Centurion’s planned Reit will do the ‘heavy lifting’ of its assets, says CEO

PURPOSE-BUILT accommodation operator Centurion Corporation said on Thursday (Feb 27) that the proposed real estate investment trust (Reit) comprising some of its worker and student accommodation assets will do “the heavy lifting” as the group focuses on becoming asset-light.

Chief executive Kong Chee Min said that the group has been aiming to grow its assets under management for some time, but does not need to hold on to the properties.

“The Reit will be able to take the heavy lifting of our assets,” he said. “We have a quite heavy asset base, so this is something the Reit vehicle will help us with.

“And because of that, we will be able to grow our premium even bigger.”

While he did not divulge details on the Reit’s make-up, he noted that it will be of a “reasonable size”, and feature mainly “stabilised assets”.

The exact assets to be included are still under discussion, particularly as some are currently in development, he said during a briefing after the group’s results announcement.

Centurion on Wednesday reported net profit of S$226.6 million for the six months ended Dec 31, 2024, up 97 per cent from S$114.8 million in the corresponding year-ago period. 

In January, the group announced that it was planning to establish a Reit, and is working with DBS and the Singapore branch of UBS to explore the proposal.

This is the second time the company has announced that it is exploring a Reit listing. In 2015, it considered plans for a Reit, and engaged Barclays, UOB and UOB Kay Hian to explore the possible transaction. These plans were later deferred.

The group’s management noted that in 2015, Centurion had considered establishing a pure-play purpose-built workers’ accommodation Reit.

Since then, its portfolio has undergone many changes, including expanding to include purpose-built student accommodation.

The group later considered separating its student accommodation portfolio, which led to the revival of the idea for a Reit. However, its student accommodation portfolio was “not sizeable still”, said Kong.

The trust will, therefore, likely include both types of assets that are owned or operated by Centurion, added the group.

Some analysts noted that Centurion has a low net gearing ratio of 29 per cent and questioned why it decided to revisit its Reit listing plans at this time.

In response, Kong said that the group hopes to “rationalise its assets” in a way that would enable them to grow bigger, in addition to its asset-light strategy.

In any case, he added that the group still has expansion plans in the pipeline that requires capital expenditure, and cannot distribute “the kinds of dividends” that Reits can.

“Why now? We feel that it is the right time to do so, and that’s why we are taking a serious step to see whether the establishment of the Reit will be successful,” he said.

As part of the trust’s establishment, the company will consider giving out a dividend-in-specie of the proposed Reit’s units to existing Centurion shareholders.

Centurion shares closed flat at S$1.02 on Thursday.