Ascott establishes a new student accommodation development venture with Riyad Capital

  • New venture acquires freehold student accommodation asset in Nebraska, USA
  • Expands student accommodation portfolio under Ascott's funds and sponsor trust Ascott Residence Trust to nine within a year

Singapore, 3 February 2022 – CapitaLand Investment Limited’s (CLI) wholly owned lodging business unit, The Ascott Limited (Ascott) has established a development venture totalling US$150 million (S$204.8 million[1]) in committed equity to develop student accommodation assets in the USA. Named Student Accommodation Development Venture (SAVE), Ascott will manage the venture and hold a 20% stake in the joint venture while the remaining stake will be held by Riyad Capital. Riyad Capital is one of the largest institutional capital partners in the Middle East and an existing partner from Ascott’s network of lodging property owners. When fully deployed, the venture will boost Ascott’s funds under management (FUM)[2] by US$375 million (S$512 million).

SAVE’s first investment is a 779-bed Class A freehold student accommodation development asset in Lincoln, Nebraska, USA. This asset will serve over 25,000 undergraduate and graduate students from the nearby University of Nebraska-Lincoln (UNL). Currently under construction, the student accommodation asset is slated for completion by August 2023, in time for the Academic Year of 2023/2024.

With the new acquisition, Ascott has invested about US$648.9 million (S$875 million) to build a diversified and quality portfolio of nine[3] student accommodation assets in a year via its funds and its sponsored trust, Ascott Residence Trust (ART). Seven of the student accommodation assets are operational. The student accommodation assets are located predominantly in the USA’s Sunbelt states, Ivy League and ‘Power 5’ athletics conference markets[4], and situated near their respective key educational institutions. With over 5,100 beds, the student accommodation assets will serve over 295,000 students from reputable universities with large student populations, steady enrolment growth and a strong athletics programme.

Mr Kevin Goh, CLI’s Chief Executive Officer for Lodging

Mr Kevin Goh, CLI’s Chief Executive Officer for Lodging said: “Student accommodation assets, with their counter-cyclical qualities provide income resilience to our investors. Our well-located assets have performed well with operating assets enjoying a strong average occupancy rate of close to 100%. We remain confident in the segment and look to invest through platforms such as SAVE to create value for our capital partners by leveraging Ascott’s expertise and network to identify under-supplied student accommodation markets that are close to good universities.”

“SAVE, together with Ascott Serviced Residence Global Fund and ART, are key investment platforms for us to further grow our FUM for lodging. In 2021, our lodging FUM grew by more than 7% year-on-year to over S$8 billion. SAVE will further increase our FUM by about US$375 million (S$512 million) when fully deployed and boost our fee-related earnings (FRE)[5]. We will continue to pursue more opportunities while remaining steadfast in building a capital-efficient business model,” added Mr Goh.

"Ascott has the distinct capacity to create value by connecting our partners with investment opportunities. Leveraging our extensive local knowledge, we are able to access favourable off-market investment deals, and match them with a ready pool of trusted capital partners. We will continue to seek more like-minded partners to set up new capital partnerships for a range of resilient lodging assets.”

Mr Mak Hoe Kit, Ascott’s Managing Director for Lodging Funds and Head of Business Development & Investment Asset Management

Mr Mak Hoe Kit, Ascott’s Managing Director for Lodging Funds and Head of Business Development & Investment Asset Management, said: “We are excited to work with our partner in SAVE to deploy into suitable student accommodation opportunities. More than just a hospitality company, as a vertically-integrated owner and operator of lodging properties around the world, Ascott has the distinct capacity to create value by connecting our partners with investment opportunities. Leveraging our extensive local knowledge, we are able to access favourable off-market investment deals, and match them with a ready pool of trusted capital partners. We will continue to seek more like-minded partners to set up new capital partnerships for a range of resilient lodging assets.”

Well-located freehold student accommodation asset in Nebraska

The newly acquired student accommodation asset will have 779 beds across 321 fully-furnished units, comprising studio, one- to five-bedroom apartments. The asset has a range of facilities including a clubhouse, games room, pool and courtyard, grill area, coffee bar, private study lounge, yoga room, fitness centre and tanning beds as well as 163 parking lots. The asset will be a green-certified building, obtaining at least a silver rating under the National Green Building Standard (NGBS)[6].

