Harrison Street is a leading investment management firm exclusively focused on alternative real assets. Since inception in 2005, the firm has created a series of differentiated investment solutions focused on demographic-driven, needs-based assets. The firm has acquired and developed over 1,508 properties that comprise more than $63bn in real estate cost across senior housing, student housing, healthcare delivery, life sciences, build-to-rent and storage real estate as well as social and utility infrastructure. Our experience includes investments on, near, or in partnership with 200+ universities and 30 top health systems and ~120 leading operating partners. We continue to innovate with this robust network throughout North America and Europe.
Headquartered in Chicago with offices in London, New York, Toronto, Tokyo, San Francisco and Washington DC, the firm has more than 220 employees and approximately $53bn in assets under management. Our dedicated and passionate team excels in finding innovative ways to generate long-term value as fiduciaries for our investors. The team consists of subject matter experts in alternative real asset investing and has one of the longest track records in non-traditional real estate. Clients of the firm include a global institutional investor base domiciled in North America, Europe, Asia Pacific, Middle East and Latin America.
Strategic corporate development
Since 2005, the Harrison Street team has spent significant time developing and nurturing relationships with top universities, health systems and operating partners across North America and Europe. It is through this network that the firm will continue to innovate within demographic-driven, needs-based real assets and strategically expand into new investment strategies and markets that complement our existing activities and meet the needs of our clients.
Since its launch in 2015, Harrison Street’s European platform has grown rapidly to become a leading investment manager in alternative real estate including student housing, residential and life sciences. Within Europe, Harrison Street has now established an exclusive network of operating partners and key relationships with top universities across multiple countries. Harrison Street Europe continues to expand its regional capabilities with an extensive hiring programme to extend and deepen its investment expertise in student housing, life sciences, healthcare and specialty residential. Harrison Street Europe plans to continue growing the opportunistic funds series, launch new strategies at the lower end of the risk spectrum as well as other real assets solutions.
Sector Forecasts
RESIDENTIAL:
European build-to-rent (BTR): Across many European cities, there are insufficient levels of residential real estate to meet rising levels of demand. Although BTR is still a nascent sector in the UK and Europe, its underlying fundamentals and acceptance as a viable housing solution have created an attractive investment opportunity. Demand for BTR in the UK and Europe is driven by structural housing undersupply and a secular shift towards rentals. The current macro conditions are driving up renters by design with home ownership decreasing as renting is a more affordable alternative. Household income growth has not matched house price inflation coupled with tighter personal mortgage markets and rising mortgage rates, underpins this shift. European cities remain significantly undersupplied from a housing perspective and rising construction costs are likely to exacerbate this further. Ultimately, levels of homeownership are likely to be impacted, with prospective first-time buyers priced out of the market. Unlike traditional buy-to-let apartments, BTR units are professionally managed and often held in long- term portfolios, giving tenants a higher quality experience than what would otherwise be available from individual landlords.
OTHER:
European student accommodation – The continued demand for higher education throughout Europe is demonstrated by positive enrolment growth and a continued rise of young adults that have completed tertiary education. Latest confirmed enrolment across major European markets saw a 2% increase in full-time enrolment, with some markets, like the UK (+8%), seeing significant increases in demand as a result of the COVID -19 pandemic. The opportunity to pursue a degree with varying levels of affordability and the advantages of greater earning potential upon completion continue to sustain the persistent demand for higher education. Furthermore, the anticipated recessionary environment in the near future will likely see student numbers further increase as people return to university in order to re-skill. University enrolment growth and limited purpose-built student accommodation have created a structural supply and demand imbalance of student housing across Europe. Accordingly, investment and development activity have increased throughout primary European university cities; however, with provision rates as low as 4% in some cities, there is still a long way to go until these markets reach full maturity. Harrison Street believes that the demographic driven demand for tertiary education offers counter-cyclical performance with the ability to deliver secure income during varying economic cycles and that the underlying demand fundamentals in many European university markets cre- ate appealing investment opportunities.
European senior housing – The European senior housing sector offers a strong real estate investment opportunity that matches institutional investors’ requirements for long-term, income secure assets that are driven by underlying structural trends rather than market cyclicality. Demographic trends across Europe highlight the opportunity to invest in European senior housing to meet the needs of a rapidly aging population, as evidenced by the growth of the absolute number of seniors and as a proportion of the total population. Accelerating demand requires an expansion of supply. Pressure on public finances and the capital requirements of existing operators seeking to expand in a consolidating market and create an opportunity for investors to capitalise on this trend through investment in this emerging sector. The opportunities for senior housing investments include countries experiencing strong growth in their aging populations and these countries have the following characteristics: affluent seniors, higher rates of income, market structures with higher requirements of self-financing for senior care and compatible housing cultures.
European life sciences – This is a nascent but growing sub-sector which services the science and innovation sectors of biotech, pharmaceuticals and healthcare. Investment into life sciences real estate has seen significant growth over the past few years, with 2021 representing a record year for investment. There is sizeable dry powder targeting both the UK and Europe as new investors enter the sector, all across the risk spectrum.
There is structural undersupply of purpose-built modern research and lab space to accommodate the ever-growing investments from both the public and private sectors. Europe has some of the world’s leading research institutions, a large pool of research professionals and an abundance of VC funding creating the fundamentals for growth. Similar to the real estate market in 2021, VC funding had a breakout year last year and although current levels of funding are not at 2021 levels, 2022 is likely to represent the second largest fundraising total in the UK. At the property level, this growth is further supported by low vacancies, relatively low available space to rent and attractive capital values per sqft.
Investment principles & strategy
Harrison Street leverages its investment expertise and exclusive focus in alternative real assets to execute its strategy with confidence. As a first mover in demographic-driven, needs-based real assets, the firm has invested $63bn of gross investment cost across 1,508 transactions in its target sectors. Additionally, the firm has realised on more than 620 assets totalling $14.4bn in total cost. It is with this deep experience that we execute a rigorous and time-tested investment process. We bring together all disciplines of the firm to collaboratively manage assets throughout the investment life cycle from strategy conception to disposition.
The demand for Harrison Street’s target sectors is driven by demographics and life events. The cycle-resilient user demand is derived from demographic trends: an aging population that continues to grow and live longer; increasing college enrollments; and a more mobile population. Further, there are varying degrees of need for services offered at the properties including important life events, such as the one-time need to obtain a college degree contributing to student housing occupancy; recurring events, such as the need to visit a physician’s office regularly; or absolute needs, such as the need to live in an assisted living or memory care senior housing community.
The firm executes strategies across the risk-return spectrum in North America and Europe.
Performance verification
Performance return cashflows for Harrison Street European Fund I, Harrison Street European Fund II and Harrison Street European Fund III have been verified by the accounting firm Ernst & Young through 31 December 2021. Returns are calculated in accordance with INREV guidelines. The calculated performance is thoroughly checked in-house by Harrison Street as part of a multi-stage process.
COMPLIANCE STATEMENT
The information contained herein is for the sole purpose of providing general information to institutional investors about Harrison Street and its affiliates. Certain subsidiaries are registered with appropriate regulatory authorities. No representation is made concerning the accuracy of the information compiles herein, and no guarantee or assurance is given that any forecast or opinion in these materials will be realized. The information contained herein is not investment advice and may not be construed as the promotion or marketing of any services or financial product sponsored or provided by Harrison Street and its affiliates. Harrison Street Overview and Investment Principles & Strategy sections are as of September 30, 2022. All other information herein is as of June 30, 2022, unless otherwise stated, and Harrison Street undertakes no obligation to update any such information.
