The manager of CDL Hospitality Trusts (CDLHT) says plans to expand its existing 404-bed purpose-built student accommodation (PBSA) asset in Liverpool could take about three years, though discussions are still in the early stages.
The REIT’s maiden foray into student accommodation in December 2024 included a plot of vacant land adjacent to the Benson Yard PBSA it acquired. This plot, acquired for a purchase consideration of GBP1 ($1.68), has received planning consent for a 144-key hotel.
In lieu of a hotel, however, CDLHT plans to build another PBSA block — subject to planning consent — which could serve to complement the existing PBSA asset.
Commenting on the timeline of this potential project, Vincent Yeo, CEO of M&C REIT Management, the manager of CDLHT, says: “It depends on when we actually start the project. Right now, we’re in the consultation phase.”
According to Yeo, converting the vacant land — “which we effectively didn’t pay anything for” — into a PBSA block would yield a “similar” number of about 144 rooms.
Talks are still in the early stages, and Mandy Koo, head of investments and investor relations at the REIT manager, says it is “too premature to guide” for the timeline of the potential project.
See also: CDLHT’s FY2024 DPS down by 6.7% y-o-y to 5.32 cents due to Manchester BTR project and interest costs
“Further feasibility studies will need to be conducted to determine the best use and returns,” says the REIT at the release of its results for FY2024 ended Dec 31, 2024.
The REIT acquired the freehold asset last month for a total cost of GBP40.6 million, inclusive of GBP3.3 million in transaction costs. The purchase consideration of GBP37.3 million was 5.4% below the property’s valuation.
Opened in February 2023, Benson Yard is “the best-in-class PBSA in Liverpool”, says Yeo in response to The Edge Singapore, with a “very high” amenity provision of 2.7 sq m per bed.
See also: CDLHT to acquire first PBSA asset in the UK for GBP37.3 mil
Benson Yard has 47 “studios” at between 23 and 29 sq m and 357 “ensuites” at between 12 and 19 sq m. The latter includes five-, seven- and eight-bed “clusters”.
As at Dec 31, 2024, the PBSA recorded a committed occupancy of 95.5% for the academic year running from Sept 1, 2024 to Aug 31 this year. It contributed gross revenue of $0.2 million and net property income (NPI) of $0.1 million for 2HFY2024.
According to the manager, leasing for the Academic Year 2025/2026 began “a few months ago” and is currently ahead of the previous academic year’s pacing.
In Liverpool, there are 1.6 students per PBSA bed, says Koo. “In certain [UK] cities, there’s also council pressure to not have students in the private housing but to move them into PBSA [properties]. So, I think on various fundamentals, PBSA is actually a pretty strong, interesting story in various cities.”
Yeo also notes that the British pound is now at a “historically weaker level”, which is attracting more international students to pursue their studies in the UK.
“The Benson Yard student accommodation acquisition continues our expanded investment strategy, to also focus on longer-stay living assets,” says Yeo. “These living assets will contribute to a more diversified and balanced income profile.”
Living assets
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
Benson Yard is one of two assets in CDLHT’s “living assets segment”, which also includes The Castings, a build-to-rent (BTR) property in Manchester CDLHT acquired via a forward-funding arrangement in August 2021.
The Castings, which opened in mid-July 2024, achieved a physical occupancy of 59.1% as at Dec 31, 2024, driven by a “strong summer leasing season”, according to the REIT manager. It recorded gross revenue of $1.8 million and NPI of $0.3 million for 2HFY2024.
CDLHT expects leasing momentum to pick up in spring and the property is expected to stabilise “by around 3QFY2025”. According to Yeo, leases are renewed each year.
Yeo attributes “part of the strength of demand” to people “struggling to make down payments for buying a home” in the UK. “Now, the problem is compounded with high interest rates [and] mortgage rates being very high… They end up having to go out to rent. So, we’re still seeing very strong demand for rental housing in the UK.”
Residential issues in the UK are a “century-old problem”, says Koo, with “short supply” in student accommodation and BTR housing. Compared to the entire private rental market, the penetration rate of the BTR rental market is “still pretty low”, Koo adds, with more people set to move from private landlords to a “professionally-managed space”.
The living asset class comprises about 7% of CDLHT’s total portfolio value, which rose 4.6% y-o-y to $3.3 billion as at Dec 31, 2024. CDLHT does not have a “specific percentage” of living assets it would like to hit, says Yeo. “Everything is more on an opportunistic basis.”
While Yeo “likes the living asset class very much”, they are constrained by “much tighter yields”. “They tend to [have] lower yields, also because they are much more stable assets. But it’s a growing institutional asset class, so the competition for those assets is quite intense.”
CDLHT has looked at the PBSA sector in “various markets”, says Koo, but the pipeline of assets is “stronger” in the UK. While there are opportunities in Australia and other “key cities” in the European Union, high funding costs mean it is “difficult to make it accretive” in terms of spread, she adds.
FY2024 results
CDLHT reported on Jan 27 total distribution per stapled security (DPS) of 5.32 cents for FY2024, 6.7% lower y-o-y. DPS for the 2HFY2024 fell by 11.9% y-o-y to 2.81 cents.
Distributable income for the full year fell by 5.8% y-o-y to $66.9 million due to lower NPI and higher interest costs. The REIT’s funding costs rose from floating rate loans, the refinancing of its fixed rate loans, the financing of The Castings as well as asset enhancement works.
The lower amount was also due to the absence of a one-off capital distribution of $0.9 million from the liquidation proceeds of an Australian subsidiary, which was recognised in the 2HFY2023.
Meanwhile, distributable income for 2HFY2024 fell by 10.9% y-o-y to $35.4 million. This was attributable to The Castings, as its contribution to the REIT’s total NPI was unable to cover its interest costs during the gestation period. The lower amount was also due to higher interest costs and lower NPI for the rest of the portfolio.
Excluding the one-off proceeds, CDLHT’s FY2024 DPS and distributable income would have declined by 5.5% and 4.6% y-o-y respectively. Similarly, 2HFY2024 DPS and distributable income would have dropped by 8.9% and 9.9% y-o-y respectively.
CDLHT’s gross revenue in FY2024 inched up by 1% y-o-y to $260.3 million thanks to higher revenue from its hotels in Perth, Japan, Germany and the UK. This was, however, offset by lower revenue from its Singapore hotels, Grand Millennium Auckland in New Zealand, Hotel Cerretani Firenze in Italy and its Maldives resorts.
Consequently, FY2024 NPI decreased by 2.2% y-o-y to $135.2 million.
