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International students flocking to this company's education real estate model

Isabella Zavarise Isabella Zavarise, The Market Herald Canada
2 Comments| January 27, 2021

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(Click image to play video)

While many businesses have struggled during the pandemic, there have been some that have prospered, and even increased their business. Vancouver-based, CIBT Education Group Inc. (MBA) (TSX.MBA, OTCQX: MBAIF, Forum) is one of those companies. It's been around since 1994 and is one of the largest education and student housing investment companies in Canada.

CIBT owns Global Education City Holdings, which is focused on education-related real estate, like student-centric housing. Global Holdings provides accommodation services to 72 schools in Metro Vancouver. The total portfolio and development budget under the GEC brand exceeds CDN$1.5 billion dollars.

In this video podcast, Stockhouse Media's Isabella Zavarise spoke with Toby Chu, the Chairman and CEO of CIBT Education Group to discuss the company's latest news and upcoming projects.


SH: As I just mentioned, your company has seen minor impacts from the pandemics. How have you managed to do this during the pandemic?

TC:Well, the education business is traditionally a counter-cyclical to the downturn of the economy. So, when people are not earning, they start learning. So that's one of the good things about the education side of the business. Real estate is another larger section of our business. The real estate rental business is also less prone to economic downturns when people do not buy properties during the uncertain times they rent. So, both are beneficial to us. Although our 2020 revenue was slightly down by 11% over the pandemic period, it was an extraordinary period. Businesses such as the hospitality and restaurant business were impacted significantly. So, we're fortunate that our revenue was only down 11%, but our students continue to stay in Canada. Quite often, when people ask me, when the borders were shut down what happened to international students? Yes, the international students, was unable to enter the country, bur we have to look at over 630,000 international students already in-country, already living in Canada. Before the pandemic, over 130,000 are living in Vancouver. So, during the past 10, 12 months, we have been very busy servicing those students already in-country. So that's why the impact on us was not significant.

SH: One of the things C-I-B-T focuses on is a student-centric real estate business. What does that mean?

TC: Basically, as an international student or as a student from out-of-town, they don't want to come here and open up a utility account, open up a wifi internet account, buy furniture and all that. Because by the time they graduate, they will throw all those away. We provide fully furnished rental apartments, using smart furniture which is slightly higher density, but the rent becomes affordable. So that is why we use smart furniture to making sure that the unit is not huge. It's comfortable. Our buildings are mostly new, and the rent is less than a condo. We also provide all the amenities including wifi, cables, month-to-month contracts. You don't have to commit to a full year contract, weekly housekeeping, parents love that, kitchen utensils, and all the bathroom and kitchen supplies. Students do not need to worry about buying all those little things. They can move in with a pair of luggage. Our emphasis is clean, safe, and convenient. So, the student can walk in and ready to stay there for a month, ten months or one year. And they don't have to discard any furniture when they finish school; they also don't need to worry about opening an internet account or apply for a B.C Hydro utility account. All those are very helpful. We also expanded to the corporate housing sector which is similar to the students' needs because Vancouver earned the nicked name Silicon Valley North. Companies such as Amazon, Facebook, Yahoo, Hootsuite all expanded to Vancouver. They send a lot of U.S employees to Vancouver. And a lot of these people arrived, and they are not going to buy a house the next day or rent a long-term condo until things settle down. So we provide housing for them. We were providing student-centric rental apartments. Now we expanded our offering to corporate housing.

SH: What are you offering to attract students to your business?

TC: I guess some of the biggest concerns for parents or students alike, whether from across the country or from around the world, three major items, clean, safe, and convenient.

Clean: We provide weekly housekeeping less frequently than a hotel. Hotels have daily housekeeping. So, we provide weekly housekeeping to keep the place clean

Safe: We have video surveillance cameras at all the buildings, public access, and public entrances. People getting in or out of the building need to sign in and out. We also have security at some of the sites for walkthrough security. We also have housekeepers at every building to be readily available.

Convenient: Most of our locations are within a hundred meters to 200 meters from the subway station or SkyTrain station. So, the distance walking from a place to live and the commute route would be minimal. That is another service we provide, and most of our properties are near subway stations.

SH: Last week you released your first quarter financials. What are some highlights?

TC: 2020 has been interesting and obviously quite a bit of impact because of COVID 19. So last week's release was covering our Q1 2021. It is important to note that our Q1 2021 covers September to November of 2020. Our year ends on August 31st.

Comparing that to the prior year was September 1st to November 30th, 2019, which is pre-COVID time. We are not exactly comparing Apple to Apple because of the period amidst the COVID, which is pre-COVID. Having said that, our total revenue was slightly impacted by the pandemic by about 16%, our net income increased by 288% to $1.09 million. Our EBITDA also increased by 24%, from $4.08 million to over $5 million within the three months. Our earnings per share increased by 1 cent per share for Q1, factoring in all the negative impacts as of September to November of last year, when we were at the peak of the COVID-19. Our assets increased by 12% to over half of a billion dollars compared to the quarter before at about $450 million.