The student accommodation asset will serve UNL, the state’s flagship university. The university is amongst the top 100 public schools in the USA and is well-recognised for its agriculture engineering programme which is amongst the top 15 programmes in the country[7]. The student accommodation asset is one block away from UNL campus grounds and a nine-minute walk to the heart of the university. It is also a two-minute walk to the vibrant Haymarket District nearby, home to several retail shops, restaurants, cafes, bars and other lifestyle options.

UNL’s total enrolment has grown consistently from 2010 to 2020 and is expected to continue to increase. 90% of its student population are from USA. UNL’s athletics programme also competes in the Big Ten Conference, one of the ‘Power 5’ athletics conferences in the National Collegiate Athletic Association. A US$170 million expansion initiative is also underway, focusing on the university’s engineering faculty. This includes the construction of the Kiewitt Hall, the largest academic facility in the UNL’s history. Slated for completion in 2023, the facility will serve as an academic hub to attract more top-tier students. Given its proximity to the UNL campus and limited new private student accommodation supply in the vicinity, the student accommodation asset is poised to perform well. For more information on the student accommodation asset, please see Annex B.

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[1] Based on an exchange rate of US$1 to S$1.365
[2] Refers to the share of total assets under listed and unlisted funds [private funds and/or investment vehicles (including but not limited to programmes, joint ventures and co-investments)]
[3] For more information on Ascott’s student accommodation portfolio, please see Annex A
[4] Membership in such athletics conferences helps to boost the universities’ brand recognition and provides them with a profitable revenue source
[5] Refers to investment and asset management fee revenue from listed and unlisted funds [private funds and/or investment vehicles (including but not limited to programmes, joint ventures and co-investments)]
[6] NGBS is a green building rating system for homes and apartments approved by the American National Standards Institute
[7] 2021 U.S. News & World Report

  • Annex A - Ascott's student accommodation portfolio

    With the latest acquisition of the student accommodation asset in Lincoln, Nebraska, Ascott has a total of nine student accommodation assets to date. The seven operating assets are new with an average age of two years, offering students well-designed apartments equipped with best-in-class facilities. Two of the student accommodation assets are under construction. Besides the newly acquired student accommodation asset, Ascott’s eight other student accommodation assets are as follows:

    In December 2021, Ascott’s sponsored hospitality trust Ascott Residence Trust (ART) announced the acquisition of four student accommodation assets in the USA for US$213.0 million (S$291.2 million). The four assets have a total of 1,651 beds, serving more than 100,000 students across five universities in three states. The Link University City is located in Pennsylvania, while Latitude on Hillsborough and Uncommon Wilmington are in North Carolina, and Latitude at Kent is in Ohio. The yield-accretive acquisition is set to increase ART’s pro forma FY 2020 Distribution per Stapled Security by approximately 3.0% and the EBITDA yield is expected to be about 4.9%.

    In November 2021, ART acquired Seven07, a freehold 548-bed student accommodation asset for US$83.25 million (S$112.4 million) with an EBITDA yield of about 4.5%. It serves about 56,000 undergraduate and graduate students from the nearby University of Illinois Urbana-Champaign.

    In September 2021, ART acquired Wildwood Lubbock, a freehold 1,005-bed student accommodation asset for US$70.0 million (S$93.8 million). It has an expected EBITDA yield of about 5.1%. Wildwood Lubbock serves over 40,000 undergraduate and graduate students at Texas Tech University.

    In June 2021, Ascott and ART announced that they will jointly invest and develop a freehold student accommodation in South Carolina. Named ‘Standard at Columbia’, Ascott and ART invested US$109.9 million (S$146.2 million) in the 678-bed asset 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%[8].

    In February 2021, ART acquired the freehold 525-bed Paloma West Midtown in Atlanta, Georgia for US$95.0 million (S$126.3 million) with an expected EBITDA yield of about 5%. Paloma West Midtown serves close to 40,000 students at Georgia Institute of Technology.

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    [8] The EBITDA yield is a target yield on a stabilised basis

  • Annex B - About the newly acquired student accommodation asset

    Location

    Lincoln, Nebraska

    Completion

    August 2023

    Land Tenure

    Freehold

    Net Rentable Area

    Approximately 280,000 square feet

    Units

    321

    Beds

    779

    Unit Mix

     

    Studio: 60 beds

    1-Bedroom: 57 beds

    2-Bedroom: 128 beds

    3-Bedroom: 132 beds

    4-Bedroom: 312 beds

    5-Bedroom: 90 beds

    Common Area Amenities

    Clubhouse, games room, pool and courtyard, grill area, coffee bar, private study lounge, yoga room, fitness centre and tanning beds as well as 163 parking lots

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