Optimism over Cogent’s new bet on student housing

By Trinity Chua / The Edge Singapore | September 17, 2017 3:36 PM SGT
(Sept 18): On Sept 7, logistics services company Cogent Holdings announced that it has been awarded a three-year lease tender by the Singapore Land Authority (SLA) to run a student hostel near Holland Village. The property is just 700m from ACS International, a popular local independent secondary school. Shares in Cogent have surged 4.4% since the announcement, closing at 83 cents on Sept 12.
Located at 362 Holland Road, the 24,951 sq ft property comprises two blocks of one-storey buildings with an estimated total gross floor area of 6,280 sq ft. About 60 students can stay there at a time. The lease agreement’s term can be extended for another three years upon request, says Cogent. The group’s indirect subsidiary, Cogent Realty Capital, will manage the property.
When The Edge Singapore went to examine it, the property was vacant and had a blue padlock at its entrance. But it could well be teeming with activity soon. The Holland Village area (pictured below) is popular with international students because of its proximity to a variety of amenities and international schools, such as Tanglin Trust School, Nexus International School and ACS International.
Residents of several terraced houses in the Holland Village area have been taking in international students as part of homestay programmes organised by schools. In fact, one resident says she has hosted at least eight students since last year. Some stayed for a few months while others stayed for up to a year.
“For [schools], I think that there will be increased demand for well-priced international student accommodation as international schools look to recruit overseas students to compensate for the dropping number of expats on the island,” says Rob Burrough, principal of ACS International.
There is little data on the student housing market here as it is very fragmented. Students can opt for private apartments, hostels or homestay programmes. But an operator of a local hostel listing site says hostels in the Holland Village area charge between $800 and $2,000 per student per month.
According to the SLA’s website, Cogent’s subsidiary, Cogent Land Capital, was the highest bidder for the Holland Road hostel with a bid rent of $32,362 per month. Runner-ups were E M Services and Homestead Holland at $27,001 and $12,000 a month, respectively.
This marks the first time Cogent will branch into managing student hostels. The company’s core business is managing warehouses and related logistics infrastructure, though it also manages The Grandstand. Occupying the site of the former Turf Club, The Grandstand comprises two buildings hosting F&B outlets, enrichment and activity centres, and grocers. Within the compound, Cogent also manages The Grandstand Car Mall, among the largest car marts in Singapore.
Now, the company says it may bid for other student hostels as it expands its property management business. “The group will expand its property management capabilities to include the management of hostels by tapping the growing opportunities in meeting the accommodation needs of local and foreign students here in Singapore,” says Benson Tan, CEO of Cogent, in a filing with the Singapore Exchange.
Investments in student accommodation have offered better returns than other real estate classes while remaining recession-proof, says Struan Robertson, global head of investment management at Global Student Accommodation Group, in a Bloomberg interview earlier this year.
Cogent’s warehousing and property management segment made up 43.5% of total revenue for FY2016 ended December at $59.5 million. The company’s other businesses are management services in automotive logistics, container depot and transportation.
This excerpt was derived from a story written by Trinity Chua, which was published in Issue 797 (Sept 18) of The Edge Singapore.