Singapore Press Holdings (SPH) has acquired a portfolio of 14 purpose-built student accommodation buildings across six towns and cities in the United Kingdom for about £180.5 million (S$321 million) in cash, it announced early yesterday morning before the market opened.
The buildings, acquired from the Unite Group, have a total capacity of 3,436 beds.
They include 10 freehold assets and four leasehold assets, and are located in established university towns and cities with large full-time student populations, namely London, Birmingham, Bristol, Huddersfield, Plymouth and Sheffield.
SPH, which owns The Straits Times, said that student accommodation in the UK has growth potential, with demand expected from both domestic and international students, driven by a rise in enrolment of first year, international and postgraduate students.
SPH chief executive officer Ng Yat Chung said: "This cash-yielding acquisition will generate recurring cash flow, and is part of our ongoing strategy to diversify our business to new growth areas.
"It will boost our real estate asset management portfolio, establish us as an overseas owner of PBSA (purpose-built student accommodation) in the UK, and allow us to pursue other growth opportunities in this sector."
SPH's wholly owned units, through which it is making the acquisition, will enter into an operating management agreement with Victoria Hall Management (UK), a professional operator of student accommodation in the UK, to manage the properties.
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Resilient sector of property market
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Student accommodation investments are seen as a relatively stable and resilient segment of the property market.
In the last few years, Asian investors have been eyeing this market.
Sovereign wealth fund GIC is among the largest investors in student ac-commodation.
One of GIC's latest deals involved the acquisition - together with the Canada Pension Plan Investment Board and The Scion Group - of a portfolio of 24 student accommodation assets in the US for US$1.1 billion (S$1.5 billion). Others with student accommodation investments include Temasek's Mapletree Investments, which has properties in the US and Britain.
Just last week, listed Wee Hur Holdings bought a freehold office building in Adelaide with plans to redevelop it into student accommodation with about 721 beds.
The transaction is expected to be completed on or around Thursday, with the consideration funded by internal as well as ex-ternal resources.
The consideration may be lowered by up to £13.7 million if actual income on certain assets is below 95 per cent of estimates, and Unite Group has provided a guarantee of up to £2.5 million to cover shortfalls between the estimated income and actual income of the assets as at Nov 30 this year.
SPH did not disclose the estimated income.
Net profit attributable to the assets being acquired was $12.1 million last year.
OCBC analyst Joseph Ng said that the announcement did not come as a surprise, with the bank's analysts previously highlighting the possibility of SPH looking for yield assets in the UK.
DBS analysts see it as part of SPH's diversification strategy as the company leverages its strong balance sheet to enter "businesses which offer resilient and visible cash flows".
In a media statement yesterday, Unite Group said the deal is "in line with Unite's strategy to recycle capital through the disposal of assets... and reinvest into developments increasingly focusing on high-and mid-ranked universities".
SPH shares closed up six cents, or 2.2 per cent, at $2.79 yesterday.
