RESPUBLICA: Respublica to Grow in Fertile African Student Accommodation Market

Property development in South Africa is on a roll. Retailers are funding a major boom in storage capacity. Logistics companies are busy with international-standard distribution centres. Housing companies are inundated with requests for new developments. Infrastructure businesses are servicing a swelling distribution centre industry. But insatiable demand for student accommodation is providing major opportunities for those that know how to deliver.

Established in 2010, Respublica is one of the country’s leading developers, owners, and operators of student accommodation. This is a business that not only can deliver, but goes beyond simple creation of effective buildings, providing turnkey, end-to-end services in the development of accommodation and ongoing nurturing of a student community and effective learning environment.

CEO Craig McMurray is an experienced industry pro, and he is excited to share news of a successful fund-raising campaign which has seen Respublica partner with local and international financial institutions to support development of safe, affordable, quality student housing in South Africa, particularly for students from low-income households.

The International Finance Corporation (part of the World Bank), French development institute PROPARCO, Bopa Moruo Private Equity, and RMB Ventures injected more than R1.1 billion into Respublica, adding significant capacity to the company’s growth strategy.

Already home to 10,000 student beds, Respublica will reach 20,000 by 2028, and the business will continue contributing to three macro South African problems: education and unemployment, quality property, and ethical and sustainable business development.

“Supporting human capital development, including through improved access to student accommodation, is vital to spurring sustainable and inclusive economic growth in South Africa. Our aim is to ensure that all students in South Africa–particularly underserved students from low-income households–have access to high-quality, safe, affordable housing from which to pursue their studies,” said IFC Country Manager for South Africa, Adamou Labara.

MORE THAN 10,000 BEDS

Currently, Respublica is busy on site with new projects in KZN and Gauteng as the demand from learners show no signs of abating.

“We have three new building sites right now, which will deliver another 1200 student beds by the end of this year,” says McMurray. “That will take our portfolio to more than 10,000 beds. One project is a greenfield, servicing the University of KZN. We have another 700 beds in Johannesburg, an expansion of our existing site, servicing Wits University. Those projects should start trading at the end of the academic year in February 23.”

The company employs around 200 people permanently, outsourcing only security, cleaning, construction, and some engineering functions. It is the holistic approach to solving multiple problems in one go that truly separates Respublica from others. Corporate in structure, but small and nimble enough to take decisions quickly, this is a business that puts clients and end users first.

The achieve this, the company has developed itself to go beyond property development. It is an industry leader in the provision of aspirational lifestyles, and the support therein of the country’s students and future workforce.

“The motto of the business is that it’s not about the bed, we are selling a lifestyle,” confirms McMurray. “That lifestyle comes with a Res Life programme and that has fundamental pillars which provide support to students, leveraging on academic support and tutoring, student well-being and mental health, sports, and social and community programmes. They get a world-class facility that is modern and amenities-rich, but we are about providing an aspirational lifestyle where they know they have the best chance of being successful in their studies.”

Historically, it has only been students on campus at the country’s top universities who would get to experience this part of student life. “It was never available for private students who couldn’t be in an on-campus residence. We are now able to replicate that and largely improve and exceed the offering to students outside of their actual academic study,” highlights McMurray.

In 2021, government spent R43 billion on free university tuition, encouraging students from poor and working-class backgrounds to access further education. “Other than Cuba, we are not aware of any country in the world that provides such comprehensive higher education support for poor students. And all this is a free bursary that does not have to be paid back anymore since 2018,” said Minister of Higher Education, Science and Innovation, Dr Blade Nzimande.

But affordability and availability of accommodation remains far behind. McMurray and Respublica have taken learnings from around the world and applied to the unique South African landscape with great effect. The company’s portfolio of residences includes Saratoga Village, Yale Village and The Fields, which provide accommodation for University of Johannesburg, Central Johannesburg College and University of the Witwatersrand students. In Midrand, Princeton House services students from Pearson International (ex MGI). In Pretoria, Hatfield Square, West City, Urban Nest and Eastwood Village accommodate students from Tshwane University of Technology and University of Pretoria. 

“When setting up this business, I travelled extensively in the USA, UK and Australia where student accommodation is far more mature compared to SA. What became apparent is that the private accommodation market is tailored towards international students, with mid to higher levels of affordability. In SA and Africa, it is all about affordability with the majority of students coming from lower LSM groups, under huge pressure, and that puts them at a disadvantage when it comes to successful studies,” details McMurray.

COMMUNITY DRIVEN

Where students live life while studying makes a major difference. According to QS (Quacquarelli Symonds) – the world’s leading provider of services, analytics, and insight to the global higher education sector – accommodation provides students with a ‘sense of belonging and security’ which can encourage them to take on the risks and challenges of higher education, and to achieve the associated academic and life growth. “A student’s living space can directly affect their academic performance; arguably one of the most important parts of the university experience,” stated a 2019 QS report.

