Korea Investment & Securities Co. Ltd. is close to acquiring a new student housing building near the University of Texas at Austin (UT Austin) for 140 billion won ($120 mn), said a company source on Sept. 16.
If the deal goes through, the transaction will become Korea Investment’s third purchase of US student housing portfolios totaling 1 trillion won within a year.
“After named the preferred buyer, we are now carrying out due diligence on the site,” the source told the Korean Investors. “It is a low-risk asset with a low vacancy rate because of its proximity to the university campus.”
The South Korean brokerage firm is expected to complete the purchase this month at its earliest.
US developer Landmark Properties constructed the student accommodation facility with a floor space of 19,100 square meters in July of this year. Landmark Properties reportedly will retain a 5% stake in the building as a rent manager.
After the acquisition, Korea Investment will sell down 65 billion won worth of equity interests to domestic institutional investors. It will borrow the remainder of the acquisition cost from US banks.
Considering an estimated 5% annual rent rise, the equity investment is expected to generate an annual return of around 7%.
Last year, Korea Investment acquired two student housing facilities near UT Austin in a $250 million portfolio of five student accommodation buildings, in partnership with Tiger Alternative. It was the first direct investment by a South Korean firm in the asset class.
In March, the brokerage firm purchased a new student housing portfolio at the University of California, Davis campus for $500 million. It reportedly sold down $200 million worth of equity interests in the property to four domestic institutions, offering a 9% annual return.
By Seonpyo Hong
<Edited by Yeonhee Kim>
(Photo: Getty Images Bank)