Ascott Residence Trust to acquire 4 US student accommodation properties for US$213M

In December 2021, Ascott Residence Trust entered a deal to acquire student accommodation property Latitude on Hillsborough in North Carolina in the United States. Credit: Ascott Residence TrustIn December 2021, Ascott Residence Trust entered a deal to acquire student accommodation property Latitude on Hillsborough in North Carolina in the United States. Credit: Ascott Residence Trust

Ascott Residence Trust entered deals to acquire four student accommodation assets in the U.S. for US$213 million, or around S$291.2 million, doubling its portfolio size, the REIT said in a filing to SGX Monday.

“The properties serve academically reputable universities with a strong athletics program. Membership in such athletic conference helps to boost the universities’ brand recognition and provides them with a profitable revenue source. The universities also have large student populations with a collective student population of more than 100,000 students,” Ascott Residence Trust (ART) said in the filing.

“The demand-supply dynamics for the properties are also favourable, as there is limited or no new upcoming supply of student accommodation assets in the vicinity,” ART added. “As most universities across USA have fully resumed in-person classes and on-campus activities, it is an opportune time to capture the fundamental recovery of the student accommodation sector.”

On a pro forma basis, the acquisitions would have increased fiscal 2020 distribution per stapled security (DPS) by around 3 percent and the earnings before interest, tax, depreciation and amortisation (ebitda) yield is estimated at around 4.9 percent, the filing said.

The acquisitions will be 92 percent funded by debt, and 8 percent by the remaining proceeds of Ascott Residence Trust’s private placement announced in September, the trust said.

The properties have a weighted average occupancy rate of around 94 percent for the 2021 academic year, ART said.

The four properties have a total of 1,651 beds, ART said.

The acquisitions will bring ART’s portfolio to eight student accommodation assets, with around 4,400 beds, the filing said. Seven of the assets are operating and contributing stable income, and one is under development, ART said. The trust said it has invested around S$780 million in the eight student accommodation assets and three rental housing properties, with an average ebitda yield of around 5 percent.

Beh Siew Kim, CEO of the trust’s manager, said the acquisitions will bring student accommodation and rental housing assets to around 16 percent of the total portfolio value, above the initial target of 15 percent, with plans to reach 20 percent in the medium term.

“ART’s student accommodation assets in the USA have proven to be resilient throughout Covid-19. We are investing more into the sector given the favourable conditions of the overall student accommodation market in the USA. Occupancy rates have recovered to pre-Covid-19 levels and the 2.3 percent year-on-year increase in rents for Academic Year (AY) 2021 is the strongest rental growth rate across the country since fall 2016,” she said.

The acquisitions are expected to be completed by end-December, ART said.

The properties include:

  • The Link at University City is located in Pennsylvania, with 251 beds in 126 units across three to five storeys, with unit sizes ranging from studios to one-to-three bedroom apartments, the filing said. Both University of Pennsylvania and Drexel University are a 10-minute walk away, ART said.
    The property’s independent valuation was US$68.5 million, and the purchase consideration is US$65.5 million, ART said.
  • Latitude on Hillsborough is located in Raleigh, North Carolina, near North Carolina State University, with 523 beds across 180 units, with unit sizes ranging from one-to-five bedroom apartments, the filing said. The property has a 97 percent occupancy rate, ART said.
    The property’s independent valuation was US$66.6 million and the purchase consideration is US$64 million, the filing said.
  • Uncommon Wilmington is located in North Carolina, near University of North Carolina Wilmington (UNCW), and has 493 beds across 150 units in a two-to-four storey townhome development, the filing said. Unit sizes are one-, two- and four-bedroom apartments, ART said. The property is 94 percent leased for academic year 2021, ART said.
    The property’s independent valuation was US$56.4 million and the purchase consideration is US$54 million, ART said.
  • Latitude at Kent is located in Ohio, near Kent State University, with 384 beds across 126 units in a five-storey building, the filing said. The property is 98 percent leased for academic year 2021, the filing said.
    The property’s independent valuation was US$31.1 million and the purchase consideration is US$29.5 million, ART said.

Read more details about the properties.