Centurion Corp’s balancing act

/ EdgeProp Singapore |

January 15, 2018 8:00 AM SGT

On Jan 5, listed property companies Centurion Corp and Lian Beng Group, together with the Association of Process Industry (ASPRI), celebrated the official opening of ASPRI-Westlite Dormitory Papan.

Construction of the $200 million project took less than 15 months, with Temporary Occupation Permit obtained in May 2016. ASPRI-Westlite Dormitory Papan, which comprises twin 18-storey blocks with a total of 7,900 beds, is the first purpose-built workers’ dormitory that incorporates a 40,000 sq ft training centre. Owned and operated by ASPRI, the training centre is designed to meet the needs of workers from the process, construction and maintenance (PCM) industry.

The ASPRI-Westlite Dormitory on Jalan Papan has a capacity of 7,900 beds and was completed in May 2016 (Credit: Centurion Corp)

The development has been billed as the first workers’ dormitory with a “live-learn- play” concept. The aim of ASPRI’s training centre is to upgrade the skills and productivity as well as quality of life of the residents at the dormitory. The domitory’s location just a 12-minute drive from the Jurong Island checkpoint means greater convenience as it reduces commute time for PCM industry employees working on Jurong Island.

“This integrated model — Live, Learn, Play — is an advancement in how we treat our foreign workers,” said Tharman Shanmugaratnam, deputy prime minister and coordinating minister for economic and social policies, who was the guest of honour at the official opening of ASPRI-Westlite Dormitory Papan on Jan 5. “It is a far cry from the norm we saw in foreign worker dormitories less than a decade ago.”

Deputy prime minister Tharman Shanmugaratnam (centre) at the ASPRI-Westlite Dormitory, where he was the Guest of Honour and was given a tour of the facilities (Credit: Albert Chua/EdgeProp Singapore)

With 7,886 out of a total of 7,900 beds taken up today, ASPRI-Westlite Dormitory Papan has an occupancy rate of close to 100%. “There were some challenges initially as the oil and gas sector wasn’t doing too well when the project was completed,” relates Kong Chee Min, Centurion Corp’s CEO. “By engaging plant owners and embarking on joint marketing efforts with our partners, we managed to arrive at 100% occupancy within a year.”

One of the biggest owner-operators in workers’ housing

Centurion first entered the purpose-built workers’ dormitory business in 2011 with 5,300 beds. The company is the result of a reverse acquisition of JM Summit, a firm that started in 1981 as a manufacturer of audio cassette tapes in Singapore. It was one of the market leaders in optical storage media industry when it was listed on the Singapore Exchange in 1995.

Since its diversification into the accommodation business in 2011, Centurion has become one of the biggest owner- operators of purpose-built workers’ housing in Singapore. Today, it has a portfolio of four workers’ dormitories in Singapore branded Westlite — in Mandai, Toh Guan, Woodlands and Jalan Papan — with a total of 26,100 beds. This excludes its fifth property, the 8,600-bed Westlite Tuas, which will close this month as the lease on the land ends on Jan 30.

The air-conditioned gym is very popular among the residents of the dormitory (Credit: Albert Chua/EdgeProp Singapore)

Further growth in Malaysia

Outside Singapore, the group has six Westlite dormitories in Johor, Malaysia, with a total of 23,700 beds. In Penang, a 6,600-bed Westlite dormitory is slated for completion in 3Q2018 and a second 6,100-bed dormitory is in the pipeline. When the Penang dormitories are completed later this year, the Westlite portfolio of workers’ dormitories in Malaysia will have a total of 36,400 beds, exceeding the Singapore portfolio’s 26,100 beds.

“We do see a bit more growth in Malaysia, with the two new dormitories in the pipeline in Penang,” says Tony Bin, Centurion’s executive director of accommodation business.

Although land cost is higher in Singapore, so are rates per bed per month, points out Centurion’s Kong. “You’re talking about $260 per bed per month in Singapore versus RM120 per bed per month in Malaysia,” he says. “Therefore, in Malaysia, it has to be a volume business, while in Singapore, we differentiate ourselves through quality.” According to Centurion’s latest results (3Q2017), its Westlite Woodlands has 100% occupancy, while Westlite Toh Guan and Westlite Mandai are at 95%.

One of the 494 apartments in the 18-storey twin tower blocks which come with eight bunk beds, an en suite kitchen and shower/toilets (Credit: EdgeProp Singapore/Albert Chua)

Slight premium

While other workers’ dormitory operators have slashed rates to stay competitive, Westlite’s dormitories still command “a slight premium”, given their “uniqueness and value-add proposition to employers”, says Centurion’s Bin.

In a report dated Nov 10, 2017, Phillip Capital investment analyst Jeremy Teong estimated that the bed rates at all the Westlite dormitories are at a 10%-to-14% premium to market rates.

