Investment Strategy
US Student Housing Growth & Income Fund (USQ) was established in 2021 and delisted from the Australia Securities Exchange (USQ:ASX) in January 2024. The Fund was established to acquire and manage high-quality purpose-built student housing assets located within close proximity to top-tier public universities across the United States, and drive value through operational strategy and capital upgrades.
Investors gain exposure to US student housing real estate and the Fund is the only Australian property trust with a primary strategy in investing in US student housing. USQ is focused on seeking to achieve long-term returns through a combination of income through rental yields along with potential long-term capital growth.
Strategy
Acquire and manage high-quality purpose-built student housing assets at large public universities, and drive value through operational strategy and capital upgrades
Portfolio
Cherry Street, Vue on Walnut and Lofts on 8th are currently under contract and aim to be settled as part of the Offer. This is subject to change and there is no guarantee these properties will be acquired by the REIT.
Asset Profile
These assets command a higher yield premium in comparison to Opportunistic but still present a strong capital growth opportunity. Core-Plus assets increase cash flow with light property improvements, management efficiencies or by increasing the quality of tenants.
These properties tend to be of superior quality and have a great track record of occupancy.
Value-Add yields similar returns to Core Plus but can be:
- well positioned assets but in distressed markets.
- newer properties with management issues.
- adolescent properties needing light enhancements to remain competitive or a combination of all three.
Opportunistic properties may have little to no cash flow at acquisition but have the potential to produce strong cash flow over time.
The intention is to add value through a higher initial capex spend to reposition the asset, ideally leading to better cash flow and potential cap rate compression.
WHY US STUDENT HOUSING?
- Sector fundamentals have been resilient during periods of economic instability due to ever-growing enrolment demand driven by demographics and little reliance on overseas students.
- Strong performance through the Pandemic and recessions has attracted institutional capital into the sector.
- Annual rental growth provides a hedge against inflation.
- Annual increases in NOI delivers the potential for growing yields and asset growth.
- Largest participant has < 4% market share with the top 10 owning only 15% market share.
- Deep pipeline of opportunity available for experienced owners and operators.
- Industry ripe for consolidation.
- Low reliance on foreign students with > 95% of US university enrolments comprising domestic students.
- Rite of passage: majority of US student population travel inter/intrastate to attend college and is seen a cultural “norm”
- 22% of US population under 18 years of age (approx. 73 million pre-college age).
- Tightened underwriting standards by agencies and banks has resulted in LVR’s reducing and credit only available to experienced investors with an operating track record in student housing.
Risks
Like all investments, an investment in the Trust carries risks which may result in the loss of income or principal invested. In addition to the general risks of investing, specific risks associated with investing in the Trust include, but are not limited to, property market risk, taxation risk and foreign exchange risk.