GCP Student Living seeking to raise £95m in expansion move


#1

Originally published at: http://whichinvestmenttrust.com/gcp-student-living-seeking-to-raise-95m-in-expansion-move/
The operator of student accommodation in the UK is intending to use the money to acquire buildings in the London.

GCP Student Living (LON:DIGS) is looking to raise from £95m upto a maximum of £130 million by way of a C-share issue, which is a special class of share operated separately from the ordinary share class, until its been invested when it is then merged. This is so that it doesn’t disadvantage existing shareholders who might suffer a dip in performance whilst the uninvested sum is earning little to nothing.

Under the open offer, existing shareholders will be entitled to one C-Share for every two ordinary shares held. The open offer will close on 19 June and placing and offer for subscription on 24 June, with new shares commencing trading on 30 June. A prospectus will be published in late May/early June. Costs are expected to be c.2% of gross proceeds.

Use of the proceeds

The proceeds will be used to acquire three developments, - Scape Surrey, Scape Shoreditch, and The Pad 2 (located adjacent to Royal Holloway, University of London). These three developments, with an aggregate of around 800 beds, are close to completion and DIGS will seek to complete the acquisition for the start of the upcoming 2015 /16 academic year (subject to completion, independent valuations and available financing).

Background

DIGS paid a 6.1p dividend in the 13 month period to 30 June 14, achieving its annualised yield target of 5.5% on the IPO issue price. Total returns of 8%-10% per annum will be targeted over the longer term. GCP Student Living raised £70.1m at IPO in May 2013. As at 31 December, the portfolio comprised three assets; Scape East in East London (588 rooms), Scape Greenwich in South East London (280 rooms) and The Pad in Egham (116 rooms). The accommodation is currently operating at full capacity and generated £5.69m of rental income pa. The shares trade at 124.8p, equivalent to a 4.7% premium to the 31 March NAV.

Change in investment policy

The trust also intends to change its investment objective and policy to allow it to invest in development projects which have received planning permission for student accommodation, and which it believes will provide investors with regular, sustainable dividends. The Board notes that it is aware of valuations being driven up by intense competition for assets, and believes that at present, restrictions relating to investment in development or unoccupied assets may “constrain the Company’s ability to source and secure investments in suitable opportunities offering an attractive total return profile for shareholders and may further limit its ability to grow its asset base”. However, the trust does not intend to use the proceeds from the current fund raise in this way.

More information can be obtained from the GCP website here. Look up metrics on the AIC website here.

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#2

The yield looks reasonably attractive but what type of NAV growth are they expecting I wonder. Are they paying a full price for these properties, we all know how expensive property in London is.


#3

My concern about the Student property sector is that everyone seems to be getting in to it, it’s become a bit of a goldrush and they can’t all win.

I prefer European property for now. This doesn’t look attractive to me.


#4

Where are you investing to get European property @smithy101 ?


#5

Where are investing to get your European property exposure @smithy101 ?


#6

There is such a shortage of property in London that no one is getting it cheap @citygirl.

I think this looks like a really interesting investment because of all the wealthy foreign students looking for quality accommodation. I think will do well.


#7

@smithy101 In London there’s a shortage of student property and it’s not likely to change for many years to come.

I think this is as good an investing if you are looking for a reasonable income as you are going to find. Both me and my sister have applied for shares to tuck away for a few years and earn 5.5%.

I love it!


#8

I agree and there’s no end in sight to the high cost of property in London. As long as they stick to London this fund should do well for as many years ahead as we can see.