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Expands investment mandate to include student accommodation to increase stable income


Expands investment mandate to include student accommodation to increase stable income

Category: Worldwide - Industry economy - Group or hotel buyout
This is a press release selected by our editorial committee and published online for free on 2021-01-27
Filed by CapitaLand

Ascott Residence Trust (ART) will foray into the student accommodation asset class with its first acquisition in the United States of America (USA) for US$95 million (S$126.3 million). The purpose-built student accommodation asset, Signature West Midtown, is a freehold property with 525 beds across 183 units located in the heart of Atlanta, Georgia. The transaction is expected to be completed by end 1Q 2021. In conjunction with the acquisition, ART will expand its investment mandate to include student accommodation. The accretive acquisition will increase the pro forma FY 2020 Distribution per Stapled Security (DPS) by approximately 4.4%.

Mr Bob Tan, Chairman of Ascott Residence Trust Management Limited (ARTML) and Ascott Business Trust Management Pte. Ltd. (the Managers of ART) said:ART has remained resilient amid COVID-19 mainly due to the long stay guests of our serviced residences and rental housing properties. The expansion of ART’s investment mandate to include student accommodation will further enhance the stability of ART’s portfolio. Student accommodation, with leases that typically last for a year, will build on our stable income streams. It will offer a new platform for growth and also diversify our portfolio beyond traditional hospitality assets, mitigating the near-term headwinds faced in the hospitality sector.”

Student accommodation is one of the most resilient real estate asset classes and has maintained high occupancy during the COVID-19 situation in the USA. ART will continue to seek opportunities for quality student accommodation assets in key markets with strong student population growth. We will also look at expanding our rental housing portfolio. We remain focused on delivering sustainable value for our Stapled Securityholders,” added Mr Tan.

Ms Beh Siew Kim, Chief Executive Officer of ARTML and Ascott Business Trust Management Pte. Ltd. (the Managers of ART) said: ART’s foray into the student accommodation asset class capitalises on the growing education industry. Enrolment at reputable universities continue to expand, supported by the rising middle class and population growth. The student accommodation asset class is also countercyclical in nature as students tend to invest in education during a recession in preparation for economic recovery. Divestment proceeds are expected to be redeployed into the accretive acquisition of Signature West Midtown, which will add an approximate 4.4% to DPS for FY 2020 on a pro forma basis. The acquisition will also increase the proportion of our longer stay assets and further enhance the quality of ART’s portfolio.”

Ms Beh added:Signature West Midtown is an attractive asset with a high occupancy rate of 95% despite COVID-19. It serves close to 40,000 undergraduate and graduate students attending the Georgia Institute of Technology (Georgia Tech) and is less than a five-minute walk from the university. About 80% of Georgia Tech’s students are domestic and enrolment has been increasing at a compound annual growth rate of 6.7% in the past 10 years. We also expect positive, long-term rental growth for Signature West Midtown with Georgia Tech’s plan to develop Technology Enterprise Park, a research and commercial hub nearby which will drive up economic activities and general rent levels around West Midtown.”

USA is the largest student housing capital market in the world. Its investment volume reached US$11 billion, accounting for 57% of global transaction volume. It also boasts the largest student population in the developed world with about 20 million students. The number of undergraduates is expected to grow by 13% and set new enrolment records from 2020 to 2026. Demand for student accommodation is expected to remain robust in 2021 as vaccination efforts increase and international travel resumes.

Signature West Midtown – a quality asset in a prime urban centre location

Completed in 2019, Signature West Midtown is the newest student accommodation in the West Midtown area. Located at 800 Marietta Street NW, Signature West Midtown is a freehold purpose-built student accommodation which consists of 525 beds across 183 apartment units. Signature West Midtown offers fully furnished studio as well as one- to five-bedroom apartment units. Facilities include a gymnasium, a swimming pool, a rooftop lounge, study lounges, a business centre, barbeque pits, a game room and parcel delivery lockers. Signature West Midtown will be managed by an unrelated third-party operator.

Signature West Midtown is a 5- to 15-minute walk to Georgia Tech’s library, sports hub and recreation centre, and student centre as well as a number of academic buildings such as the colleges of business, computing, design and engineering.

Signature West Midtown is also within walking distance to the upcoming 2.2 million square feet Technology Enterprise Park to be developed by Georgia Tech. Poised to be a state-of-the-art biosciences and health innovation district, the expansion includes more laboratory and office space for research and entrepreneurship. When fully completed in 2029, it is set to revitalise the district and create some 5,000 new jobs, forming a strong pipeline of demand for quality accommodation in the area.

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