Centurion: DVD manufacturer turned global PBSA investor

Around a decade ago, Summit, a Singapore DVD manufacturer took the strategic decision to move into the young but rapidly expanding sector of workers’ accommodation. Singapore’s industrialisation was heavily reliant on migrant workers and so there was a clear logic when the firm decided, after 27 years, to leave behind a sunset industry and turn itself into a specialised accommodation provider.

The turning point came with the purchase of a business known as Westlite, from Centurion Properties, which owned an existing dormitory offering 5,300 beds in Singapore’s industrial west. Along with the transaction, Summit renamed itself Centurion Corp.

This laid the foundation for Centurion’s specialised accommodation business, catering to workers and students in purpose-built accommodation. Its portfolio has grown to 67,377 beds, with more than 5,200 in purpose-built student accommodation (PBSA) and the rest in purpose-built worker accommodation (PBWA).

The assets are in five countries, with PBWA located in Malaysia and Singapore and PBSA in the UK, US and Australia.

“While these two sets of asset classes cater to different customers, there are similarities,” says CEO Kong Chee Min. “Both student and worker accommodation houses residents who are away from their homes for extended periods of time. Centurion recognises that there can be more vulnerabilities for people living in a foreign city and sees it as part of our responsibility to provide for their physical, social and mental wellbeing.”

As both student housing and worker accommodation is specialised, there are efficiencies the company can leverage in property and community management platforms, systems, and processes, including technology solutions, he says. “Centurion has established – and continues to refine – its management platforms and operating practices, and we are able to extend these efficiencies to our property owners and partners when managing assets under master leases or management contracts,” he says.

Kong sees the potential to exploit these synergies to provide accommodation to a wider group of industries. “We will look into opportunities to expand our portfolio and scope in specialised accommodation to cater to more consumer segments,” he says. “Centurion’s current worker accommodation residents are mainly from the construction, marine and process sectors, and we do see possibilities to expand to industries such as healthcare or services – and perhaps also to working professionals.”

Kong says there are also some properties that may attract both students and professionals to stay together in a mixed community. At one of its US properties, College and Crown, residents already include working professionals.

Centurion’s immediate focus, however, is to grow its student and workers accommodation. In Singapore, Centurion is actively looking for tenders as it continues to explore opportunities to enlarge its Singapore PBWA portfolio capacity. Similarly in Malaysia, the group is in expansion mode. It is already the largest PBWA owner-operator in both countries.

In October 2023, Centurion set the stage for expansion into the Middle East, signing a memorandum of understanding with a UAE state-owned company, KEZAD Communities, to explore development and management of PBWA in the UAE and Gulf Coast Countries.

But Centurion’s CEO says the company continues to monitor the geopolitical situation in the Middle East. Demand for PBWA is similar to Singapore and Malaysia, but the culture, political and legal systems are different.

Kong adds: “We view the UK as a market that would provide us with more immediate growth within the capability of our group. It is a deep market which has many cities home to good universities. The UK market is more mature than Australia, but Australia is an up-and-coming market.”

Australia provided Centurion its entry into student housing when in 2014 it bought RMIT Village in Melbourne and four years later developed its second property in Adelaide. Also in 2014, the Singapore investor bought its first portfolio of four assets in the UK.

In the US, Centurion is looking for further opportunities as it sells down its portfolio of six student housing assets, held in the Centurion US Student Housing Fund, in which it holds a 28.7% stake.

Ho Lip Chin, Centurion’s CIO, says the fund’s five-year term ended in 2022 and, given the challenging market conditions then, it successfully sought investor approval to extend the fund’s term by two years – to the end of 2024.

“We have sold one asset and are in the process of selling the remaining five assets to meet the fund’s end of life,” says Ho. “The US is one country where we want to be – but at an opportune time. The debt cost is just too high and we will wait for the right time and opportunity to go back into the US market.”

Centurion is not averse to trying out new markets and in 2018 spotted an opportunity to enter South Korea. “We know there is a high student population in Korea, and Seoul is known to be one of Asia’s strongest international study destinations, with many renowned universities,” he says.

But PBSA is not an established concept there. “There is on-campus accommodation linked to universities, but we felt we could use our experience in the UK and Australia to kickstart a PBSA sector in Korea.” Centurion bought a hotel at distressed price and converted it to student accommodation.

“Business was good. We attracted many foreign students from Europe and Southeast Asia because of language,” he says, with Centurion’s management speaking English. “At the time of our entry there were opportunities to buy distressed assets and we planned to add more assets into our portfolio. However, this was not the case because of the scale we wanted, and we exited Korea as part of a rationalisation of the group’s asset portfolio to concentrate on those markets where we already have a foothold and are growing.”

Kong has not abandoned ambitions to have a presence in North Asia. “We are open to exploring opportunities which align with the group’s investment objectives and asset-light strategy,” he says.

Centurion has Europe on its watching brief. Currently, however, it has much to do in its existing markets. “We don’t want to spread our resources too thin,” says Kong.

Student housing makes up 25% of Centurion’s total portfolio, but the strategy is to have an equal split between workers and students. In the foreseeable future, says Kong, worker accommodation will grow faster because of opportunities coming out of that sector, given growing cohorts of migrant workers in many countries.

In terms of revenue, after Singapore, the UK PBSA portfolio is the second-largest source of earnings for the group.

Kong says his company want to expand its development capability beyond Singapore and Malaysia and expects to begin developing in the UK where it has, until now, only bought stabilised assets.

Centurion’s parent company, Centurial Global, is focused on property development in North and Southeast Asia. It develops property in all sectors bar student housing, but in an exception will, however, build Centurion’s third PBSA property in Sydney’s Macquarie Park, costing A$132m (€80m).

Kong does not rule out mergers and acquisitions for further growth. Centurion has started to implement a sales-and-leaseback strategy to free up capital. Last December, it sold two dormitories to the Malaysian public sector pension fund, KWAP, for RM227m (€44m).

“We are trying to have an asset-light strategy and we are looking for capital partners. We set up our first fund to hold our US assets. We intend to take this model further,” he says.

“It has always been our intention to package the assets currently held on our balance sheet, and to offer them to investors as a real estate investment trust (REIT). As assets are stabilised, they will go into the REIT and we will continue to manage them.”