Ascott Residence Trust (ART) will acquire a student accommodation asset in Texas, USA for US$70 million ($93.8 million), its manager announced on Sept 9.
Wildwood Lubbock, a freehold property encompassing 1,005 beds, is ART’s third student accommodation investment in the last seven months.
The manager also announced the launch of a private placement of new stapled securities in ART to raise gross proceeds of approximately $150 million, of which $58.7 million will be used to partially fund the acquisition of Wildwood Lubbock.
According to the manager, the property serves the undergraduate and graduate student population at Texas Tech University (TTU), which totals over 40,000 students.
The accretive acquisition will increase ART’s pro forma FY2020 ended December distribution per stapled security by approximately 1.5%, while EBITDA yield is expected to be 5.1%.
The transaction will be completed on Sept 21.
“The acquisition of our third student accommodation asset is in line with ART’s strategy to acquire assets with longer length of stay and diversify our portfolio from traditional hospitality assets, further increasing ART’s resilience and stable income. Leases are typically for a year and Wildwood Lubbock will start contributing income immediately. Despite Covid-19, Wildwood Lubbock is 100% leased for the 2021 academic year and there is minimal upcoming private student accommodation supply,” says Beh Siew Kim, CEO of the manager.
Beh highlights that the acquisition will expand ART’s longer-stay portfolio to some 11%, in line with the manager’s target to have student accommodation and rental housing properties constitute about 15%-20% of ART’s total property value in the medium term.
See also: Analysts maintain 'buy' on Ascott Residence Trust with TP of at least $1.21, as recovery 'underway'
Since the expansion of ART’s investment mandate to include student accommodation assets in January, ART has committed to invest around $379 million on three prime student accommodation assets in USA and three rental housing properties in Sapporo, Japan at an average EBITDA yield of about 5%. Following this acquisition, ART’s gearing would remain unchanged at 35.9%.
Wildwood Lubbock will be managed by an unrelated third-party operator.
For the private placement, the issue price for each new stapled security will be between 98.3 cents and $1.014, which represents a discount of between 2.5% and 5.5% to the volume weighted average price of $1.040 per stapled security in ART on Sept 8.
JP Morgan (SEA) and Oversea-Chinese Banking Corporation have been appointed joint lead managers and underwriters.
Apart from the$58.7 million earmarked to partially fund the acquisition of Wildwood Lubbock, $89 million of the remaining gross proceeds will be used to partially fund any future potential acquisitions, while approximately $2.3 million will be used to pay the professional fees and expenses in connection with the private placement.
The balance of the gross proceeds, if any, will be used for general corporate and/or working capital purposes.
The new stapled securities are expected to be listed on or around 20 September 2021.
In connection with the private placement, the managers intend to declare a distribution of the distributable income for the period from July 1 to Sept 19, the day immediately prior to the issuance of the new stapled securities. The advanced distribution is estimated to be between 0.486 cents to 0.586 cents per stapled security.
Units in ART closed at $1.04 on Sept 8 before trading was suspended this morning at 7.30am.
Photo: ART
