Carlyle Enters the UK Student Accommodation Market

Joint venture with Generation Estates to acquire, develop and operate purpose built student accommodation

London - Global alternative asset manager The Carlyle Group ("Carlyle" or the "Group"), today announces that it has entered the UK student housing market following the acquisition of a site in Highbury & Islington in London, and the formation of a joint venture agreement with General Estates Limited ("GEL"). Carlyle and GEL are also progressing schemes on a further three sites in London which are to be acquired, providing the Group with an initial portfolio with capacity for circa 1,850 beds at a total value of around £350 million. Carlyle and GEL also hope to work closely with London Universities and other private sector and overseas educational providers to fulfill their specific requirements.

Carlyle is a strong believer in student housing as a long term institutional asset class and the move into the London market follows its announcement of a student accommodation development programme and investment called "City Living" in the Netherlands in October 2009. It is also considering a similar venture in Paris. Carlyle will invest through its third European real estate fund CEREP III, which raised €2.2 billion in June 2008.

The Isledon Road site is a 0.9 acre freehold, former industrial property located adjacent to Finsbury Park Underground station and bus terminus in Islington, North London. It has planning permission for a 400 bed, 10,800 sqm student housing scheme with approximately 1,433 sqm of commercial space at basement and ground floor level. Demolition is due to start next month enabling completion of the scheme in time for the 2012 academic year. The site is situated near several further education institutes including London Metropolitan University and City University whilst transport connections to Central London are excellent.

There are over 20,000 full time students in Islington and only approximately 6,000 beds within purpose built accommodation blocks. With only an estimated 2,420 bed spaces within the planning pipeline in the area, Carlyle expects there to be a shortfall in excess of 10,000 beds on the assumption that the entire current pipeline is built out.

Carlyle/GEL has agreed to acquire three further sites, subject to planning permissions which are expected to be received in Q1 2011, with construction starting as soon as possible thereafter. It is intended that all of these sites will become operational by September 2013, providing a total of 1,850 beds.

Carlyle intends to build a business with GEL of at least 4,000 beds in London, including the initial pipeline of schemes. Each site will comprise a mix of studio rooms (en suite plus kitchenette) and smaller en-suite study bedrooms, which will be in the three to four star bracket which Carlyle believes offers the most sustainable and attractive business proposition. Carlyle will place a particular emphasis on design and quality where it believes it can leverage the hospitality sector experience of other parts of its business in order to provide a more appealing offering than its competitors.

GEL, which is an experienced developer and operator of student accommodation, will be responsible for the ongoing operation of the completed developments.

The Carlyle Group believes there is a strong supply/demand imbalance in the student living sector and in London particularly, where there are over 260,000 full time students, with only enough purpose built accommodation for around 16% of these. London also has the highest number of overseas students, at over 90,000 full-time, a demographic which highly favours purpose built secure accommodation. This demand has resulted in solid rental growth, which was 10% in 2009 and around 7% as a longer term average. Growth in student numbers for post graduates and overseas students is projected to be 14% and 15% respectively, while delivery of new accommodation is substantially below that, with only 4,000 beds due for delivery between 2010 and 2012. Carlyle also believes there is strong demand from the non-university education sector which includes students studying professional and language courses. The asset class therefore offers good growth potential and security of income.

Commenting on the joint venture, Robert Hodges, Managing Director, Carlyle European Real Estate, said: “We have been aware of the attraction of student accommodation for some time, given the strong fundaments of the market, particularly the ongoing supply/demand imbalance in the UK and the new joint venture follows our entry into the student accommodation market in the Benelux region in October last year. The Isledon Road site fulfils our investment criteria of being well located near to both a number of universities and transport connections, in an area that has a strong supply/demand imbalance and will provide well designed student accommodation.

“One of the crucial factors with regard to any student accommodation investment is to ensure that the management of the end product can be undertaken by an experienced operator. We are therefore delighted to be working in partnership with GEL, which is well- established in the sector, having already developed over 3,000 beds in London to date.”

Alan Artus, Director of GEL, added: “Through our joint venture with Carlyle, we can work from a well financed position to provide high quality new product that will meet some of the significant demand in London for purpose built student accommodation. We will continue to work closely with the relevant local authorities through the planning process and hope to work together with local universities to meet their individual requirements. We are now actively seeking to grow our business with Carlyle by identifying and acquiring well located sites in Central London in order to create a sizeable operational platform.”

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For further information:

Financial Dynamics – for The Carlyle Group
Richard Sunderland: T. +44 (0)20 7831 3113
Carlyle@fd.com

About Carlyle Europe Real Estate Partners
Carlyle Europe Real Estate is the European real estate operation of The Carlyle Group and has been advising on investments throughout Europe since 2001. Carlyle Europe Real Estate aims to add significant value to the properties through active asset management. Carlyle Europe Real Estate has six advisory entities based in Frankfurt, London, Madrid, Milan, Paris and Stockholm, which, advise on the investments of three European funds based in Luxembourg - Carlyle Europe Real Estate Partners I - III, which total €3.4 billion of assets under management. The Carlyle Group, a global private equity firm, closed its first real estate fund in the United States in 1997 and, since then, has sponsored a further ten real estate funds in the United States, Europe, Asia and Latin America. Total real estate assets under management amount to $11 billion.

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