Paramount buys 66% of REAL for RM183m
> Group to dispose of education assets worth between RM150m and RM200m to REIT
KUALA LUMPUR: Property and education player Paramount Corp Bhd, which plans to dispose of education assets worth between RM150 million and RM200 million to a real estate investment trust (REIT), yesterday bought a controlling stake in K-12 education group REAL Education Group for RM183 million cash.
Paramount previously said it was exploring the option of selling its education assets to a private REIT, as part of its asset-light strategy.
“We decided to pursue that (the disposal plan) and if (it is) concluded, the proceeds will be used to fund our expansion and repay our debts,” Paramount group CEO Jeffrey Chew said after the group’s signing ceremony with REAL.
“It (the asset to be disposed of) has 3,200 students with a 12-acre land in a very good location. In a way, we are looking at finalising the numbers (asset valuation). Roughly, our valuation for the property is RM150 million to RM200 million,” he added.
Paramount’s education assets include the Sri KDU Schools, KDU College Petaling Jaya and KDU University College with campuses in Glenmarie, Shah Alam and Penang.
Paramount acquired a 66% stake in REAL from Character First Sdn Bhd for RM183 million cash, thus emerging as one of the largest full-spectrum education services providers in the country.
Chew said the investment will allow the group to penetrate the kindergarten, primary and secondary (K-12) education segment.
“We are very excited about the acquisition and the K-12 segment, which is very resilient and highly profitable,” he added.
Chew said the acquisition is expected to provide an additional 10% to the group’s recurring income. The education business contributes about 30% to its turnover currently.
The transaction is expected to be completed within three months and will be financed with internally generated funds and bank borrowings.
Upon completion of the acquisition, Character First will retain the remaining 34% stake in REAL.
Chew said the acquisition is based on REAL’s 30-year proven track record, 18,000-student population, as well as its well-run group and highly experienced management team.
“The primary and secondary school segment is an important component of Paramount Education — we can either choose to grow organically or we can achieve scale efficiently by investing in the right partner. REAL offers us the opportunity to do the latter; it is a strong K-12 brand that complements our existing offerings.
“With its instant access to an additional 18,000 students, the investment allows us to accelerate the growth plans for Paramount’s education division, establish a strong leadership position in the K-12 sector, and concurrently build a strong base of recurring income for the Paramount group,” he noted.
Established in 1985, REAL’s key brands include REAL Kids, REAL Schools and Cambridge English for Life. To date, it has 30 REAL Kids centres, six international and private schools in three campuses, and 60 Cambridge centres.
On property, Chew said he expects the industry to perform better than last year, given the improved economic fundamentals due to the recovery in oil and crude palm oil prices.
This year, he said, the group intends to launch property projects worth RM600 million, more than those launched in 2016.
“We are quite positive on the property side this year. Therefore, we will launch more (projects) than last year. In the first nine months of 2016, we held back some of the launches due to the slow market.
“We closed over RM400 million (sales) last year, and the previous year was also about the same. I think this year we expect the sales to be within RM400 million to RM600 million,” he added.