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Wed, 16 June 2021

Ascott to Develop Student Accommodation in South Carolina, USA

Ascott and its hospitality trust, Ascott Residence Trust (ART), are to invest and develop a freehold student accommodation asset located in South Carolina, USA for an expected total amount of US$109.9 million (S$146.2 million).

The 678-bed student accommodation will serve over 35,000 undergraduate and graduate students from the nearby University of South Carolina (USC).

Construction of the student accommodation is scheduled to start in Q2 2021 and complete in Q2 2023.

At the initial stage, Ascott and ART will jointly invest in the asset to own a 45% stake each. A third-party partner, which is a joint venture between one of the largest student housing developers in the USA and a large national real estate developer and contractor based in the USA, will own the remaining 10% stake for alignment of interest. When the propertys performance stabilises, Ascott and ART will acquire the remaining share from the third-party partner.

The 678-bed student accommodation will serve over 35,000 undergraduate and graduate students from the nearby University of South Carolina (USC). Click to enlarge.

Ascott has also formed a partnership with the student housing developer to invest and develop more student accommodation properties in the USA. These properties could become a potential pipeline for ART from its sponsor.

The accretive investment in this maiden asset in South Carolina, is expected to increase ARTs pro forma FY 2020 Distribution per Stapled Security (DPS) by about 2.1%. Upon stabilisation, the EBITDA yield is expected to be approximately 6.2%3. ART will also have the priority to fully acquire the student accommodation asset from Ascott to generate greater stable returns for ARTs Stapled Securityholders.

Ms Beh Siew Kim, Chief Executive Officer of ART Management Limited and Ascott Business Trust Management Pte. Ltd. (the Managers of ART), said, The acquisition of our second student accommodation asset is in line with ARTs strategy to grow our longer-stay portfolio to further enhance income stability and create greater value for our Stapled Securityholders. Student accommodation have leases that typically last for a year and its countercyclical nature further strengthens the resilience of ARTs portfolio against any short-term volatility.

This latest acquisition follows ARTs agreement to purchase three rental housing properties in Sapporo, Japan as well as our first student accommodation asset Paloma West Midtown in Georgia, USA. It will expand our student accommodation and rental  housing portfolios to about 9% of our total property value. We aim to increase it to about 15-20% in the medium term.

Partnering with our sponsor, Ascott allows ART to tap on their expertise and experience, while generating a higher yield when the property turns operational by participating in the development of the asset. With this investment, ART will remain within the 10% regulatory limit on property development for REITs.

Premium Student Living Steps Away from Campus

The freehold purpose-built student accommodation asset will offer 678 beds across 247 units and is close to a plethora of food and entertainment options.

It will provide fully furnished studios as well as one to five-bedroom apartment units, each of 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, study lounges, a coffee bar, and jumbotron TV on an elevated amenity deck with swimming pool and cabanas.

The property will be managed by an affiliate of one of the members of the third-party partner.

Expanding Ascott Residence Trusts Longer-Stay Portfolio

In January 2021, ART expanded its investment mandate to include student accommodation to enhance the stability of its portfolio and diversify its portfolio beyond traditional hospitality assets.

In February 2021, ART acquired Paloma West Midtown for US$95 million (S$126.3 million) at an expected EBITDA yield of about 5%. Paloma West Midtown enjoys high occupancy rate of approximately 97%.

Less than a five-minute walk to the Georgia Institute of Technology (Georgia Tech), the 525-bed accommodation serves close to 40,000 undergraduate and graduate students of Georgia Tech. The asset is also within walking distance to Georgia Techs upcoming Technology Enterprise Park, a 2.2 million square feet research and commercial hub which will drive up economic activities and general rent levels around the district.

ART also recently entered into agreements to acquire three freehold rental housing properties in Sapporo, Japan for a total of JPY 6.78 billion (S$85.2 million[8]). The average EBITDA yield of the three acquisitions is approximately 4%. On a FY 2020 pro forma basis, ARTs DPS is also expected to increase by 2.6%. The transactions are expected to complete by end June 2021. The three rental housing properties are the 126-unit City Court Kita 1 jo, 158-unit Big Palace Minami 5 jo, and 127-unit Alpha Square Kita 15 jo.

In addition to the two student accommodation assets, Ascott and ART own five other hotels with over 1,200 units in the USA.

Ascott also owns a majority stake in Synergy Global Housing (Synergy), a leading accommodation provider in the market, which offers apartments for corporate lease. Synergy has over 1,800 units in the USA, with a strong presence in the West Coast, including Los Angeles, Orange County, San Diego, Seattle as well as New York.

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