Ascott Residence Trust (ART) is acquiring a freehold 548-bed student accommodation asset, named Seven07 in Champaign, Illinois, US for US$83.25 million (S$112.4 million).
Seven07 serves about 56,000 undergraduate and graduate students from the nearby University of Illinois Urbana-Champaign (UIUC).
ART said the yield-accretive acquisition is set to increase its pro forma FY 2020 Distribution per Stapled Security by approximately 1.2%.
The entry EBITDA yield is expected to be about 4.5% and is expected to rise to about 4.8% on strong rental growth for Academic Year (AY) 2022, according to the company.
The transaction, which is expected to be completed in mid-November 2021, will be funded by debt and part of the proceeds from ART’s private placement launched in September 2021.
The acquisition of Seven07 follows Ascott Residence Trust’s recent acquisition of Wildwood Lubbock in Texas and is ART’s fourth student accommodation investment within 10 months this year.
Beh Siew Kim, Chief Executive Officer of Ascott Residence Trust Management Limited and Ascott Business Trust Management Pte. Ltd. (the Managers of ART) said: “ART continues to ramp up our investments in the longer-stay segment to build stable income and the resilience of our portfolio. Seven07 is operational and will start contributing stable income immediately upon acquisition. The student accommodation asset is 100% occupied for AY 2021, with lease terms of about one year. For the AY 2022, Seven07 is about 50% pre-leased with strong rental growth of about 8% over AY 2021.”
“ART has successfully replaced distributable income of divested assets at higher yields. We have divested five properties for about S$501 million in FY 2020 and 2021 to date, at an average exit yield of around 2%. We have invested a total of about S$491 million in four student accommodation assets and three rental housing properties at an average EBITDA yield of about 5%. With Seven07, ART will increase our student accommodation and rental housing properties to about 12% of our total portfolio value, keeping us on target to grow longer-stay lodging assets to about 15-20% in the medium term. Following this acquisition, ART’s gearing will be at 35.8%. ART remains in a strong financial position to seek accretive investments in more longer-stay assets to diversify our portfolio, enhancing our resilience and creating more value for our Stapled Securityholders,” added Beh.