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Deadline close for buying new shares in GCP Student Living

Investors have until 24 June to buy new shares in a high-yielding UK student REIT
June 17, 2015

The deadline is almost up to invest in high-yielding student REIT GCP Student Living (DIGS) through its Open Offer, in which new, convertible shares are being issued to current shareholders and newcomers for £1 each.

The Offer officially closes on 24 June and the trust is hoping to raise between £95-£130m capital to buy three new student accomodation assets, taking GCP’s portfolio from three to six student buildings. The new shares will convert from preference C shares to ordinary shares when all the assets are fully occupied and new shareholders could qualify for the trust’s next dividend if all have reached 100 per cent occupancy by the end of the university placement period in September.

The C shares - which do not pay dividends - will be converted based on the NAV of the portfolio at the time of conversion and managers claim they expect the NAV to rise above a pound before that date. Existing shareholders with two shares can apply for one more and those without any shares can apply by subscription for the excess C shares not taken up by current shareholders.

It could be a good time to gain exposure to the GCP, which has already experienced a dramatic rise in share price and NAV since launch in 2013 and could head the same way as other property investments which trade at double digit premiums. The C shares, at a cost of 100p each, compare to ordinary GCP shares currently trade at 128p against a net asset value of 119.18p according to Morningstar, a premium of 7.40 per cent.

The trust has already returned 35.4 per cent since its first day of trading on 20 May 2013 and has succeeded in delivering its income target of a 5.5 per cent dividend yield in year one. It targets a total return of between 8-10 per cent per year and aims to deliver regular, sustainable dividends linked to inflation. The fund was designed to tap into soaring demand from overseas students to study in London and a lack of student accommodation in the capital.

London has the largest population of international students of any city in the world, and, with demand for student places increasing and with the highest ever intake of students to UK universities in 2014/15 and a shortfall of around 170,000 university beds in 2014, demand is high.

That has driven up rents in GCP’s current assets, which are 87 per cent occupied by international students, and helped boost the NAV sharply in a short space of time, from 97p at IPO to 119p this month.