Alleyroads makes inroads in student digs
Property developer acquires R1.2bn portfolio as it expands into education residential market
● Privately-owned property developer Alleyroads has acquired a portfolio of sectional-title units and student accommodation from Pulse Property for R1.2bn as it expands its assets, especially in the lucrative tertiary education residential market.
Alleyroads founder and COO Ivan Pretorius said the properties in the Western Cape, Eastern Cape and Gauteng made for a compelling investment opportunity and “further diversifies our current exposure to residential rental apartments by introducing student accommodation to our portfolio”.
Thousands of students descend on cities and towns across the country to start university each year, but accommodation provided by tertiary institutions does not meet demand. Investors have increasingly been focusing on student accommodation, generating steady and profitable income streams.
Pretorius said the transaction provides further momentum to Alleyroads’s goal of growing to 20,000 residential rental units in the affordable housing market, 10,000 student beds and 150,000m2 of retail space by 2027.
Alleyroads’s entry into student accommodation started with the acquisition of 2,200 units in East London. “We had students living inside some of our residential units and we saw the potential and bought the property,” said Pretorius.
The company is working on a project to complete a 2,800-bed development close to the University of Venda in Limpopo. This will be followed by 2,200 units in Johannesburg to feed one of the universities. It also has a small development in Emalahleni.
“By the end of 2026 we should have just under 7,000 student beds that we are renting out and they are all focused on Nsfas [National Student Financial Aid Scheme] students.”
Pretorius said the student accommodation market is attractive, “but I think a lot of people are afraid of it because of the uncertainty around where the government is going with regards to student funding and how Nsfas has been operating. The demand for accommod- ation is there and we are trying to provide the right level of accommodation and create an environment conducive to learning.”
Alleyroads CEO Barry Chapman said one of the key reasons for the acquisition is that “it eliminates construction and market risk and the uncertainties and risks associated with new development projects”.
He added: “The acquisition further aligns with our strategic direction of catering to the growing demand for student accommodation and brings risk diversification by spreading our exposure across various defensive residential sub-asset classes in different geographical locations.”
Alleyroads’s residential portfolio comprises 1,800 rental apartments, with a further 1,500 units under construction. The acquired portfolio of 3,305 apartments is located across 46 properties in Parklands in the Western Cape; East London; Florida, Johannesburg; and in the Johannesburg and Pretoria central business districts.
“There is going to be a huge demand for rental because interest rates are still going to remain high for a while. This is a rental market. What is key for us is finding the right funding partners and the right investment partners because this wave of rental stock is going to be here for the next five to seven years. It [rental property] is by far the best investment and we are achieving internal rate of returns of above 15%.” Alleyroads was started by Pretorius, a civil engineer, in 2009 with 34 units and has since grown the portfolio into 100,000m2 of retail and residential space. It started with eight employees and now has 75. It is building a new 22,000m2 shopping centre in Meyerton, south of Johannesburg, which is expected to be opened in March 2025.
“This is the first shopping centre we have designed and it will cater to the affordable housing market. Right next to the centre we are putting 338 residential units for rental. We are not just building shopping centres but creating a whole community to feed into each other. Our model is to build hubs where we have shopping centres and residential, as well as student accommodation,” said Pretorius.
The company is also in discussions with a black-owned developer of retail properties to build residential units around shopping centres it owns. The developer owns malls in townships and small towns and cities.
Alleyroads plans to build four new shopping centres — three in Gauteng and one in Mpumalanga — in the next three to five years. Pretorius said all its residential property developments will be completely offgrid, and where possible its shopping centres and student accommodation will also not be reliant on the national grid.
Expansion outside South Africa is also under way. “We have two countries that we’ve already been asked to give a lot of strategic guidance. In Kenya we have been asked to roll out 10,000 residential units for the government, and in Morocco we’ve been asked to partner on 250 residential units for rental,” he said. Alleyroads is conducting due diligence on both projects.
“Growth in [the rest of] Africa is the route that we have to go,” Pretorius said.