Far East Orchard Buys UK Student Housing Assets for £55M

Singapore-listed property developer Far East Orchard Limited has added three freehold student housing properties to its UK portfolio in a 622-bed deal worth £55 million ($72.96 million), according to a company statement.

The subsidiary of property giant Far East Organization paid £55 million in cash for the 133-bed Harbor Court and 166-bed St Lawrence House in Bristol, and The Glassworks in Liverpool with 323 beds. The acquisition amount was lower than a combined valuation of £57.6 million provided by JLL earlier this month according to Far East Orchard’s filing with the Singapore exchange.

The developer said in the statement that the latest deal will allow it to continue expanding and diversifying its student housing portfolio, which now includes over 2,000 beds in the country, into “established university cities in the UK with large full-time student populations.”

Betting on a Niche to Beat the Cycle

The student accommodation asset class in the UK has counter-cyclical qualities and a track record of strong occupancy and rental growth, Far East Orchard indicated in its rationale for the investment. The company expects that, despite Brexit, demand for purpose-built student accommodation in the UK will remain strong given the established reputation of the country’s higher education system and a healthy student-to-bed ratio.

The Bristol asset was attractive due to the city’s strength as a regional education hub, the company said, noting the presence of two major universities in the city of 535,000 people in southwest England. Like Bristol, Liverpool is seen as a centre for higher learning, with four tertiary education institutions in the city of 552,000.

The transaction was funded through a combination of internal resources and external debt facilities, according to the statement. Taking into account the unaudited consolidated financial statements of the target companies for the year to August 31, 2018, the acquisition would have bumped up Far East Orchard’s earnings per share from S$7.64 to S$8.15, assuming it had taken place on January 1, 2018 the company said.

Lui Chong Chee, group CEO and managing director of Far East Orchard, added that the latest acquisition is “part of our strategy to enlarge our recurring income base, thereby reinforcing the group’s resilience.”

Adding to Existing UK Portfolio

Following the transaction, the company plans to ink a facility management arrangement with an operator that is already managing its existing student housing properties in Newcastle upon Tyne, where Far East Orchard made its maiden foray into British student housing in 2015.

Upon completion of this latest acquisition, the property developer and hospitality operator now has a portfolio of around 2,100 beds in the UK cities of Bristol, Liverpool and Newcastle upon Tyne. Far East Orchard remains on target to grow its student accommodation portfolio to 3,000 beds by 2023 Lui indicated.

In Brighton, the group is now developing Hollingbury House, a 193-bed student accommodation property. Upon its completion at the end of this year, the development will further scale up Far East Orchard’s UK portfolio to close to 2,300 beds.

Far East Orchard’s latest foray into student housing in England comes less than four months after its compatriots from Singapore Press Holdings paid S$321 million to acquire a portfolio of 14 student accommodation properties located in six towns and cities across the UK in September last year.

In 2017, Singapore’s sovereign wealth fund, GIC, formed a joint venture with a student housing specialist to invest £227 million in its own set of UK youth accommodation.