Since Centurion Accommodation’s IPO, the sponsor’s share price (SGX:OU8) has trended down 10% while the REIT (SGX: 8C8U) has exhibited gains of over 12%. I will seek to understand what caused these price movements.
The proposed Initial Portfolio for the Centurion Accommodation Real Estate Investment Trust (REIT) IPO is defined by a selection strategy focused on assets that demonstrate robust operational health. The occupancy rates strongly suggest that the chosen properties represent some of the highest-performing assets within the broader Sponsor Group’s portfolio. This selective curation provides a compelling operational foundation for the new REIT, particularly when analyzing the core segments of Purpose-Built Worker Accommodation (PBWA) and Purpose-Built Student Accommodation (PBSA).
You might also like
Superior Performance in Purpose-Built Worker Accommodation
The five Singapore PBWA assets included in the Initial Portfolio are distinguished by their exceptional occupancy rates, significantly surpassing the Sponsor Group’s overall performance in the segment. In the financial year 2024 (FY 2024), the Sponsor Group’s overall PBWA portfolio achieved a financial occupancy of 94.0%. In stark contrast, the Initial Portfolio’s Singapore PBWA assets, when excluding the newly operational Westlite Ubi, delivered an average occupancy rate of 99.2%. This near-full capacity performance underscores the strategic value of the selected assets.
Further granular data confirms this trend, with assets like Westlite Woodlands (99.8%) and Westlite Juniper (99.9%) demonstrating occupancies virtually at capacity during the three months ending 31 March 2025. This success is structurally supported by favorable dynamics in the Singapore market, including high demand for foreign labor juxtaposed with carefully controlled supply. The PBWA assets forming the Initial Portfolio have maintained a strong track record, averaging 97.9% occupancy between FY 2022 and FY 2024 (excluding Westlite Ubi), validating their selection as prime assets for the REIT. The only noted exception is Westlite Ubi, which reported 69.8% occupancy due to its recent commencement of operations in December 2024 and being in the standard initial ramp-up phase.
High Occupancy in Purpose-Built Student Accommodation
A similar pattern of superior selection is evident within the PBSA segment. The PBSA assets designated for the Initial Portfolio achieved an average occupancy rate of 98.2% in FY 2024. This figure slightly outpaced the Sponsor Group’s overall PBSA portfolio financial occupancy, which also demonstrated strong growth by rising to 97.0% for the same period.
This high performance reflects the strong market fundamentals in the UK and Australia, where robust demand for student housing often outstrips available supply. The divestiture assets have demonstrated historical stability, averaging 94.1% occupancy over the three-year period from FY 2022 to FY 2024 (excluding the developmental asset, Epiisod Macquarie Park). The consistency and high current occupancy confirm the desirability of these specific properties, making them reliable income contributors to the proposed REIT.
Last Thoughts
Overall, this IPO is beneficial for both the sponsor and the REIT. Spinning off allows the REIT to raise cash for higher and better use through asset enhancement initiatives. This allows the REIT to further expand and fully focus on its own operations. I was honoured to be able to speak to the REIT CEO before the IPO and he mentioned this initiative is for the best of both companies. With this spin off, the sponsor gets to expand into other areas like China to experiment and grow its operations. Furthermore, after testing and proving the feasibility of new assets, the REIT can leverage on its ROFR (Right of first refusal) to buy these assets to grow its portfolio.
Moreover, as analyzed previously, the REIT has a strong incentive-based management fee that is lower than competitors in the region as they charge a percentage of property value. This ensures investors that REIT managers are aligned with providing the best for the portfolio. With that being said, the Sponsor now also possesses strong growth potential with new cash raised and looking to enter the Chinese market.
For now, it seems the market is pricing in the REIT’s “better assets” and foreseeable dividends in the next 2 years. The Sponsor had a strong rally for the past year; this spin off may have dampened some optimism. However, we don’t see a material impact to the Sponsor’s operations, in fact, this is a new opportunity for growth.
If you’re looking for more stock ideas, Alvin shares how he finds the best stocks to invest in to grow our Dr Wealth portfolio. Learn more here.
