Vancouver education company looking to spin off $1.4 billion of student housing
CIBT Education Group announced today it is considering spinning off Global Education City (GEC), its student real estate subsidiary, as a separately listed entity.
The parent company, which is currently listed on the TSX, intends to have GEC listed on a recognized North American stock exchange while also seeking “strategic funding opportunities” around the world.
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Over the past five years, GEC has quickly become a major private provider of student housing options within Metro Vancouver, with its target demographic being mainly international students.
“Over the past year, we have seen a shift in the global political environment in many Asian countries. This has led to an exodus of capital and a lack of available investment opportunities for real estate assets in Canada,” said Toby Chu, chairman and CEO of CIBT, in a statement this week.
CIBT also owns Sprott Shaw College and Sprott Shaw Language College, which educates 11,000 students annually combined.
“We at CIBT believe we are well-positioned to offer a publicly traded platform to many of these investors that are looking for a safe and reliable alternative method to invest in the Canadian student housing sector,” continued Chu.
“Further, we believe the possibility of an additional exchange listing will provide many of these investors with a direct way of accessing this market.”
This possible shift, of course, comes at a time when there has been a significant drop in international students due to COVID-19.
In 2019, there were over 600,000 international students living in Canada — an increase of 13% over the previous year. This includes approximately 160,000 international students in British Columbia.
While there are certainly short-term challenges, CIBT believes long-standing fundamentals, both locally and abroad, will lead to a rebound in domestic and international students after the crisis abides. This includes the historically low rental housing vacancy rates, and the believe “the pandemic will delay plans, but it will likely not permanently change a student’s lifelong plan.”
“It is expected that fewer people will rush into buying properties in light of the current economic situation, which would be expected to mean relatively higher demand for rental apartments. Rental real estate has generally remained relatively strong during recessions,” reads a May 2020 corporate update.
“Our ability to thrive under the most difficult macroeconomic environments proves our business model. Our value proposition of having a high-value rental income stream to support our significant education income while maintaining a diversified pipeline of students from more than 40 countries around the world is allowing CIBT Education Group to continue to operate relatively immune from the adverse economic consequences of the pandemic. We will continue to provide students a safe, clean and healthy environment in which to study and live.”
GEC properties across Metro Vancouver
As of May 2020, the market value of GEC’s portfolio was estimated at about $580 million. The portfolio totals 1.5 million sq. ft. of leasable floor area — over 3,400 student beds in Metro Vancouver — with a development construction budget of nearly $1 billion and a projected exit value of $1.4 billion.
GEC has four student housing properties currently operational, and another seven locations in the region that are proposed, planned, or under construction.
Properties that are currently open include GEC Viva (1311 Howe Street in downtown; 230 beds), GEC Burnaby Heights (438 Gamma Avenue in Burnaby; 84 beds), GEC Granville Suites Hotel (718 Darke Street in downtown; 143 rooms), and the newly completed GEC Pearson (7657 Cambie Street in Vancouver; 300 beds).
Future locations that are currently under construction entail GEC Global Education City Richmond as part of the Atmosphere mixed-use redevelopment at 5411 No. 3 Road, next to SkyTrain’s Lansdowne Station. GEC Richmond will be a 1,100 student beds within two condominium towers, and 80,000 sq. ft. of education space within an office tower. The location’s value upon completion is $252 million.
Construction recently began on GEC King Edward at 431-455 West King Edward Avenue, near SkyTrain’s King Edward Station. The company acquired the approved five-storey secured market rental housing project from a developer to provide about 200 student beds. This project’s value is $64 million when it reaches completion.
Elsewhere in Vancouver, the company has signed a 21-year master lease with a developer for their six-storey secured market rental housing redevelopment at 2153-2199 Kingsway. When open, it will provide approximately 400 student beds.
Five other projects are either being proposed or planned, including GEC Cyber City at 7840 River Road in Richmond, and near SkyTrain’s Aberdeen Station.
This high-profile, 2.3-acre, 330,000-sq-ft project, worth $247 million, on the bank of the Fraser River, will have two office towers for schools and educational institutions and a micro-suite student hotel with about 265 beds.
In Surrey City Centre, the company has proposed GEC Education Mega Centre — a 626-ft-tall, 55-storey education campus at 10240 City Parkway, near SkyTrain’s Surrey Central Station. When complete, it will be one of Metro Vancouver’s tallest skyscrapers, containing 800 beds of student housing, micro suites, and office space for institutions. Its worth is pegged at $364 million.
In Fall 2019, the company’s GEC Oakridge project at 441-475 West 42nd Avenue — next to SkyTrain’s 41st-Avenue-Oakridge Station — reached the rezoning application stage. If approved, the 18-storey tower worth $165 million will have a capacity for 475 student beds.
In June 2020, CIBT announced GEC had acquired two apartment buildings in an undisclosed location in the region. Both concrete buildings are four years old and can accommodate up to 254 students. The deal, establishing GEC’s 11th location in the region, is expected to close this month.