The second site, at Kranji Close, covers 2.21 ha and has a higher gross plot ratio of 3.0, which means some 7,000 beds can be built. Centurion bid $343 million. This tender also drew 10 bids, and closed on June 12.
If Centurion is awarded both sites, it can potentially increase its capacity for purpose-built workers' dormitories by 12,000 beds, equivalent to an expansion of 30% from its current capacity of 39,918 beds.
"The developments would further strengthen the group's market-leading position in Singapore's worker accommodation sector," says DBS Group Research analyst Ng Jia Hui in a July 13 note.
The Edge Singapore has contacted Centurion for more information.
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"While being the highest bidder does not guarantee an award and the evaluation process is expected to take 1-2 months, a successful outcome would be a positive catalyst for Centurion," she adds.
Both sites will come with a relatively long lease of 30 years each. From Ng's perspective, this can help provide a long runway for recurring earnings growth and enhancing earnings visibility.
She estimates that the projects can generate yield on cost between 5.7%-6.2% and deliver a 19%-21% uplift in Ebit (once completed in FY2028-FY2029), supported by favourable demand-supply dynamics in Singapore's worker accommodation market.
"In addition, the new assets could further enhance Centurion's pipeline of stabilised assets for potential future injection into Centurion Accommodation REIT, supporting its capital recycling strategy," says Ng, who has kept her "buy" call and $1.86 target price, which will be revisited if the tender is successful.
