Ascott Residence Trust to Buy UIUC Student Accommodation Building in Illinois, USA

(01 Nov 2021) Ascott Residence Trust (ART) has unveiled plans to acquire the freehold of a 548-bed student accommodation asset named Seven07 in Champaign, Illinois, USA for US$83.25 million (S$112.4 million).

Seven07 serves about 56,000 undergraduate and graduate students from the nearby University of Illinois Urbana-Champaign (UIUC).

The yield-accretive acquisition is set to increase ART’s pro forma FY 2020 Distribution per Stapled Security by approximately 1.2% while the entry EBITDA yield is expected to be about 4.5% and is expected to rise to about 4.8% on strong rental growth for Academic Year (AY) 2022.

The transaction, which is expected to be completed in mid-November 2021, will be funded by debt and part of the proceeds from ART’s private placement launched in September 2021.

The acquisition of Seven07 follows ART’s recent acquisition of Wildwood Lubbock in Texas and is ART’s fourth student accommodation investment within 10 months this year.

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, “ART continues to ramp up our investments in the longer-stay segment to build stable income and the resilience of our portfolio. Seven07 is operational and will start contributing stable income immediately upon acquisition. The student accommodation asset is 100% occupied for AY 2021, with lease terms of about one year. For the AY 2022, Seven07 is about 50% pre-leased with strong rental growth of about 8% over AY 2021.”

Seven07 serves UIUC, commonly known as a ‘Public Ivy’ school. The prestigious UIUC is a flagship university of Illinois and is consistently ranked as one of the top schools in USA for its accounting, computer science and undergraduate engineering programmes.

UIUC’s student population has grown consistently at a compound annual growth rate of 2% from 2010 to 2020, twice the national average. Enrolment at UIUC also grew 2% in 2020 despite COVID19. 87% of its student population are from USA.

UIUC’s athletics programme also competes in the Big Ten Conference, one of the ‘Power 5’ athletics conferences in the National Collegiate Athletic Association. There is minimal new private student accommodation supply in the vicinity of Seven07 in the medium term.

Seven07

Opened in 2019, the 15-storey Seven07 has 548 beds across 218 units, comprising studio, one- to four-bedroom apartments.

Each apartment has a fully equipped kitchen, smart TV, and washer and dryer. Most bedrooms within the apartments also have a private bathroom.

The student accommodation asset has a range of facilities including an outdoor amenities deck with pool, state-of-the-art fitness centre, outdoor lounge with grill stations, indoor basketball court, spa with tanning services and sauna, study rooms, club room, bike storage, lounge café and covered parking lots and garages.

The property is located less than 200 metres from UIUC and close to several restaurants, cafés and other lifestyle options.

Seven07 will be managed by an unrelated third-party operator.

“ART has successfully replaced distributable income of divested assets at higher yields,” added Ms Beh. “We have divested five properties for about S$501 million in FY 2020 and 2021 to date, at an average exit yield of around 2%. We have invested a total of about S$491 million in four student accommodation assets and three rental housing properties at an average EBITDA yield of about 5%. With Seven07, ART will increase our student accommodation and rental housing properties to about 12% of our total portfolio value, keeping us on target to grow longer-stay lodging assets to about 15-20% in the medium term. Following this acquisition, ART’s gearing will be at 35.8%. ART remains in a strong financial position to seek accretive investments in more longer-stay assets to diversify our portfolio, enhancing our resilience and creating more value for our Stapled Securityholders.”

With the addition of Seven07, ART’s four student accommodation assets in the USA will offer a total of 2,756 beds.