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Far East Orchard buys three more British student dorms

MAINBOARD-LISTED property player Far East Orchard has added three freehold properties to its British student housing portfolio, in a deal announced just after midnight on Saturday.

It paid £55 million (S$98.7 million) in cash for two purpose-built student housing assets in Bristol, and one in Liverpool. This is shy of a combined market value of £57.6 million as at March 4, according to a Jones Lang LaSalle valuation report commissioned by Far East Orchard.

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

The 622-bed deal takes Far East Orchard's British student housing footprint to 2,091 beds across eight properties. Another 193-bed development in Brighton is in the pipeline for 2019.

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The board said in a bourse announcement that the latest deal will allow the group to continue expanding and diversifying its student housing portfolio into "established university cities... with large full-time student populations", with the group still on track for its goal of 3,000 beds by 2023.

"The acquisition is also in line with the group's strategic focus to increase the recurring and stabilised income of the group," the board added.

While Britain's planned withdrawal from the European Union is impending, Far East Orchard said in a statement that demand for purpose-built student housing in Britain "is expected to remain strong, given the established reputation of the UK higher education system and a healthy student-to-bed ratio".

Lui Chong Chee, group chief executive officer and managing director, added that the new acquisition "is part of our strategy to enlarge our recurring income base, thereby reinforcing the group's resilience".

The transaction was funded through a combination of internal resources and external debt facilities.

Taking into account the unaudited consolidated financial statements of the target companies for the year to Aug 31, 2018, the acquisition would have bumped up Far East Orchard's earnings per share from 7.64 Singapore cents to 8.15 Singapore cents if it went through on Jan 1, 2018, said the board.