CapitaLand’s wholly-owned lodging business unit, The Ascott Limited (Ascott) and its hospitality trust, Ascott Residence Trust (ART), have announced plans to jointly invest and develop a freehold student accommodation asset in the US for an expected total amount of US$109.9 million ($146.2 million).
Located in South Carolina, the freehold 678-bed student accommodation will serve over 35,000 undergraduate and graduate students from the nearby University of South Carolina (USC).
Construction of the student accommodation is scheduled to start in 3Q2021 and complete in 2Q2023.
At the initial stage, Ascott and ART will jointly invest in the asset to own 45% stake each. A third-party partner, which is a joint venture between one of the largest student housing developers in the USA and a large national real estate developer and contractor based in the USA, will own the remaining 10% stake for alignment of interest. When the property’s performance stabilises, Ascott and ART will acquire the remaining share from the third-party partner.
Ascott has separately formed a partnership with the student housing developer to invest and develop more student accommodation properties in the USA. These properties could become a potential pipeline for ART from its sponsor.
The accretive investment in this maiden asset in South Carolina, is expected to increase ART’s pro forma FY2020 ended December distribution per stapled security (DPS) by about 2.1%.
Upon stabilisation, the EBITDA yield is expected to be approximately 6.2%. ART will also have the priority to fully acquire the student accommodation asset from Ascott to generate greater stable returns for ART’s stapled securityholders.
“Through our partnership with the leading local student housing developer, Ascott will gain immediate access to prime student accommodation assets in the USA. It allows us to combine our own global expertise in lodging and our partner’s expertise on the ground,” says Kevin Goh, CapitaLand’s CEO for lodging and Ascott’s CEO.
Beh Siew Kim, CEO of the manager for ART, says the acquisition marks ART’s second student accommodation and is in line with the manager’s strategy to grow the REIT’s longer-stay portfolio. “[The acquisition] will expand our student accommodation and rental housing portfolios to about 9% of our total property value. We aim to increase it to about 15%-20% in the medium term,” she remarks.
Beh believes the student accommodation is primed to enjoy steady occupancies given USC’s status as the largest university in the state. ”The university’s student population has been increasing steadily even amid Covid-19 as about 96% of its students are domestic and we expect continued strong demand in the long term,” she adds.
Units in ART closed flat at $1.04 on June 15.
Artist's impression of the student accommodation: Ascott
