Ascott Residence Trust (ART) will acquire four student accommodation assets in the USA for US$213.0 million ($291.2 million), announced the company on Dec 27.
The four assets have a total of 1,651 beds, serving more than 100,000 students across five universities in three states.
The Link University City is located in Pennsylvania, while Latitude on Hillsborough and Uncommon Wilmington are in North Carolina, and Latitude at Kent is in Ohio.
The yield-accretive acquisition is set to increase ART’s pro-forma FY2020 distribution per stapled security by approximately 3.0% and the EBITDA yield is expected to be about 4.9%.
The acquisition is expected to be completed in phases from end-December 2021. The acquisition will be 92% funded by debt and 8% funded by the remaining proceeds from ART’s private placement launched in September 2021.
With the new acquisition, ART has built a portfolio of eight student accommodation assets with about 4,400 beds in under a year.
See also: Sembcorp issues $350 mil of guaranteed notes due 2036 at 3.65%
Seven of the student accommodation assets are operating assets that are contributing stable income while one is under development.
ART’s student accommodation assets are located across seven states, with each state accounting for less than 23% of total beds, reducing portfolio concentration risk through its diversified geographical presence, says the company.
The eight student accommodation assets will serve over 250,000 students.
Beh Siew Kim, CEO of Ascott Residence Trust Management Limited and Ascott Business Trust Management, the Managers of ART, says: “With the new acquisition, ART has doubled the number of student accommodation assets in our portfolio. Our student accommodation assets and rental housing properties now make up about 16% of our total portfolio value, surpassing our initial target of 15%."
"We remain on track to grow this longer-stay portfolio to 20% in the medium term, building a sizeable stable income base. In FY2020 and FY2021 to date, ART divested five assets for about $501 million at an average exit yield of around 2%. In 2021, ART has invested a total of about $780 million in eight student accommodation assets and three rental housing properties at an average EBITDA yield of about 5%, replacing the distributable income from our divested assets at higher yields," she adds.
"We would successfully deploy our funds from the private placement upon completion of the acquisition of the four new student accommodation assets and ART’s gearing will be at 37.8%," says Beh. "ART remains in a strong financial position to seek further yield-accretive investments and generate long-term value for our Stapled Securityholders.”
According to Beh, the assets have proven resiilient throughout Covid-19. Occupancy rates have recovered to pre-Covid-19 levels and the 2.3% y-o-y increase in rents for Academic Year (AY) 2021 is the strongest rental growth rate across the country since Fall 2016, says Beh.
The four student accommodation assets being acquired were completed between 2019 and 2020. They have a weighted average occupancy rate of about 94% for the AY 2021.
The four new student accommodation assets are predominantly freehold. They will be managed by unrelated third-party operators.
Photo: Latitude on Hillsborough, North Carolina by Ascott Residence Trust
