US investor buys student hostels

ASX-listed Ingenia Communities Group has sold its three uStay student accommodation blocks in central Wellington to an American investor for $35 million.

The properties comprise three hostels on Willis St in Wellington's CBD, which between them are understood to provide around 550 beds.

Two of the buildings are leased to Victoria University and the third to Wellington Institute of Technology, which guarantees rental income during the 38-week academic year. Their rooms are also rented out on a short-term basis over the end of year holiday break.

The sale has been a long time coming. The properties were put on the market in May 2010.

In his statement to the ASX, Ingenia chief executive Simon Owen said negotiations over the sale took a year to conclude and the deal was clinched once new 15- year leases to the tertiary institutions were signed.

The sale is conditional on finance which is expected to be confirmed by the end of the year with settlement expected in late January.

The price is a 40 per cent premium to the properties' book value of A$19.8m ($25.1m), and after repayment of debt will net Ingenia about A$9.8m.

The properties were put on the market after Ingenia decided to divest all non-core assets and concentrate exclusively on the retirement living markets in Australia and the US.

The buyer's identity has not been revealed but Ingenia said it was a private US-based investment group that was already active in the student accommodation market.

- © Fairfax NZ News