Following the successful spin-off of Centurion Accommodation REIT (CAREIT), Centurion Corporation is now focusing on its next phase of growth by adopting an asset-light approach, generating recurring income, and remaining a growth company with a focus on living accommodation properties.

The REIT will generate higher management fees and recurring net income for the group, which is where the next phase of growth lies, says CEO Kong Chee Min.

“We retain a sizeable interest in the REIT. So that would actually be recurring income for us,” he shares with The Edge Singapore. Following the listing of CAREIT on Sept 25, Centurion retains a 42.8% sponsor stake in the REIT. Through the REIT, the group will receive recurring income and fees, which are paid based on the percentage of its distributable income, said Kong after the group’s extraordinary general meeting (EGM) to decide on the REIT spin-off on Sept 10.

Centurion is also exploring new markets and asset classes to expand its business.

Venturing into new markets

Kong shares that the team is venturing into the Middle East, where it currently has no presence. The group is also looking to expand its build-to-rent (BTR) accommodation portfolio, which currently accounts for 0.6% of its portfolio as at the end of June. Centurion has one operating asset in Xiamen, China, with a capacity of around 400 apartments. It entered the asset class in September 2024 through a joint venture with Xiamen City Home Apartment Management Co (City Home).

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In addition, the group is exploring the prospect of key worker accommodations for skilled workers and professionals in markets such as Australia and the UK. 

At the same time, Centurion will continue to explore opportunities for expansion in student accommodation and co-living properties.

The key worker accommodations will fall under a different brand from Centurion’s existing Westlite brand for purpose-built workers’ accommodations (PBWAs) and are seen as a “natural extension” to the company’s strategy, says Kong.

He adds that it has always been the company’s “interest” to invest in that segment. In September 2012, Centurion announced that it had acquired four adjacent plots of land totalling 4,434 sqm to develop an accommodation property in Port Hedland, in Western Australia. The land was acquired for A$4.8 million to build accommodation for workers and business executives in the region’s mining industry.

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However, plans for the project were shelved as the group focused on other expansion plans. “We wanted to focus, given that we had expansion plans in many areas since then till now,” says Kong.

Since the reverse takeover (RTO) in 2011, Centurion has grown from a niche accommodation operator and provider with an initial portfolio of 5,300 beds. Today, the company manages around 70,000 beds.

Expanding into different asset segments

With most of the mature assets now in the REIT, Centurion can look to expand into different asset segments, says Kong.

Following the spin-off, Centurion still holds around 30 assets on its books, comprising a mix of longer- and shorter-term PBWA properties. These include Centurion’s most recent land acquisition in London, intended for a 225-bed purpose-built student accommodation (PBSA) and six PBWA assets under Johor-based dormitory operator Harum Megah, acquired on Sept 2. 

Short-term assets refer to quick build dormitories (QBDs) in Singapore, which are on three-plus-one-plus-two-year leases, whereas longer-term assets refer to purpose-built dormitories with land tenures of 20 to 30 years, such as ASPRI-Westlite Papan PBWA. Both contribute recurring income, Kong explains. Centurion’s PBSAs are on long leasehold or freehold land. 

The company believes the QBD leases will be extended further, given the major shortage of workers’ accommodations in Singapore.

Centurion’s Malaysian portfolio of PBWAs and properties in Hong Kong and Xiamen, which weren’t seeded in the REIT, will be retained for recurring operating income.

Pipeline of assets

As the REIT’s sponsor, Centurion will continue curating a pipeline of PBSAs and PBWAs.

“We have a pipeline of assets that will go into the REIT, like the one in Australia, Dwell Village Melbourne City. That asset hasn’t been included in the REIT because it’s undergoing major intensification. Attached to that property is a car park that we are developing into student accommodation,” says Kong. “Once that develops, the entire premises will go into the REIT.”

Other assets in the pipeline include another piece of land on MacKenzie Road, a stone’s throw from RMIT University, to be developed under its Epiisod PBSA brand; the newly-acquired London property, also under Epiisod; and two pieces of land in Perth under Centurion Properties. The land in Perth is owned equally by Centurion Corporation’s controlling shareholders, executive director and joint chairman David Loh, and non-executive director and joint chairman Han Seng Juan. In total, about 2,200 PBSA beds will be incorporated into the REIT upon completion, Kong confirms. 

