Ground Rents Income Fund has acquired the ground rents of four prime student accommodation buildings and exchanged contracts to acquire a further two for a total consideration of GBP7.1 million.
The portfolio, which is a mix of freehold and long-leasehold interests, consists of 848 units across six refurbished buildings in the established student locations of Liverpool, Bristol, Exeter and Southampton.
The four buildings which have been acquired are The Chapel at 3 Crosshall Street, Liverpool (68 units); 35-37 Colston Avenue, Bristol (132 units); Portland House, Longbrook Street, Exeter (156 units); and Richmond House, Terminus Terrace, Southampton (202 units).
The two buildings where contracts have been exchanged are 5-7 Crosshall Street (158 units) and Tinlings at 9-11 Crosshall Street (132 units), which are both in Liverpool.
The total ground rent income for the six assets will be GBP296,800 a year, reflecting an initial yield of 4.17 per cent. The ground rents will increase in line with the Retail Prices Index (RPI) every five years at three of the buildings and every 10 years at the remainder.
The vendor of the portfolio is student accommodation provider Vita Student, part of the Select Property Group which is headquartered in Alderley Edge, near Manchester.
James Agar, investment director of Brooks Macdonald Funds, investment adviser to GRIF, says: “The Vita Student acquisition provides shareholders with a significant portfolio of stable, secure, income-producing assets. This income is closely correlated to inflation at a mixture of five and 10 year intervals, reducing the average review cycle of the portfolio.
“Student accommodation continues to be an attractive sector to both UK and international investors and Vita has leveraged its long-term international client relationships in order to facilitate this market opportunity. The high-quality nature of each development is very attractive and the brand offering will continue to generate stable returns for underlying unit owners.”
Mark Stott, CEO of Select Property, says: “Student property is currently performing very strongly. The Vita Student proposition represents the very finest student residences on the market which has resulted in them being extremely sought-after by investors and students alike, so it was no surprise that James and the team at Brooks Macdonald were interested in securing a long-term interest in this first phase of our project pipeline.
“The acquisition represents a stable and secure investment which will generate stable returns for the REIT for many years.”