All in all, we are making headway, we are moving forward positively. Hopefully, this COVID will go away soon. We can then go back to normal operating status compared to any other year.

SH: Vancouver has become a sought-out destination for international students.Obviously, the pandemic has impacted this with border closures and travel restrictions. What are you anticipating this year when it comes to international students needing your services?

TC: Canada re-opened its borders for international students on October 20th, 2020, which is great news. It was shut down from March to October 20th. We are seeing a steady return of international students registered for our March to Summer sessions of 2021. I think we are heading in the right direction. Unlike the restaurant business or hospitality, or tourism industry, people who did not spend yesterday can not double-spend or double eat tomorrow.

Education business is a one to six-year undertaking. If you are taking a bachelor's degree, it is a four-year undertaking, a college diploma, be two-year, and the Master-Degree will be a six-year undertaking. It is unlikely a student would say, Hey, pandemic hit. I gave up my life and turned into a couch potato. Many of them are coming back, and international students are returning for their education. Also affects our real estate rental business because when more students are coming back, our properties will always be full.

Our tenant base also made an interesting turn during the COVID. Before COVID, we had about 82% of our tenants at GEC properties who were international students. During COVID, we switched to 62% domestic Canadian students because some international students went home. The Canadian students from across the country still need a place to live. We have been keeping steady that way. Also, Canadian universities shut down all of their dormitories across the country, and they're re-opening some of them. We are seeing more supplies coming back into the system. However, international students are also coming back quite rapidly. I think the remaining of the year will be a steady recovery, as long as the vaccines are coming and possibly reducing the impacts.

SH: What projects are you working on?

TC: We've been quite busy. Some of the big ones are from the real estate division. Global Education City has five projects under development, totalling about $710 million. The biggest one is the education mega center located in downtown Surrey, about 10 meters from the Surrey Central SkyTrain station and about 150 meters from Simon Fraser University Surrey campus. After it's built, Education Mega Center will be a 49 storey superstructure with the capacity to house about five to seven schools on the lower floors and accommodates up to 800+ students from the seventh to the 49th floor. A big project for us. This is a $270 million project and will become one of the tallest buildings in British Columbia at the top five chart, depending on what else will come up. Last night, we received approval from the City of Vancouver. The city council has approved our GEC Oakbridge rental building construction.

We received approvals on the public readings one, two, three, and four. Now we are proceeding toward Development Permit and Building Permit. The news-release has been scheduled for release in the next couple of minutes. And that will also keep us busy. GEC Oakridge would house close to about 300+ occupants and generate several million dollars of rental income after it's built. So, these are the projects we'll keep working on, and then there'll be some more acquisitions during the year and continue to build out what we have in addition to our 16 buildings and 11 projects.

SH: In 2020, The Financial Times named CIBT as one of the fastest growing businesses in the Americas. How can you continue this growth?

TC: I think our school business will see steady growth while the pandemic tailwind still lingers. But our real estate business will continue its rapid growth by acquiring new buildings or transforming an existing building into a student rental housing facility. For example, last October, amid COVID-19 shutdowns, we acquired GEC Marine Gateway located at a corner off Cambie Street and Marine Drive. And that's a turnaround immediately. We had 75 to 80% occupancy; now, it is almost a hundred percent full. So that will again increase our rental income for 2021 as more buildings are coming online as more projects are being built over a coming couple of years. We think our rental income will continue to increase and our development fees will continue to grow.

SH: Anything else you'd like to add, or that you think is important?

TC: I guess overall, I'm just looking at the market, the public market and the economy. I think Vancouver's real estate market, according to the most recent reports published by the Greater Vancouver Real Estate Board, between September to December 2020, some of the most substantial growth and broke records in recent history. So, our business model goes back to the basics of brick and mortar and value propositions at the time of economic uncertainties. Our education platform feeds our students through our rental buildings. So, we sort of like feeding ourselves with our customers, which creates tangible financial results. We add assets to our balance sheets. We increase our income. As Vancouver's real estate market continues to grow; I think it'll create substantial benefits to our shareholders as the share value goes up. Our assets and our or book value per share also have been increasing. It was 69 cents in the last quarter already increased to 71 cents in this most recent quarter, right through the pandemic period. So, I think this is a pretty good show to prove that our business is steady. It's not like some technology company with overnight success. It is steady. It is growing. Our market is quite counter-cyclical, beneficial during the bad-time that we're able to stay low and also continue to prosper over the next coming years

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FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.

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great story and an excellent interview
January 29, 2021

It sound like everything is going up, other than the stock price lol.
January 27, 2021

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