When asked if the REIT will acquire its own assets or rely on the sponsor for a steady pipeline, Kong shares that it does not make sense for the REIT to acquire assets from existing markets due to tight yields and a lack of suitable properties, especially in Australia. However, the REIT may consider exploring acquisitions in the UK, given the more mature PBSA market and higher rental rates in cities like London.

He adds that the sponsor’s role is not to develop assets for the REIT, but to focus on increasing its assets under management (AUM).

The group also intends to remain focused on the living accommodation niche that it is in, such as students’ and workers’ accommodations, where it can add value. 

Looking at steady growth

Shares in Centurion have surged this year, hitting a record of $1.82 in August. Year to date, shares in the company are up 52.08% to $1.46 from 96 cents on Jan 2, reflecting investor confidence in its growth story and REIT spin-off.

Moving forward, shareholders have little reason for concern, as the company looks to strengthen its position within its living accommodation segment. 

“We will remain focused on assets [such as student and workers’ accommodation] that we can add value to,” says Kong. 

He adds that the group is evaluating the entry into certain other relevant asset classes beyond PBSAs and PBWAs. With this move, there is little cause for Centurion’s shareholders to worry that the company will remain stagnant without the assets it has invested in the REIT. “In fact, [our shareholders] should be thinking of how big Centurion will grow [moving forward],” says Kong.

That said, he acknowledged that rental rates will moderate in the near future, tapering off from the spikes seen in the past two years, as the Ministry of Manpower (MOM) has stepped in to regulate and increase the temporary supply of accommodations.

However, when demand eases and when some of these temporary dormitories disappear, Centurion will still be in a good place, Kong adds. “But we do not actually expect — and I told our investors — that they shouldn’t expect a constant 30% increase in rent… It’s just not reasonable.”

“Ultimately, when [our investors] understand it, they understand it… What we are looking at is steady growth. It’s not that rents may not surge again, but it’s something we won’t anticipate,” he adds.

On its peers entering the workers’ dormitories segment, Kong isn’t too worried. For one, the newly listed Soon Hock Enterprise is also looking to generate income through operating workers’ dormitories. However, unlike Centurion’s PBWAs, Soon Hock’s are factory converted dormitories, which are “quite common” in Singapore due to the shortage of workers’ accommodations.

To be sure, Kong believes an increase in supply is good, especially for small- and medium-sized enterprises (SMEs), as the acute shortage may have an impact on their businesses. “They need workers, but basically, if there is no accommodation, they can’t bring workers into Singapore. Therefore, I think it’s healthy for the industry.”

Having navigated the boom and bust cycles of the construction industry, Kong is confident that Centurion will emerge as the leader. After all, the company has been through these cycles, having already operated workers’ dormitories for 14 to 15 years. “There are up cycles and down cycles. When there’s a down cycle, you will see that this business — which is regulated by the government — will let the temporary dormitories expire and they will take back the piece of land.”

In the current shortage, the government is allowing such dormitories to extend their leases, but this is, Kong stresses, a temporary solution.

For Centurion, which has permanent workers’ accommodations and is considered the best of its kind, the company is unlikely to be badly affected by any lowered demand.

“In fact, we are well-positioned to be the last man standing. So a lot of the accommodations that are not so conducive, like factory converted dormitories (FCDs), which have three-year licences, their licences will expire,” says Kong. While he does not see FCDs being phased out due to their more conducive locations compared to PBWAs, many of them will likely go if demand tapers off.

Kong is also confident in the demand for PBSAs, given that the new tightened visa rules in Australia and the UK mainly affect lower-ranking universities. “The assets we’re in, in the UK, are in the Russell group of universities, which means we’ll hardly be impacted,” he says.

While Centurion may see impact from students in China given that the country’s economic situation is not doing that well and would probably choose locations closer to home, the group mitigates this by having a mix of domestic students within its PBSAs. To be sure, the group’s UK portfolio has achieved close to full occupancy while its Australian PBSAs are “doing quite well” despite the cap.

Regarding the REIT, Kong urges investors to view it as a way to generate steady, recurring fees via property management, as opposed to divesting its assets. Funds derived from the REIT will also support expansion in Malaysia and new markets such as Hong Kong and new asset classes such as BTR and key worker accommodation.