Korea Investment acquires US student housing for $250 mn

Korea Investment & Securities Co. Ltd. has acquired five US student housing for $250 million, in the first direct investment by a South Korean firm in the asset class.

Despite its relatively long investment period of 10 years, the brokerage firm completed the resale to a domestic pension fund and other institutional investors, according to sources with knowledge of the matter on Oct. 10.

The investment is expected to generate an 8% annual return after expenses.

Under the transaction, Korea Investment bought a 95% stake in the student housing portfolio, while US developer Landmark Properties purchased the remaining 5% stake.

For the acquisition, they teamed up with Seoul-based Tiger Alternative Investors and US investment company Ocean West Capital.

Landmark Properties and Tiger Alternative will set up a joint venture to operate and manage the assets.

The five properties consist of two student housing communities adjacent to the University of Michigan in Ann Arbor, constructed in 2009 and 2012 respectively; two facilities near the University of Texas at Austin; and one near the Florida State University in Tallahassee.

The three housing facilities in Austin and Tallahassee are recently-completed “Nine” brand properties.

Combined, the five student housing communities consist of 476 units totaling nearly 1,600 beds on a leasable space of 51,000 square meters.

“The properties currently are 99% occupied and expected to see stable demand given that the three universities are ranked highest in the US,” one of the sources told the Korean Investors.

Student housing is increasingly perceived as a defensive, alternative asset class with some non-cyclical characteristics.

Ocean West said in a recent statement that it will continue to target student housing acquisitions around top-tier public universities with strong records of academic excellence that offer real value to its students and graduates.

The acquisition comes after a Korean rating agency warned of a growing resale failure risk at domestic brokerage companies, with 1.3 trillion won ($1.1 billion) worth of their overseas alternative assets yet to be sold down for more than six months as of end-June, 2019.

By Hyun-il Lee

hiuneal@hankyung.com

(Photo: The Nine at Austin - West Campus website)