19/08/2021 - 15:46

Aspen Group to buy BGC apartments

19/08/2021 - 15:46

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Aspen Group plans to spend $52 million buying and refurbishing a portfolio of Perth apartments with an extraordinarily high 59 per cent vacancy rate.

Applecross dwellings included in the portfolio include a complex on Matheson Road and properties along Canning Highway. Photo: Gabriel Oliveira

Aspen Group plans to spend $52 million buying and refurbishing a portfolio of Perth apartments with an extraordinarily high 59 per cent vacancy rate. 

The portfolio comprises 514 apartments across 17 properties in Perth’s inner-metro suburbs: Trigg, Glendalough, Maylands, Swanbourne, Claremont and Applecross.

Announcing the news to the ASX today, Aspen said it had entered into agreements with associates of the Buckeridge Group of Companies to facilitate the acquisition, noting the $52 million figure was pre-transaction costs, valuing each apartment at $101,000, with land value a high component of total value.

It follows the sale of several other BGC Australia assets, including The Westin Perth and the Aloft Hotel, with the proceeds understood to be distributed to the Buckeridge family. 

The bulk of the buildings - a mix of mainly one and two-bedroom apartments - were constructed in the 1970s.

Internal floorspaces of the apartments were 55 square metres on average, with occupancy across the portfolio just 41 per cent.

The average rent across the portfolio sat at $215 per week, which Aspen said reflected the state of many of the apartments.

The group notes the varying conditions of the apartments, from uninhabitable to relatively new.

Aspen outlined intentions to invest about $25 million into refurbishment over the next 18-24 months where required, with plans to hold the vast majority as rental stock.

The group expects total returns to be consistent with the company’s objective of generating 10 per cent growth in profits over the medium term.

Net rental yield is predicted to be 1-1.5 per cent for the first 12 months, dependent on how many apartments would undergo upgrade works, with that expected to increase to more than 5 per cent post the refurbishment and leasing program.

“We are aiming for a valuation uplift of at least 30 per cent on total cost post refurbishing and leasing apartments,” the announcement stated.

“The portfolio is very well suited to Aspen’s business of providing quality accommodation on competitive terms in residential, retirement and park communities.

“Perth offers an attractive lifestyle, its economy and population are growing, residential vacancy rate is around 1 per cent, residential rents and prices have increased about 10-15 per cent from the bottom, but prices are still generally less than they were 10 years ago and have lagged the eastern states.”

While most of the portfolio will be retained for rent, Aspen said it also planned to develop additional apartments where the land was already approved for higher density.

There was also a possibility to recycle capital, in cases where some of the apartments may be less suited to Aspen’s business: two buildings were already strata-titled and some smaller properties could be attractive to passive investors, it said.

Aspen plans to fund the acquisition via a $23.2 million placement, in addition to a $2.75 million share purchase plan, with a $2.25 million director/employee tranche subject to shareholder approval at its AGM later this year.

At the close of trade Aspen shares were unchanged at $1.50 per share.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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