Wee Hur rises 11% on partial stake sale in student housing fund to GIC-linked entity

NEWS of Wee Hur Holdings' partial divestment of its stake in a student accommodation fund to a GIC-linked investment company have sent its shares soaring.

Shares of the property developer and builder closed at S$0.22, higher by S$0.022 or 11.1 per cent on Friday (Apr 22).

The price had peaked at S$0.23 at 3.46 pm, up by S$0.032 or 16.2 per cent over its last closing price, with close to 6.2 million securities changing hands.

The last time Wee Hur was trading at S$0.23 was more than 2 years ago, in November 2019.

The rally had started right after the Singapore stock market opened for trading on Friday, when its shares climbed 8.6 per cent or S$0.017 to S$0.215 at 9.16 am, with almost 444,000 securities being transacted.

It then pulled back slightly to trade at S$0.205 at 9.35 am, before continuing on its uptrend just minutes later, and throughout Friday's trading session.

No married deals were recorded in early trade, showed ShareInvestor data.

Wee Hur announced via a bourse filing before the market opened on Friday that it will be selling a 9.9 per cent stake in Wee Hur PBSA Master Trust (WHPMT) for A$112.7 million (S$113.3 million).

Other unitholders of WHPMT holding a 40 per cent stake will also divest all of their interests in the property trust, valuing the total deal at A$567.9 million.

The deal values the fund's properties at A$1.14 billion, with an equity value of A$551.1 million. The equity value is 1.4 times its current value on Wee Hur's books.

Based on the company's latest financials for FY2021 ending in December last year, Wee Hur's 60 per cent stake in WHPMT was valued at S$241.92 million.

After offsetting the gross purchase price for first mortgage indebtedness against the fund's student housing properties and other factors, Wee Hur's share of the deal consideration is A$54.6 million, which was equivalent to 30 per cent of the company's market capitalisation just before the deal was announced.

After the completion of the deal, Wee Hur will hold a 50.1 per cent stake in the fund while the buyer, Reco Weather, will own 49.9 per cent. According to Wee Hur, Reco Weather is a Singapore-based investment holding company backed by a global institutional investor. Documents show the investor is linked to state investment firm GIC.

A filing with the Accounting and Corporate Regulatory Authority shows that Reco Weather shares the same address as GIC and its directors are senior vice-presidents of GIC's real estate division.

When contacted by The Business Times, GIC declined to comment.

WHPMT's portfolio currently comprises 5,662 beds across 7 student accommodation properties located in Sydney, Melbourne, Brisbane, Adelaide, and Canberra. As only 4 of the assets are operational, while the remaining 3 are to be completed before the end of 2023, the transaction is to be completed over 3 stages of settlement depending on when the properties are being completed.

Wee Hur's executive chairman, Goh Yeow Lian, said: "We are extremely pleased to have done a recapitalisation of our first Australia focused PBSA fund, providing exit certainty for our investors within the fund term and providing a war chest for the group from the partial recycling of capital should further investment opportunities arise."

The deal is slated to be completed before Jan 1, 2024.

After discussions with transaction advisers, market feedback and security requirements imposed by the banks that are currently financing the development of the student accommodations, the 49.9 per cent divestment was deemed the most optimal exit strategy for unitholders, while ensuring Wee Hur was still the majority stakeholder.

Under the terms of the trust deed established in December 2016, Wee Hur Capital, the manager of WHPMT, had to prepare an exit strategy before its term expiry on Jun 30, 2022.

The sale also reduces Wee Hur's exposure to fund any additional equity injections into the student accommodation fund if it does require the funds for any cash flow and refinancing issues.

Wee Hur noted that Reco Weather offered the best price and terms, and it met its target reserve price set internally before the Covid-19 pandemic.

Assuming the sale had been completed on Dec 31, 2021, Wee Hur's net tangible assets per share as at end-2021 would have increased to S$0.59 from S$0.49. If the deal had been completed on Jan 1, 2021, earnings per share for FY2021 ended December would have increased to 11.85 Singapore cents from 0.07 cent. On a pro forma basis, the excess proceeds over the carrying value of the fund units would be S$91.4 million.

Goh Wee Ping, chief executive officer of Wee Hur Capital, said it will still take some time to stabilise its existing portfolio to generate a healthy annual cash flow, even as the company is constantly looking out for more opportunities in Australia.

"Australia definitely remains a strong tertiary education destination that will continue to attract tertiary students, international and domestic alike. The difference is that now, more than ever, we need to be very selective in where we want to be, focusing on sites that are in great locations that are still underserved by the market, as the market has definitely seen a marked increase in PBSA (purpose-built student accommodation) supply over the past decade," he added.