Far East Orchard buys new student accommodation in UK for £13.9m

DEVELOPER Far East Orchard : O10 0% has acquired a freehold student accommodation property in Southampton, UK, for a price of £13.9 million (S$22.9 million), said Far East in a bourse filing on Friday (Dec 9).

The deal is expected to be earnings accretive, as Far East estimated earnings per share to rise from 6.12 Singapore cents to 6.18 cents post-acquisition, assuming it took place on Jan 1.

The developer will be managing the property with an unnamed UK student accommodation operator, with the latter acting as facility manager.

The acquisition comes as part of the group’s efforts to expand and diversify its student accommodation portfolio in the UK, which the manager said has shown “resilience against economic downturns”.

The property is Far East’s first student accommodation property in Southampton.

Located at 1 Fitzhugh Street, Southampton SO15 2PU, United Kingdom, the plot has a site area of approximately 1,380 square metres with a total of 180 beds.

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It is within walking distance of three Solent University campuses and stands adjacent to the Southampton Central Railway station. A new amenity block was added to the property just last year, with facilities such as a gym, cinema room, games room, large open study space and a private dining room.

The property was last valued at approximately £14.2 million, according to Jones Lang LaSalle‘s valuation on Nov 25 this year.

Far East funded the deal in cash through external debt facilities the group had obtained through its wholly-owned subsidiary, IUKSeven.

Completion of the deal, however, is conditional upon the seller, Empiric (Southampton Emily Davies), undertaking and completing certain minor works. Far East expects these changes to be complete by April 2023, before the deal’s long-stop date on Apr 30.

“There is a favourable demand and supply imbalance of student accommodation in the UK with the return of international students following the lifting of travel restrictions, coupled with the projected domestic students’ growth over the next 10 years,” said Alan Tang, group chief executive of Far East Orchard.

“Notwithstanding inflationary cost pressures amid increasing energy prices and rising interest rates, we remain upbeat about the student accommodation sector, which acts as an inflationary-hedged asset class.”

The developer has plans to grow its portfolio until it reaches 5,000 student accommodation beds by 2025. Following the recent acquisition, it currently manages 4,400 beds in the UK.

Shares of the property developer ended Thursday flat at S$1.03, before the announcement.