CapitaLand Ascott Trust fully acquires student accommodation property Standard at Columbia to boost income resilience
Acquisition is expected to generate EBITDA yield on cost of approximately 7%
CapitaLand Ascott Trust (CLAS) has acquired the remaining 10% stake in Standard at Columbia, a freehold student accommodation property in South Carolina, United States of America (USA). The earnings before interest, taxes, depreciation and amortisation (EBITDA) yield on total development cost is expected to be approximately 7%. This is higher than the 6.2% EBITDA yield that was projected in 2021 on the basis that the property has achieved stable performance. The acquisition is funded by proceeds from CLAS’ earlier divestments.
CLAS acquired Standard at Columbia in phases over three years. In June 2021, CLAS and its sponsor, The Ascott Limited (Ascott), jointly invested to own 90% of the student accommodation property on a 50:50 basis and to develop the property. CLAS subsequently acquired Ascott’s 45% stake in November 2022.
The 678-bed Standard at Columbia serves over 35,000 undergraduate and graduate students from the nearby University of South Carolina (USC), the largest university in the state. It turned operational in August 2023 with an occupancy rate of over 90%. Standard at Columbia is one of the best performing student accommodation properties serving the USC, commanding one of the highest rents per bed[1]. For the upcoming academic year (AY) 2024-2025, the pre-leasing occupancy rate has reached 99% as at end May, with rental growth of about 4% compared to AY 2023-2024.
Ms Serena Teo, Chief Executive Officer of CapitaLand Ascott Trust Management Limited and CapitaLand Ascott Business Trust Management Pte. Ltd. (the Managers of CLAS), said: “The acquisition of Standard at Columbia is in line with CLAS’ strategy to marry stability and growth to generate long-term returns to Stapled Securityholders. Recycling capital from our divestment proceeds into this longer-stay asset with strong operating performance will further boost our returns. With an average length of stay of about one year, student accommodation properties enhance CLAS’ stable income stream and strengthen our portfolio’s resilience against macroeconomic uncertainties. It diversifies our portfolio which also comprises hospitality assets such as serviced residences or hotels that allow us to capture travel demand for growth income.”
“We actively enhance the quality of CLAS’ portfolio through accretive acquisitions, opportunistic divestments and asset enhancements. In 1Q 2024, we completed the acquisition of a rental housing property in Japan. We will continue to seek accretive investments in properties in prime locations within key capital cities with strong demand drivers and selectively undertake development projects with higher yields. In the last year, we announced divestments of S$408.1 million comprising 10 mature assets[2] at a premium to book value and an average exit yield of about 3.8%[3]. In addition, we have seven properties[4] that are undergoing or will undergo asset enhance initiatives (AEI). When completed, the AEIs will uplift the value and profitability of our portfolio, positioning CLAS for sustained growth,” added Ms Teo.
CLAS’ student accommodation portfolio
CLAS expanded into the student accommodation segment in January 2021. Today, CLAS has nine operating student accommodation properties, with eight properties in the USA and one in Japan totalling more than 4,500 beds.
As at 1Q 2024, CLAS’ eight operating student accommodation properties in the USA achieved year-on-year (y-o-y) rental growth of about 5.5%[5] for the current academic year. Excluding Wildwood Lubbock in Texas, which is undergoing light refurbishment to refresh the property, rental growth is about 6.5%5 y-o-y and the average occupancy rate is about 95%. For the AY 2024-2025, pre-leasing of the student accommodation properties continues to be favourable, with several properties pacing ahead of their respective markets.
After the acquisition, about 17% of CLAS’ total portfolio value is in longer-stay assets such as student accommodation and rental housing properties. CLAS’ medium-term asset allocation target is to have a stable income base with 25-30% of its total portfolio value in longer-stay assets, and the remaining 70-75% in hospitality assets such as serviced residences or hotels for growth income.
[1] RealPage, April 2024.
[2] The 10 properties comprise four properties in regional France, two properties in Australia, three properties in Japan and one property in Singapore.
[3] The exit yield of the France and Australia properties is computed based on FY 2022 EBITDA. The exit yield of the Japan portfolio is not meaningful and has not been included in the average exit yield computation as the properties were largely closed in 2022. If included, the average exit yield will be about 2.8%.
[4] The seven properties are Citadines Holborn-Covent Garden London, Citadines Les Halles Paris, Citadines Kurfürstendamm Berlin, La Clef Tour Eiffel Paris, Temple Bar Hotel, The Cavendish London and Novotel Sydney Central.
[5] Excludes Standard at Columbia which began receiving students in August 2023.