In Malaysia, Westlite dormitories had a portfolio occupancy rate of 86% as at 3Q2017, up from 82% in 2Q2017 and 74% in 1Q2017, according to Phillip Capital. The improvement in occupancy is caused by two factors: the crackdown on illegal worker dormitories that has resulted in more foreign workers being housed in purpose-built accommodation, and an increase in the number of workers allowed in certain sectors. “We can expect positive rental reversion in 2018 as policy continues to be favourable,” says Phillip Capital’s Teong.

Centurion is looking at expanding the worker accommodation business beyond Singapore and Malaysia. In December 2013, the company announced that it had acquired a 77,715 sq ft piece of land in Jakarta, Indonesia, for $800,000. The intention was to build 750 apartment units to house workers and mid-level executives working in the industrial parks nearby. The project “is still on the drawing board”, says Bin.

In 2014, Centurion had indicated that it was exploring countries in the Middle East for its worker accommodation business. “But we won’t be venturing in very aggressively because we’re evaluating other risks as well and prioritising our resources,” says Kong.

Tony Bin (left), Centurion’s executive director of accommodation business, and CEO Kong Chee Min (Credit: Albert Chua/EdgeProp Singapore)

Rapid growth in student accommodation

It was also in 2014 that Centurion ventured into the student accommodation business with acquisitions in Australia and the UK. Centurion acquired its maiden student accommodation asset, RMIT Village in Melbourne, Australia, for A$60 million at the start of 2014. The purpose- built student accommodation contains 229 apartments and has a capacity of 456 beds.

The group now owns and operates eight student accommodation assets with a capacity of 2,420 beds across the UK, including Bristol, Manchester and Newcastle.

In February 2017, Centurion announced that it was branding its student accommodation “dwell”. The company also rolled out a new mobile app to enhance the experience of its student residents. The app can be used by residents to request for maintenance services, book facilities and receive notifications on status of parcel delivery as well as information on upcoming events for the student community. The mobile app was launched at nine of Centurion’s student accommodation properties — eight in the UK and one in Singapore.

A student bedroom at dwell The Statesider, a 78-unit, 226-bed student housing asset located near the University of Wisconsin-Madison (Credit: Centurion Corp)

The sole student accommodation asset in Singapore is the 332-bed dwell Selegie, strategically located near Singapore Management University, LaSalle College of the Arts, Nanyang Academy of Fine Arts and Kaplan City Campus.

Last March, Centurion acquired a freehold site in Adelaide for A$3.5 million ($3.6 million) to develop a purpose-built student dormitory with 280 beds. This marks its second student accommodation asset in Australia. The total cost of the project, including construction, is projected to be A$45.5 million. The property, located within walking distance of the University of Adelaide and University of South Australia, is expected to be completed by 4Q2018, in time for the student intake in the 2019 academic year.

In May, Centurion undertook an asset enhancement programme at RMIT Village, its first student accommodation asset in Australia. The A$30 million enhancement works are expected to be completed in 4Q2018, ahead of the 2019 academic year. It will include the building of a new 11-storey wing, comprising studios and four- and five-bedroom en suite apartments that will add 160 new beds and increase the total number of beds at RMIT Village by 35% to 616.

dwell Stadium View is a 156-unit, 216-bed student accommodation near Texas A&M University (Credit: Centurion Corp)

Entering the US

Last year, Centurion made its maiden foray into the US. The company announced in July its plan to buy a portfolio of five student accommodation assets with a total of 1,936 beds across four states — Alabama, Florida, Texas and Wisconsin — for about US$136 million ($187 million).

This was followed in August by its plan to acquire College & Crown, a student accommodation asset with 160 units and a capacity of 204 beds near Yale University in New Haven, Connecticut. The purchase price of the asset was US$70 million. This brought its total US portfolio to six assets with a total of 2,140 beds.

In November, Centurion announced that it had closed its inaugural private fund, the Centurion US Student Housing Fund, with an aggregate committed capital of US$89.5 million. The money was used to acquire the six assets in the US.

The assets have also been branded dwell, and will be managed by dwell US Student Living, a joint venture between Centurion and a student accommodation manager in the US. Centurion holds 28.7% of the Centurion US Student Housing Fund. The remainder is owned by third-party investors.

dwell College & Crown, New Haven, Connecticut is a 204-bed student accommodation building located near Yale University (Credit: Centurion Corp)

‘Better balance’

The injection of the US portfolio brings Centurion’s total student accommodation portfolio to 5,348 beds. In FY2016 ended December, the latest full-year results available, workers’ accommodation still contributed to 71% of revenue, while the student accommodation business accounted for 27%. Centurion expects contribution from student accommodation to increase in FY2017. “For diversification purposes, we want to see a better balance of about 50:50,” says Kong.

The profit margin for workers’ accommodation is slightly higher, owing to the lower operating costs for workers’ dormitories, which also need less maintenance and space per bed, compared with student accommodation, says Kong. Even though workers’ accommodation provides better margins, the student accommodation business is “far more resilient” and less affected by shifts in the economic cycle, notes Kong. “The student accommodation business has greater scope for expansion and scalability.”

A student apartment at dwell The Towers on State, a 127-unit, 231-bed student accommodation near the University of Wisconsin-Madison (Credit: Centurion/Corp)

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