US: The Ascott Limited and Ascott Residence Trust have announced plans to jointly invest and develop a student housing accommodation in South Carolina.
Ascott Limited and Ascott Residence trust, or ART, which are two divisions of CapitaLand, will invest an estimated $109.9 million for the project. Initially, Ascott and ART will each invest and receive 45 per cent ownership of the property. The remaining ten per cent will be owned by a joint venture between a large American student housing developer and a large American national real estate developer and contractor.
Once the property stabilises, Ascott and ART will buy the ten per cent share back from the third-party.
The project is expected to start in Q1 of 2021 and to finish by Q2 of 2023.
The facility will have 678 beds in 247 units, ranging from studios to five-bedroom apartments, and is designed to serve 35,000 graduate and undergraduate students from the largest university in the state, the University of South Carolina, which is 0.8 kilometres away from the property. Each unit has a shared kitchen and laundry appliances. Other amenities include a fitness centre, a coffee bar, study lounges, a TV on the amenities deck, a swimming pool, and cabanas.
This is an accretive investment that is expected to increase ART’s pro forma FY 2020 Distribution per Stapled Security by 2.1 per cent, and, once stable, the investment is also predicted to give an EBITDA yield of 6.1 per cent. Ascott Residence also has priority to purchase this asset from Ascott Limited to create stable returns for Stapled Securityholders.
ART entered the student accommodation market in January of this year when they announced the expansion of their investment mandate to include student accommodation. Since then, ART has acquired a property in Georgia, in close proximity to the Georgia Institute of Technology, as well as three properties in Sapporo, Japan.
Beh Siew Kim, chief executive officer of Ascott Residence Trust Management Limited and Ascott Business Trust Management Pte. Ltd. (the Managers of ART), said: “The acquisition of our second student accommodation asset is in line with ART’s strategy to grow our longer-stay portfolio to further enhance income stability and create greater value for our Stapled Securityholders. Student accommodation have leases that typically last for a year and its countercyclical nature further strengthens the resilience of ART’s portfolio against any short-term volatility. This latest acquisition follows ART’s agreement to purchase three rental housing properties in Sapporo, Japan as well as our first student accommodation asset Paloma West Midtown in Georgia, USA. It 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 to 20 per cent in the medium term. Partnering with our sponsor, Ascott allows ART to tap on their expertise and experience, while generating a higher yield when the property turns operational by participating in the development of the asset. With this investment, ART will remain within the 10 per cent regulatory limit on property development for REITs.”
Additionally, Ascott has formed a partnership with the student housing developer in the joint venture to invest and plan more student accommodations in the United States in the future. ART also has potential to become a part of these projects.
CapitaLand’s chief executive officer for lodging and Ascott’s chief executive officer, Kevin Goh, said: “This transaction demonstrates Ascott’s ability to seek out and seize good investment opportunities to support our sponsored Ascott Residence Trust (ART) in creating sustainable value. 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. Ascott will continue to work with reputable partners to enlarge our student accommodation and rental housing portfolios in our target markets.
