier this summer, Antwerp-headquartered Xior inked its most significant takeover ever, acquiring European peer, Basecamp Group, in a deal worth €939 mln. The purchase followed the acquisition of Quares Student Housing at the end of 2021.

While the Quares deal, worth around €156 mln, increased Xior’s Belgian portfolio by around 25%, the Basecamp acquisition is much more far-reaching. It brings 11 new purpose-built student accommodation (PBSA) assets comprising 5,341 units across nine cities in Germany, Poland, Denmark and Sweden.

Importantly, these are all markets where Xior has not been operational to date, focusing hitherto on Belgium, the Netherlands, Portugal and Spain. It also adds 32% to the total fair value of Xior’s portfolio – raising it to around €3.7 bn with a total 26,526 units across eight countries. This consolidates its position as the largest student housing platform in continental Europe.

Shared vision
Unsurprisingly, the deal didn’t happen overnight, confirms Christian Teunissen, CEO of Xior. He recounts how just over two years ago – at the beginning of the pandemic – a meeting over dinner with Armon Bar-Tur, executive chairman of Basecamp, first spotlighted the synergies between the two firms.

‘We met and started talking about the PBSA business, and the future for students. Immediately, we felt an alliance,’ Teunissen says. ‘Our companies both share the same approach and vision on student housing, while Basecamp was also doing developments in-house with a very professional team. So, we felt that we were approaching the PBSA business on the European continent in the same way and had similar ideas about the future. Then Covid created a pause.

‘But we picked up discussions again six months ago and still felt aligned, as if nothing had changed after two years. We still think the same, and the market is there right now. The fact that we could unite four markets each to create a business in eight countries was a match made in heaven. It is an acquisition but it feels like a merger, and we will in fact merge both teams to further develop an organisation focused on operational efficiency and scalability.’

Adds Bar-Tur: ‘The timing of the deal wasn’t critical. The markets are always going to go up and down. Nevertheless, our market is in a secular growth phase that will be unbroken over the long term. By way of comparison, the largest student housing player in Europe is Unite, which is active only in the UK – a very mature market. We are in a market 3.3 times the size with a third of the supply on a percentage basis, so the potential is huge.’

‘We have shown the markets that we have the teams to do the job in hand – develop, operate, and own the assets. So, this is really putting a marker in the ground that we are the first really pan-European vertically-integrated student housing company and we have the infrastructure to be able to realise our combined vision. This tie-up accelerates our jointly held ambitions by many years.’

Says Teunissen: ‘We want to keep growing in a sustainable way across those eight countries before we look to further territories. We have a lot of development to do and a lot of standing assets to acquire and the story doesn’t end there.’ He points out that markets such as France, Italy and Norway are all interesting in terms of PBSA potential but stresses a focus on the current geographies and integration.

Quips Bar-Tur: ‘We want to conquer Europe, but we want to get there methodically. All of our markets are growing and have also benefitted from Brexit and the further expansion of the Erasmus programme, allowing European universities to shine even further.’

Forward funding projects
In its early days, Xior was also a developer of projects, but scaled back this business line on the eve of its IPO in 2015 to reduce the firm’s risk profile for the stock market. ‘Over the last seven years, 85% of growth has been achieved through forward funding assets on a turnkey basis with rental guarantees,’ Teunissen adds. ‘We’re looking forward to extending our development capabilities again through Basecamp.’

Notes Bar-Tur: ‘Pure developers build and sell. Design and location are less important. As we are also the operating company, we think about every detail. Over the last seven years, we have been building our knowledge base and creating our design books. Higher construction costs today also mean that you must be more efficient and learn from your mistakes, to create an internal growth engine that is impactful to the overall business.’

When the deal goes through, Xior will be bigger than ever but also significantly exposed to a single asset class. Isn’t that risky in the current climate?

‘That’s not how I see it,’ Teunissen explains. ‘We are a focused, core student housing provider and we want to be the specialist that investors can trust. Xior creates opportunities for investors to spread their risks by putting say 5% of their firepower into student housing through us.

‘Apart from our geographical spread, another way we mitigate risk is by our approach to ESG. We aren’t just trying to create extremely sustainable buildings, we also focus on the social part, from our own workforce to the student experience. That adds value.’

Says Bar-Tur: ‘We are facing such significant potential in PBSA alone that we don’t want to “style drift” into co-living or homes for young professionals.’

He adds: ‘Our greatest strength is investing for the long term. You see a number of student housing brands being traded between private equity players. We are one of the few permanent, publicly listed capital companies, and own our operating model for the long term. That consistency is our guarantee of quality.’

 

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