Alignvest Student Housing REIT has more than doubled its portfolio with the acquisition this week of four modern, purpose-built student accommodation properties in three Ontario cities. ASH REIT, which was formed in mid-2018, now owns seven properties in the province comprising more than 3,300 beds.
“This is a transformative acquisition which basically doubles the size of our portfolio,” Alignvest managing partner Sanjil Shah told RENX in an interview.
The properties are:
* King Street Tower I and II at 333 and 339 King Street North in Waterloo;
* West Village Suites at 1686 Main Street West in Hamilton;
* and Village Suites Oshawa at 1700 Simcoe Street North in Oshawa.
The acquisitions continue a pattern of very rapid growth for the REIT, which launched in June with the purchase of one student housing property in Waterloo. It has since bought two other buildings in Ottawa.
“We saw a gap in the marketplace and we’ve been trying to execute on our plan,” Shah said. “We are ahead of plan, though. We did not expect to execute on seven properties in less than one year. This is consistent with our pre-launch thesis that this is an opportunity to consolidate and professionalize the student housing asset class in Canada.”
Although Shah said he could not confirm financial details of the transaction due to confidentiality agreements, RENX has learned the deal is valued at just under $200 million. It doubles ASH REITs asset base to about $400 million.
ASH REIT plans to continue its consolidation of the high-quality student housing sector in Canada, though Shah said it will likely take a short pause in the wake of this deal before attempting to resume property acquisitions later this year.
“We have a very active pipeline still; we have about $500 million more deal flow in our pipeline that we could transact on,” Shah said. “We won’t do all of it, but I’d be shocked and surprised if we don’t do any more deals in 2019.”
The Waterloo buildings
King Street Tower I is about 400 metres from Wilfrid Laurier University and 800 metres from the University of Waterloo. The 17-storey tower was built in 2011 with 536 beds in 126 fully furnished units. It was 100 per cent occupied as of this month and is 100 per cent pre-leased for the 2019-’20 school year.
King Street Tower II is adjacent to King Street Tower I. The 21-storey building was built in 2013 with 419 beds in 80 fully furnished units, is 100 per cent occupied as of March 2019 and 100 per cent pre-leased for the 2019-’20 school year.
The two properties offer the highest-quality amenities in the Waterloo market, Alignvest says, including exercise facilities, games rooms, study rooms, conference/boardrooms, a computer centre, a theatre room, a rooftop patio with a fire pit, tanning beds, saunas and several other attractive offerings.
The two buildings operate as a single entity, with suite configurations ranging from three- to five-bedroom units.
West Village Suites in Hamilton
West Village Suites is a LEED Platinum-certified property and is the only purpose-built student accommodation in Hamilton servicing McMaster University’s 31,000 students. The property was built in 2008.
West Village Suites is located close to campus and is adjacent to many shops and restaurants that are targeted to McMaster students. The nine-storey building has high-end amenities including a fitness studio, study rooms, student lounges, games rooms, a yoga studio and about 12,000 square feet of ground-floor commercial space.
The building offers a mix of two- to five-bedroom units with a total of 449 beds in 107 units, is 100 per cent occupied as of March 2019 and 100 per cent pre-leased for the 2019-’20 school year.
Village Suites Oshawa
Village Suites Oshawa is a LEED Gold certified building 600 metres from the main campus of the rapidly-growing University of Ontario Institute of Technology.
UOIT shares its campus with approximately 8,000 students enrolled at Durham College, creating a total targeted tenant base of close to 17,000 full-time students.
The property consists of a six-storey building and an attached four-storey building, both built in 2010. There are 588 beds in 133 units with a mix of three- to five-bedroom configurations and over 4,000 square feet ground floor commercial space.
Amenities include a fitness studio, various study spaces, student lounges, games rooms, a yoga studio. The buildings are 95 per cent occupied as of March 2019 and “well ahead” of last year’s September occupancy targets.
More acquisitions, new development
Looking ahead, Shah told RENX the trust hopes to begin acquiring properties outside Ontario later this year, and is also considering supporting developers in creating new student housing properties for what it considers an under-serviced accommodation sector.
“We’d love to be across Canada now but the reality is 40 per cent of university students are in Ontario, and the bulk of these student assets are in Ontario,” he explained, noting in many markets it is difficult to access high-quality student housing properties.
“We’re working actively on opportunities in Halifax, in Montreal, Winnipeg, Calgary, Edmonton and Saskatoon. We are hoping these will lead to some opportunities.
“Our ambition and plan is to be a national player.”
On the development front, Shah said Alignvest’s growing prominence and reputation might actually lead to additional development of student housing. Because so few potential owners have actively sought out these properties, it has created a challenge for developers.
“We are already in discussions with developers, both national developers, and with local and regionalized developers to work with them and partner with them. Not to do the development ourselves, but to be very supportive,” he said. Alignvest could assist in areas such as design, forward-purchase agreements and operations.
“There is a real supply-demand imbalance. What we are finding now is because of our growth, developers are now seeing that there is a takeout vehicle for them if they build, somebody can buy them out.
“Prior to us, they were hesitant developing because they were worried they’d be stuck with the asset for years on end without an exit path.”