CDL Hospitality Trusts is venturing into the student accommodation business for the first time, with the purchase of a purpose-built student accommodation (PBSA) in Liverpool, United Kingdom.
The PBSA is part of CDL Hospitality Trusts’ (CDLHT) wider acquisition of freehold land, which also comprises a piece of vacant land adjacent to the student accommodation asset, said the trusts’ managers in a bourse filing on Thursday (Dec 19).
The whole site – the PBSA and adjacent vacant land – was acquired for £37.3 million (S$63.9 million).
The total cost of the acquisition is about £40.6 million, which includes an estimated £3.3 million in transaction costs.
The deal will be funded through debt financing, with CDLHT’s pro forma gearing ratio to increase to 40.2 per cent, from 38.8 per cent pre-acquisition.
The PBSA, Benson Yard, was opened in February 2023. It will continue to be managed by the existing operator, Fresh Property, after the transaction is completed.
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The vacant freehold land has planning consent for a 144-key hotel to be built. However, CDLHT said that feasibility studies will still need to be conducted to determine the best use of the land.
Other options include building another PBSA block, instead of a hotel, as it could complement the existing Benson Yard.
CDLHT said this acquisition follows its revised principal investment strategy made in 2021 to diversify into adjacent living assets.
It added that Benson Yard will contribute to a more diversified and balanced income profile, aligning with CDLHT’s broader strategic objectives for stable long-term growth and income resilience. This is because PBSAs operate on different demand drivers compared to traditional hospitality assets.
The asset’s attractive location will support its occupancy and profile as a defensive asset, the trusts’ managers said. As at Dec 10, Benson Yard has an occupancy of 95 per cent for the academic year running from Sep 1, 2024 to Aug 31, 2025.
Based on rents for the leases signed in the academic year, the pro forma net property-income yield is about 5.6 per cent. This does not include any additional leases to be signed, as well as summer income during the rest of this academic year.
The deal is expected, on a pro forma basis, to achieve a 1.3 per cent growth in CDLHT’s distribution per stapled security.
CDLHT also said that there is upside potential in future academic years as Benson Yard solidifies its reputation and garners more brand awareness, given that the PBSA has not fully stabilised.
Vincent Yeo, chief executive officer of the managers, said: “Importantly, we were able to secure this acquisition from administrators at a meaningful discount relative to current replacement cost and independent valuation, positioning the asset for capital appreciation in the future, amid elevated institutional investment interest.”
CDLHT is a stapled group comprising CDL Hospitality Real Estate Investment Trust and CDL Hospitality Business Trust, and the securities of each entity are listed and traded as one unit, known as stapled securities.
Stapled securities of CDLHT closed flat at S$0.85 on Thursday, before the announcement.
