ART, Ascott to jointly invest, develop South Carolina student housing asset for US$109.9m

ASCOTT Residence Trust (ART) and its sponsor The Ascott will jointly invest and develop a 678-bed freehold student accommodation asset in South Carolina for US$109.9 million.

This comes as the stapled group looks to expand its longer-stay portfolio after including student accommodation in its investment mandate this year.

The manager expects the accretive investment to raise ART's pro forma FY2020 distribution per stapled security by about 2.1 per cent. Upon stabilisation, the earnings before interest, taxes, depreciation, and amortisation (Ebitda) yield is projected to be about 6.2 per cent.

The student housing asset will start construction in Q3 2021 and be completed in Q2 2023, the managers said in a press statement on Wednesday morning. It will serve over 35,000 undergraduate and graduate students from the University of South Carolina (USC) nearby.

The property has a net rentable area of 232,748 square feet. It will provide fully-furnished studios, as well as one to five-bedroom apartment units which will come with a fully-equipped shared kitchen and appliances such as a washer and dryer. Community amenities include a fitness centre and study lounges, to name a few.

To start, ART and Ascott will each own 45 per cent of the South Carolina student housing asset, while a third-party partner owns the remaining 10 per cent.

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Ascott and ART will acquire the remaining 10 per cent after the property's performance stabilises, the managers said. ART will also have the priority to fully acquire the student accommodation asset from Ascott.

The third party is a joint venture between unnamed parties, referred to as "one of the largest student housing developers in the US" and a "large national real estate developer and contractor based in the US". The asset will be managed by an affiliate of one of the members of the third party.

Separately, Ascott has formed a partnership with the student housing developer to invest and develop more student accommodation properties in the US, which the manager said could become a potential pipeline for ART from its sponsor.

CapitaLand's chief executive for lodging and Ascott's chief executive Kevin Goh said: "Through our partnership with the leading local student housing developer, Ascott will gain immediate access to prime student accommodation assets in the US."

He said that Ascott's focus on the long-stay segment has allowed it to remain resilient amid Covid-19 and outperform its peers. Ascott is CapitaLand's wholly-owned lodging business unit. 

The move follows ART's agreement this month to purchase three rental housing properties in Sapporo, Japan. The stapled group also acquired its first student accommodation asset Paloma West Midtown in Georgia, US, in February this year. 

Beh Siew Kim, chief executive of ART's managers, said student accommodation assets have leases that typically last for a year and their countercyclical nature further strengthens the resilience of ART's portfolio against any short-term volatility.

She noted that the South Carolina asset is in a prime location in downtown Columbia, the capital of South Carolina - which is the fourth fastest-growing state in the US.

USC is the largest university in the state and has an athletics programme that competes in the South-eastern Conference, one of the "Power 5" athletics conferences in the National Collegiate Athletic Association, Ms Beh added. About 96 per cent of USC's students are domestic and the managers expect continued strong demand in the long term, she said. 

On top of two student accommodation assets, Ascott and ART own five other hotels with over 1,200 units in the US, the managers said. Ascott also owns a majority stake in Synergy Global Housing, an accommodation provider which offers apartments for corporate lease.

At Wednesday's close, stapled securities of ART fell 2.9 per cent or S$0.03 to finish at S$1.01, while CapitaLand shares lost 1.9 per cent or S$0.07 to S$3.71.