SGX-listed Far East Orchard Limited said it has acquired a portfolio of student accommodation properties within Shieldfield, Newcastle upon Tyne, United Kingdom for £40.9 million ($62 million)
The investment involves acquiring two land sites for development into purpose-built student accommodation, an existing student accommodation, and another student accommodation undergoing development. The latter is expected to be completed in the second half of 2015., the company said in its regulatory filing.
The property acquisitions will be funded by internal sources and/or external debt facilities, the company said.
The acquisition includes Turner Court, an existing operating building; Rosedale Court, an ongoing development; a land site for development of two buildings and another land site for development of three buildings. These are located within walking distance of educational institutions such as Northumbria University, Newcastle University, Newcastle University Business School and Newcastle College, the regulatory filing added.
Far East Orchard’s group chief executive officer and managing director Lui Chong Chee said, “For the group, this move represents several milestones: an expansion of our property development beyond Singapore into Europe, and an extension of our development capabilities into the student housing sector in the UK, to develop our position as a leading regional real estate player. It also pools together the extensive experience from our established hospitality operations. As the UK student accommodation market has been structurally undersupplied, we plan to contribute and provide high quality purpose built student housing. In addition, this new asset class opens a door to stable capital growth in one of Europe’s major property markets for FEOrchard.”
According to global real estate service provider Jones Lang LaSalle (JLL), the UK student buy-tolet market is buoyant, and the picture is one of healthy, sustainable growth and overall stability for the sector despite well-publicised demographic dip in the number of 18-year-olds in the UK. JLL has forecasted an annual rental growth rate of 3-4 per cent for London, 2-3 per cent in university towns and 3-5 per cent regionally. Data from commercial real estate analytics firm, Real Capital Analytics, showed that the average investment yield for UK student accommodation was 5.8 per cent, compared to 5.1 per cent for offices.
In the last one year, FE Orchard acquired four hotels in Germany and Denmark for €21.0 million. The group also entered into a residential development joint venture project in Sydney, Australia.