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132 Guildford Road, Maylands is being acquired by Aspen with a valuation of $57.5k per apartment. Source: Google Maps
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  • Aspen Group (APZ) plans to raise $28.3 million to help fund a $52 million acquisition of Perth apartments owned by BGC associates
  • The portfolio consists of 17 properties with 514 apartments averaging 1.7 bedrooms
  • The condition of apartments is varied and, where necessary, Aspen aims to renovate the units and keep the majority as rental stock
  • Over the next 18-24 months, Aspen expects to invest about $25 million throughout the portfolio
  • Shares in Aspen are sitting at $1.51 in a trading halt

Aspen Group (APZ) is aiming to raise $28.3 million to partly fund a $52 million purchase of a Perth apartment portfolio owned by ‘associates of BGC’.

The portfolio consists of 17 properties with 514 apartments averaging 1.7 bedrooms. Current occupancy is just 41 per cent and the average weekly rent is only $215, indicating the condition of the flats, with a rental income yield of around 1.25 per cent.

The apartments are in various states of repair, ranging from uninhabitable to renovated and new. Where necessary, Aspen aims to renovate the units and keep the great majority as rental stock.

Over the next 18-24 months, Aspen expects to invest about $25 million throughout the portfolio. That works out to approximately $50,000 per unit purchased, however the amount will vary from $0 to roughly $100k depending on the state of each building/apartment.

Aspen said the $52 million price for the portfolio was only $101,000 per apartment, which is about half the median price of comparable apartments in the same suburbs. The portfolio will predominately consist of refurbishing to rent products which Aspen said was well below the cost of build to rent.

Expected total returns were consistent with Aspen’s objective of generating 10 per cent growth in profits/book equity over the medium term, the company said.

Aspen expects the net rental yield to be only 1-1.5 per cent for the first 12 months depending on how many apartments are offline for refurbishment and to increase to over five per cent post the refurbishment and leasing program.

The company is aiming for a valuation uplift of at least 30 per cent on total cost post refurbishing and leasing apartments.

To partly fund the project, Aspen is aiming to raise $28.3 million of new equity at $1.33 per security which will consist of a $23.3 placement plus up to $2.75 million security holder purchase plan as well as $2.25 in director/employee tranches.

The $1.33 issue price is an 11.9 per cent discount on the last close price of $1.51, with UBS AG’s Australian branch acting as lead manager, bookrunner and underwriter for the placement.

The remaining $34.4 million for the initial purchase will be from additional debt funding.

FY21 financial results

Aspen’s property portfolio rose in value by 37 per cent year over year to $229 million, mostly due to revaluation gains and acquisitions.

Total revenue increased 18 per cent to $36 million while its operating profit, before transaction costs and in a non-IFRS (International Financial Reporting Standards) measure, increased 36 per cent to $9 million.

Property net operating income (NOI) increased eight per cent to $12.7 million while earnings and dividends per share were up 14 and 10 per cents respectively to 7.73 and 6.6 cents.

Shares in Aspen are sitting at $1.51 in a trading halt.

APZ by the numbers
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