SINGAPORE (THE BUSINESS TIMES) – CapitaLand’s lodging business unit The Ascott and its hospitality trust, Ascott Residence Trust (ART), will jointly invest and develop a 678-bed freehold student accommodation property in the US state of South Carolina for US$109.9 million (S$146.2 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 financial year 2020 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.
Construction of the property will start in the third quarter of 2021 and be completed in Q2 2023, the managers said on Wednesday morning (June 16). It will serve over 35,000 undergraduate and graduate students from the University of South Carolina (USC) nearby.
The property will provide fully-furnished studios, as well as one to five-bedroom apartment units which will come with a fully-equipped shared kitchen, as well as appliances such as a washer and dryer. Community amenities include a fitness centre and study lounges, to name a few.
To start, Ascott and ART will each own 45 per cent of the South Carolina student housing asset, while a third-party partner owns the remaining 10 per cent.
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.
Stapled securities of ART closed flat at $1.04 on Tuesday.