Respublica’s aim is to deliver a learning community that impacts all aspects of life positively. While academic performance is often considered as the only measure of a successful university stay, there is now clear evidence to suggest that multiple factors feed into this.

“A lot of people and companies see us as a real estate business, and while that is true to a certain extent, we are all about managing student communities,” details McMurray

“We have a strong social imperative in terms of the impact we are trying to make as business, over and above the financial returns that must be justified and delivered to shareholders,” he says. “One of our most important ambitions is our social impact. Supporting education covers two very important aspects, firstly education and secondly social housing. You could also say that thirdly we are very concerned with student well-being and mental health, which post-Covid has become a very real issue. Every week, we deal with suicide issues, GBV issues, and more. You must have support staff, training, and educational programmes to teach students about this while giving access to support.”

Respublica handles community development, and is an in-sourcer when it comes to daily operations on site. Little is left to third parties and the company retains control over as much as it can to deliver its community concept. “We don’t want to be security or cleaning specialists and we outsource those to a big national firm. We concentrate on student administration, letting, leasing, and rental collections, as well as managing student communities – that is the core of our business,” adds McMurray.

Communities are already strong across the portfolio with strong testimonials received regularly from The Fields, Urban Nest, West City, Eastwood Village and more. “The past five months have been nothing short of incredible, in that the expectations I had, are met, far beyond what I had imagined,” said Lincoln House resident, Dineo Monethi. “Having lived in a residence on campus, my focus was only on the completion of my degree – little did I know that I would be experiencing something far greater as well. I have grown as an individual through the people I have met here, and the initiatives conducted.”

NATURAL GROWTH

For McMurray, a former-farmer and then banker turned property expert, growth is of course at the forefront of strategy development. Using the funding from investment partners, the number of beds under management will grow, and the opportunities created will also expand. But this entrepreneur has ambitions beyond South Africa, and is keen on creating standards around Africa where student accommodation remains a nascent industry.

“The IFC and PROPARCO have strong development mandates, and good coverage on the African continent, and we are trying to leverage our operational platform and our IP in this specific sector into those geographies that haven’t formally started a growth phase with student accommodation,” he says.

“These development agencies and finance institutions that are wanting to put capital in, but don’t have the confidence that there is a level of experience required to run such an operationally intensive business, can leverage us through their investment to assist them in other geographies where there is demand for student accommodation.”

According to UNESCO Institute for Statistics, there was a 21% increase in the number of students in tertiary education in Africa between 2012 and 2017, and the number continues to boom as a young population eagerly prepares for future opportunities. But there is a lack of suitable accommodation and the booming demand v supply conundrum is attracting international investors who see the opportunity as an emerging asset class. This is why McMurray sees so much potential firstly in South Africa, but eventually across the borders.

“There are certainly obstacles and here in SA – we like to create obstacles for ourselves – but there is without doubt major opportunity. We do have competition and the economics are now a lot tougher than it was when we started. Affordability is always a challenge at all levels. Being able to deliver a product in terms of building cost, capital cost, as well as monthly operating cost to operate the beds on a credible basis with a student as the end user, remains challenging.

“Demand exceeds supply many times over and the challenge is to put together feasible projects that make sense financially while still being affordable for students in general.”

The additional support and schemes provided by Respublica show a thorough understanding of the industry and a wider reason for being, beyond creating nice buildings for profit. Ensuring first-class experience while delivering for both student and university is not something as high on the list of priorities for many competitors in the industry.  

“It’s more relevant in the African context because of levels of poverty and affordability. Many students come from impoverished backgrounds and they are entering tertiary education for the first time, with their families never having been to university. There is a lot of pressure on students financially and psychologically. Making sure they have access to support is absolutely critical.

“We have an aggressive growth profile that we will follow over the next five to seven years.

Our expertise is building and operating student residences,” says McMurray.

This model speaks to the end-to-end nature of Respublica – a very deliberate structure, allowing the company to retain quality through the value chain.

“We specialise in the design and development management of any new facilities. We will source land, raise funding, design the product, and manage the development to get it delivered. We run all the property management from administration through leasing and rental collections to student affairs and residential community. We also perform the asset management function, the same as it would be handled in any industry, with capital raising, acquisitions, disposals etc,” explains the CEO.

With this level of expertise – from seed, through growth, all the way to distribution – McMurray and team can call on almost unrivalled knowledge and experience to satisfy students, educational institutions, financiers, and governments.

“We need to find opportunities and those could be land for development and properties to acquire in the South African context. We want to expand our management footprint outside of South Africa, bringing everything including our software to new markets. We want to move into areas that are don’t have a lot of formal student accommodation and help them establish the industry in those areas. We have right sized our balance sheet and we have good scope to continue growing our business,” he concludes.