Nearly a decade after entering the student housing market in the UK in 2015, Singaporean real estate company Far East Orchard O10 continues to see massive potential for growth.
In April, it announced that it had purchased a 49% stake in Homes for Students, a purpose-built student accommodation (PBSA) operator based in the country. Last month, the company also announced the establishment of its first private FE UK Student Accommodation Development Fund.
Homes for Students manages over 40,000 beds in over 50 university towns and cities in the UK and Ireland. It is considered the largest independent PBSA operator in the UK. “With this acquisition, we now have capabilities across investment, asset management and operations,” says Far East Orchard group CEO Alan Tang.
Tang is bullish about the PBSA market’s prospects, given the persistent and growing gap between supply and demand. “According to Knight Frank’s research, from 2012 to now, the UK has added only about 258,000 student beds even as its student population grew by about 470,000. Studies show a current shortfall of about 580,000 beds across the UK,” he explains.
Moreover, the Universities and Colleges Admissions Service estimates there could be up to a million higher education students in the UK by 2030, nearly a quarter million more than today. “This higher demand and limited supply bodes well for companies like ours, which is why we are very positive about our opportunities in the market.”
Tang adds that Far East Orchard’s stake in Homes for Students, which it can increase if it meets specific financial targets, is in line with its business strategy. “Some people still think of us as a property developer, but we’ve restructured and transformed to focus on lodging, specifically hospitality and PBSA. That’s our differentiating factor.”
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“With so many companies in the real estate sector, we need to find our space and play to our strengths. By concentrating on hospitality and student housing, we can also more easily hedge against inflation by adjusting our rates. We can change our rates much more quickly, especially in hospitality, than if we were renting offices to corporations.”
Becoming a leader in lodging
The group is close to achieving its goals, set out in its Far East Orchard 25 strategy launched in 2021, of having 25,000 hospitality rooms and 5,000 PBSA beds by 2025. “We’ve grown both portfolios through strategic partnerships, hotel management agreements and selective acquisitions to build a lodging platform that delivers growth and sustainable, recurring income.”
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In student housing, it owns and manages about 3,700 beds in sites in Brighton, Bristol, Leeds, Liverpool, Newcastle upon Tyne, Sheffield and Southampton, and has another 1,000 beds in the pipeline in Bristol and Glasgow. It also recently established its first private fund in Singapore to invest in PBSA development opportunities in the UK with a first close of GBP70 million ($120 million), out of the target aggregate commitment of GBP100 million.
“With Homes for Students, we are looking at another 40,000 to 50,000 beds. It has also started to branch out into the build- to-rent and co-living sectors, which we could scale up in the future. Besides the UK, other PBSA markets worth playing for include the US, Australia and Europe. There is a lot of room for growth.”
Tang adds that this strategic shift will help to bolster the Far East Orchard’s income streams. “Moving into the fee-based investment management business is a natural progression to leverage our investment and asset management capabilities in the PBSA business in the UK. It allows the group to grow its recurring income stream as it steers towards an asset-light business model, ultimately reducing its balance sheet exposure and delivering greater sustainable value to shareholders.”
Far East Hospitality, Far East Orchard’s 70:30 joint venture with The Straits Trading Company, owns over 10 hospitality assets and manages over 100 others in Australia, Austria, Denmark, Germany, Hungary, Japan, Malaysia, New Zealand, Singapore and Switzerland. These contain more than 16,500 hospitality rooms in total.
“We have a niche in the mid-market segment in this field. We don’t go ultra-luxe or luxury but keep our offerings affordable, which makes us attractive in the current high-cost environment. At the same time, we give value-added services. We have to work hard at managing our costs, but this is a very solid business model and pillar for us,” Tang says.
He highlights the firm’s success in penetrating the Japanese market in the past few years. “We have expanded our footprint by signing third-party management agreements. By going asset-light, which we are pursuing in hospitality and PBSA, we can grow faster while minimising our balance sheet exposure in Japan and other countries too.”
Strategies for business longevity
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As Far East Orchard looks to 2025 and beyond, its board and senior management are united in their vision for the firm. Tang recalls: “I joined the business in 2020, shortly before the Covid-19 pandemic hit. Despite that, I managed to gather the senior management together. I believe it is very important to align the company so that everybody is on the same page.”
“We agreed that we want to establish Far East Orchard as an enduring Singapore real estate enterprise. With that objective, our mission has been to redefine Far East Orchard as a lodging platform leader with a balanced and diversified portfolio anchored on hospitality and student accommodation. This clarity has enabled us to know what we need to do.”
“As Far East Orchard strengthens its position in hospitality and student housing, I am guided by my belief in stewardship and servant leadership, rooted in my Christian faith. Stewardship means responsibly managing company capital, nurturing our staff, and valuing natural resources, which aligns with our strategic vision to enhance returns, support growth, and ensure the long-term success of Far East Orchard.”
Under his leadership, Far East Orchard has implemented an annual strategic review to check that it is on track. “This is essentially an intensive and disciplined process where we go through our entire portfolio of assets, across hospitality and PBSA, to make sure that we are doing the best we can with each of them.”
“We evaluate their lifecycle and assess how we can improve the performance of each asset; for example, through capital expenditure. We plan how to enhance its performance, until it reaches the point where it may need to be recycled. This is our diligent and methodical approach to recycling capital and planning ahead.”
“These reviews also ensure that we time the disposal of assets correctly. We don’t want to be stuck with capital without opportunity or have to entertain the possibility of a fire sale. With the reviews, we can identify assets that we may need to dispose of and have time to test the market to see if it is right for an exit and if we would be able to reinvest fairly quickly.”
Tang emphasises that recycling capital enables it to switch to assets with better yields to benefit shareholders and set the company up for further growth. “With our vision as a guide, even if the environment changes and we must re-strategise, we know what to work towards. We’re just getting started and we plan to be around for a long time.”
About Far East Orchard
Far East Orchard is a real estate company with a lodging platform that aims to achieve sustainable and recurring income through a diversified and balanced portfolio. Established in 1967, Far East Orchard has a track record in real estate development, investment and management across residential, commercial, hospitality and Purpose-Built Student Accommodation (PBSA) properties in Australia, Japan, Malaysia, Singapore and the UK. Listed on the mainboard of the Singapore Exchange S68 , Far East Orchard is also a member of Far East Organization, Singapore’s largest private property developer. The company’s website is www.fareastorchard.com.sg.
About kopi-C: The Company Brew
kopi-C is a regular column by SGX Research in collaboration with Beansprout (https://growbeansprout.com), a MAS- licensed investment advisory platform, that features C-level executives of leading companies listed on the Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.
