ING Management Limited ("IML") as Responsible Entity of ING Real Estate Community Living Fund ("ILF" or "the Fund") has announced that the Fund has acquired two quality collegiate style student apartment complexes in the strong Florida student market. The properties were acquired from a local developer operator in an off-market transaction for US$36.45 million and will provide an initial yield of 7.4%, representing a 10% discount to valuation.
The two properties include The Preserve at Tallahassee and Campus Club Apartments in Tampa, located in Florida, USA. The Preserve at Tallahassee, was built in 2003, has 190 units (570 bedrooms) and is located on 36.2 acres, less than three miles from Florida State University and one mile from Tallahassee Community College. Campus Club at Tampa, was completed in 2005, has 64 units (256 bedrooms) and is located on 5.4 acres, just one mile from the University of South Florida.
This acquisition is the third portfolio to be sourced off market by the Fund's alliance with US based Rabil Properties. It further advances the Fund's strategy of diversifying into the low risk student market, in States that have experienced strong growth in student enrolments. Florida is forecast to have the fourth fastest growth in student enrolments in the US, over the 10 year period from 2001 to 2010.
Collegiate style properties differ from traditional student accommodation, in the breadth and quality of amenities that they offer. This style of student housing is a relatively recent phenomenon on a large scale basis, although it has been utilised in some markets as early as the 1970's. Each apartment has three to four lockable fully self contained bedrooms, with individual bathrooms, kitchenettes, and individual phone and cable TV. In addition each apartment has shared facilities including living/dining room, kitchen, laundry and an additional bathroom. Other amenities include Clubhouse, swimming pool, fitness centre, computer centre, Jacuzzi, games room, and at least one car space per bedroom. This style of accommodation has strong appeal to second and third year students.
Both properties enjoy occupancies of around 95%, in markets that have experienced similar levels of occupancy over the last 3 to 5 years. The near term outlook for these markets is for continued healthy conditions.
Both Florida State University and the University of South Florida are expected to increase enrolments by 2-4% per annum over the next five years, with Tallahassee Community College expected to expand more rapidly.
The vendor has agreed to manage the assets in the short term to allow an effective transition to Greystar, who is one of the largest student accommodation operators in the South-east with 15,908 units under management.
Hugh Thomson, CEO of ING Real Estate Investment Management Australia said, "These acquisitions improve the Fund's earnings and growth prospects, geographically expanding the Fund's student portfolio into the US market, introducing a new operator and diversifying the overall portfolio with two more good quality investment assets."
Ian Muir, ILF CEO added, "On completion of these acquisitions and the current development pipeline, the Australasian weighting of the Fund will be 28% and the student housing component will be 27%. The Fund will have 98 properties in total, with a gross asset value of AUD$866 million. The acquisition will be fully debt funded, which will take the gearing on a look through basis from 58% to 60%, which will be reduced by an underwritten DRP in due course."
Source: ING Real Estate