Ascott Residence Trust Secures Third Student Accommodation Asset With Acquisition In USA For US$70 Million

Ascott Residence Trust (ART) will acquire a freehold 1,005-bed student accommodation asset in Texas, USA for US$70.0 million[1] (S$93.8 million[2]), its third student accommodation investment within a span of seven months. One of the newest student accommodation in the area, Wildwood Lubbock is a cottage-style property which serves over 40,000 undergraduate and graduate students from Texas Tech University (TTU). The accretive acquisition will increase ARTs pro forma FY 2020 Distribution per Stapled Security by approximately 1.5%[3]. The EBITDA[4] yield is expected to be 5.1%. The transaction will be completed on 21 September 2021.

Ms Beh Siew Kim, Chief Executive Officer of Ascott Residence Trust Management Limited and Ascott Business Trust Management Pte. Ltd. (the Managers of ART) said: The acquisition of our third student accommodation asset is in line with ARTs strategy to acquire assets with longer length of stay and diversify our portfolio from traditional hospitality assets, further increasing ARTs resilience and stable income. Leases are typically for a year and Wildwood Lubbock will start contributing income immediately. Despite COVID-19, Wildwood Lubbock is 100% leased for the 2021 Academic Year and there is minimal upcoming private student accommodation supply.

With Wildwood Lubbock, ART will expand its longer-stay portfolio to about 11%, keeping us on track to have student accommodation and rental housing properties constitute about 15-20% of our total property value in the medium term. Since the expansion of ARTs investment mandate to include student accommodation assets in January 2021, ART has committed to invest a total of about S$379 million on three prime student accommodation assets in USA and three rental housing properties in Sapporo, Japan at an average EBITDA yield of about 5%[5]. Following this acquisition, ARTs gearing would remain unchanged at 35.9%[6]. ART continues to be in a strong financial position to seek accretive investments in more longer-stay lodging assets and create greater value for our Stapled Securityholders, added Ms Beh.

Opened in 2017, Wildwood Lubbock is close to TTU, one of the top public research universities[7] with elite college athletics status. TTUs student population has grown consistently at a compound annual growth rate of 2.5% over the past decade. The overall enrollment for the 2020 Academic Year also increased by 4.0 % year-on-year despite COVID-19. TTU is the sixth largest university in Texas by student population with local students comprising 98% of its total student population. TTUs athletics programme also competes in the Big 12 Conference, one of the Power 5 athletics conferences in the National Collegiate Athletic Association.

Wildwood Lubbock has 1,005 beds across 294 units, comprising two- to four-bedroom apartments and each room comes with ensuite bathrooms. The student accommodation has top-of-the-market on-site amenities such as the largest resort-style pool in Lubbock with jetted hot tubs, a swim-up bar, outdoor cabanas with gas grills and firepits. The student accommodation also has a gynamisum, study rooms, a clubhouse with a game-day theatre room, a pet park as well as basketball and volleyball courts. With most students driving to campus, Wildwood Lubbock offers close to 1,100 parking lots. Students can also access the heart of the TTU campus via a shuttle bus ride. Wildwood Lubbock will be managed by an unrelated third-party operator.

For more information on the student accommodation, please see the Annex.

Growing ARTs stable income with third student accommodation investment

Prior to the acquisition of Wildwood Lubbock, ART acquired the freehold Paloma West Midtown in Atlanta, Georgia, USA in February 2021. The student accommodation was acquired for US$95 million (S$126.3 million) at an EBITDA yield of about 5%. Serving close to 40,000 students of Georgia Institute of Technology, the 525-bed Paloma West Midtown is 100%[8] leased for the 2021 Academic Year.

In June 2021, ART and its sponsor, The Ascott Limited, announced that they will jointly invest and develop a freehold student accommodation in South Carolina, USA. ART will invest US$55.2 million[9] (S$73.4 million) in the 678-bed student accommodation which will serve over 35,000 students from the nearby University of South Carolina. Construction of the student accommodation started in 3Q 2021 and is expected to complete in 2Q 2023. Upon stabilisation, the EBITDA yield is expected to be approximately 6.2%[10].

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[1] The purchase consideration takes into account the agreed property value, which was arrived at on a willing-buyer and willing-seller basis and derived based on the independent valuation dated 7 September 2021 by Colliers International Valuation and Advisory Services LLC at US$72.0 million (equivalent to approximately S$96.5 million)
[2] Based on the exchange rate of US$1 to S$1.34
[3] Based on FY 2020 pro forma Distribution per Stapled Security. The pro forma is based on the audited financial statements of ART for the financial year ended 31 December 2020, assuming that (1) the acquisition was completed on 1 January 2020 and ART held and operated the property through to 31 December 2020 and (2) the acquisition will be funded 40% by debt and 60% by equity
[4] Earnings before net interest expense, tax, depreciation and amortisation
[5] For the student accommodation development in South Carolina, USA, the EBITDA yield is a target yield on a stabilised basis
[6] Based on the unaudited financial statements of ART as at 30 June 2021 and assuming the acquisition was completed on 30 June 2021
[7] TTU has a R1 designation by the Carnegie Commission on Higher Education, denoting very high research activity
[8] As of August 2021
[9] Comprises ARTs investment in the initial 45% stake, estimated cost of the additional 5% stake which ART will acquire at fair market valuation, and other deal related expenses
[10] Based on ARTs total investment

Annex - About the student accommodation asset