Centurion wins shareholder support for Reit listing plan

The Reit will accelerate the group’s growth and support sustainable capital recycling, says chief executive Kong Chee Min

Mainboard-listed Centurion Corp won overwhelming support at an extraordinary general meeting (EGM) on Wednesday (Sep 10), for its planned listing of Centurion Accommodation Real Estate Investment Trust (Reit) and related transactions.

This includes the divestment of selected assets into the new Reit, Centurion’s role as the sponsor and manager of the trust, and the board’s authorisation to take all the necessary steps to implement the listing.

Approval was also sought for the payment of expenses tied to the transaction.

At the EGM, nearly 100 per cent of the votes cast by shareholders in person or by proxy gave their nod of approval. The shares represented by these votes accounted for 420.7 million shares, while shareholders holding 7,200 shares voted against.

Speaking to the media after the EGM, Centurion chief executive Kong Chee Min said shareholders were “very positive” about the upcoming Reit.

While Centurion has had a “phenomenal” two years, especially when compared to the performance of other asset classes, Kong said the group has a limit to how much further it can grow.

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The upcoming Reit will enable Centurion to expand its assets under management (AUM) even further and hopefully accelerate its growth, he said. “We’ve been growing (our portfolio) since 2011... up S$2.6 billion over a span of 14 years. With the Reit, we hope to shorten that.”

Capital recycling from the Reit will also support a more sustainable growth model, said Kong.

The chief executive acknowledged shareholder concerns raised at the EGM, that divesting Centurion’s top assets to the Reit could leave the group with less attractive ones.

In response, Kong said: “We have 37 operating assets and are putting only 14 (suitable ones) into the Reit.”

The 14 properties include five purpose-built worker accommodation assets in Singapore, eight purpose-built student accommodation assets in Britain and one in Australia.

Another student accommodation property will be added to the portfolio once its acquistion is completed, bringing the portfolio’s value to around S$2.1 billion.

Centurion will still be “heavily invested” in the Reit, while retaining the remaining assets, he said. “I would say in the short and medium-term, yes, there will be a reduction in profitability. But in the longer term, (growth) will be much better and more sustainable, and it will be faster as well.”

The Reit will also not feature Centurion’s Malaysian properties, given emerging market risk, said Kong.

Nonetheless, the country remains a key market with long-term growth potential, he said. The listco also intends to double its bed capacity in Malaysia over the next five years, which would significantly enlarge its AUM.

When asked about the rise in share prices following the Reit announcement, and whether such levels were sustainable, Kong said the rally reflects recognition of the company’s true value, from previously undervalued levels to one that was closer to its fair value.

“For shareholders, staying with Centurion is something positive,” he added, “because then they will be exposed to stable recurring income from the Reit and also Centurion’s growth story (from its expanding portfolio), plus those fees that we’ll be able to derive from managing the Reit.”

To align Centurion with shareholders, Kong said management fees will be taken as a percentage of the Reit’s distributable income, instead of its AUM.

Shares of Centurion closed 1.1 per cent or S$0.02 lower at S$1.76 on Wednesday, before the news.