American Campus Communities, the owner, manager and developer of student housing properties in the United States, has entered into an agreement to recapitalize and ultimately acquire seven select student housing properties for $590.6 million.
The seven properties total 3,776 beds. The transaction also includes an option to acquire a 248-bed property in Seattle from affiliates of Core Spaces and DRW Real Estate Investments.
“Core Spaces and DRW have developed some of the finest student housing properties in the country,” said Bill Bayless, American Campus Communities CEO. “The properties we have strategically selected in this portfolio are located in Power-5 conference and state flagship university markets that meet the highest levels of our investment criteria of differentiated products in close proximity to campus in submarkets with high barriers to entry. With the implementation of our operating platform across the portfolio, we should achieve meaningful accretion in asset value as well as additional operational efficiencies within the five markets where we have existing properties.”
The transaction is expected to include closing and funding events over approximately two years. It includes the acquisition of two existing communities (Hub Eugene at the University of Oregon and State at Colorado State University), two communities opening in fall 2017 (The James at the University of Wisconsin
and Hub U District Seattle at the University of Washington), and three projects under-construction scheduled for completion in fall 2018 (Hub Ann Arbor at the University of Michigan, Hub West Lafayette at Purdue University and Hub Flagstaff at Northern Arizona University), with closing and funding events scheduled to occur in a staged manner over approximately two years, allowing for optimal integration and funding.
The company intends to fund a substantial portion of the total transaction through the monetization of select existing core assets via disposition or joint venture. After investments of $7.9 million of upfront capital improvements, the portfolio targets a stabilized cap rate of 5.4 percent nominal and 5.2 percent economic for the 2019–2020 academic year, with multiple property market efficiencies offering the potential for additional yield above the going-in cap rates for five of the seven assets.
