ART to buy Texas student housing asset for US$70m; proposes S$150m placement

ASCOTT Residence Trust (ART) will acquire a 1,005-bed student accommodation asset in Texas, United States for US$70 million. To partially fund the acquisition, the managers have proposed a S$150 million private placement.

The Texas asset - Wildwood Lubbock - is the hospitality trust's third student accommodation investment within a span of seven months, the managers said in a press statement on Thursday.

Its acquisition is also in line with ART's strategy to buy assets with a longer length of stay, as well as diversify its portfolio from traditional hospitality assets to increase resilience and stable income.

Based on pro forma estimates, the accretive acquisition will raise ART's FY2020 distribution per stapled security by about 1.5 per cent, assuming the acquisition was completed on Jan 1, 2020, and ART held and operated the facility until Dec 31, 2020.

The transaction is expected to complete on Sept 21, 2021.

Wildwood Lubbock is a freehold, off-campus, cottage-style facility that was completed in 2017. It is also fully furnished and 100 per cent leased for the 2021 academic year.

The property serves over 40,000 undergraduate and graduate students from Texas Tech University (TTU), one of the top public research universities with elite college athletics status, ART's managers said.

TTU is the sixth-largest university in Texas, with a student population that has grown consistently at a compound annual growth rate of 2.5 per cent over the past decade. Overall enrolment for the 2020 academic year also rose by 4 per cent on the year despite Covid-19.

Beh Siew Kim, chief executive of ART's managers, said: "With Wildwood Lubbock, ART will expand its longer-stay portfolio to about 11 per cent, keeping us on track to have student accommodation and rental housing properties constitute about 15-20 per cent of our total property value in the medium term."

Since the expansion of ART's investment mandate to include student accommodation assets in January 2021, the hospitality trust has committed to invest a total of about S$379 million on three prime student accommodation assets in the US and three rental housing properties in Sapporo, Japan.

The S$150 million private placement will be targeted at institutional and other investors at an issue price of between 98.3 Singapore cents and S$1.014 per new stapled security.

This represents a discount of between 2.5 per cent and 5.5 per cent to ART's volume-weighted average price of S$1.040 per stapled security, for trades done on Sept 8 up to the time the placement agreement was signed on Sept 9.

About S$58.7 million or 39.1 per cent of the gross proceeds will go towards partially funding the Wildwood Lubbock acquisition, S$89 million or 59.4 per cent will be used to partially fund future potential acquisitions. The remaining S$2.3 million or 1.5 per cent will be used to pay the estimated professional and other fees and expenses in connection with the private placement.

ART halted trading on Thursday before the announcement. The counter closed flat at S$1.04 on Wednesday.