Tailwinds from Robust Affordable Housing Demand and Falling Rates

• Following the divestment of its Sprott Shaw College (SSC) subsidiary for $35 M ($0.52/share) in August 2025, the company has fully transitioned into a pure-play student housing operator. Unlike traditional multifamily, student housing is a specialized asset class, typically offering higher rent per square foot and stronger yields for investors.
• Last month, Morgan Stanley Investment Management (NYSE: MS), and its partner, acquired an eight-property, 6,200-unit U.S. student-housing portfolio for $1.4B, implying a value of $162k per bed, very close to our $165k per bed valuation on GEC’s operating projects, as reported in our August 2025 report. Rental assets provide inflation-protected income with relatively low volatility, making them highly attractive to pension funds and institutional investors.

• FY2025 (ended August 2025) revenue for GEC’s flagship rental business declined 1% YoY, driven by an asset sale, but exceeded our estimate by 5%. Gross margins increased 3 pp to 59%, in line with our forecast.
• Recorded a $35M gain from the sale of SSC, and a $17M write-down on properties (5% of total value). Excluding the unexpected write-down, net income was $21M ($0.31/share) vs. our estimate of $0.37/share.
• Several Canadian REITs have taken property write-downs this year due to lower market rents and comparable property sales. We believe current valuations understate intrinsic value, as rents and property values have likely bottomed and should begin recovering in 2026, supported by falling rates, slower supply growth, and robust demand for affordable housing. As a result, GEC is likely to report substantial property valuation gains next year.
• Last month, Canada signaled a shift toward quality over quantity in international education, exempting master’s and PhD students at public institutions from study permit caps. This shift is positive for GEC, supporting demand for its Vancouver student housing projects amid prior uncertainty from tighter immigration rules.
• In another positive development, GEC made progress on the Richmond Atmosphere project, for which it had provided a $60M deposit. The project stalled in 2022 after the lender ceased funding, leading GEC to write off the investment. Last month, the BC Court of Appeal ruled in GEC’s favor, strengthening its legal position, and creating the possibility of recovering part or all of the $60M. We are not including potential upside from this for conservatism.
• With vacancies for affordable units in Vancouver (<$1,750/month) remaining below 1%, we maintain a positive outlook on the city’s student housing market.
• Relative to REITs, GEC is trading at 7x forward revenue (sector: 11x), and 14x forward EBITDA (sector: 19x), a 31% discount on average.

Price and Volume (1-year)

* Global Education Communities has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions. All figures in C$ unless otherwise specified. 

Core Business Strategy

Source: Company

GEC operates B.C.’s largest off campus student housing platform, comprising 14 buildings: eight in operation and six in development

Per the latest audited financial statements, these projects were appraised at $306M as of August 2025

The company also owns two language schools: Sprott Shaw Language College (SSLC) and Vancouver International College (VIC

Operating Projects

Eight operating buildings across six projects totalling 1,200+ beds

GEC holds minority interests and acts as project operator across all properties

Source: Company

Potential to generate $14M in NOI, or $11k/bed in NOI per year

Per the latest audited financial statements, these projects were appraised at $254M as of August 2025

Source: Company /FRC

Developing six buildings across four projects, totaling 2,988 beds, and $45M in projected NOI, or $15k/bed per year

 

Using an average cap rate of 4%, we value these projects at $1.12B, upon completion 

Management aims to complete these projects by 2027-2030; although these timelines are reasonable, we note that real estate development projects are often subject to permitting/financing delays

Financials

Revenue was down 18% YoY, missing our estimate by 3%, driven by softer education revenue

Revenue from the flagship rental business fell 1% YoY due to an asset sale, yet exceeded our estimate by 5%

Gross margins rose 3 pp to 59%, exactly in line with our estimate

EBITDA was down 23% YoY, missing our estimate by 25%, reflecting softer revenue and higher G&A expenses

Recorded a $35M gain from the sale of SSC, and a $17M write-down on properties (5% of total value)

 Excluding the unexpected write-down, net income was $21M or $0.31/share vs our estimate of $0.37/share

Source: FRC / Company

Several major Canadian REITs have recorded property write-downs this year. For GEC, the adjustment appears driven by lower market rents , and auditor reliance on comparable regional land sales. We believe c urrent valuations likely understate intrinsic value due to weak pre-sales and high developer financing costs. With rents and property values expected to recover in 2026, we believe GEC is positioned to report significant gains , and valuations should rise further as development projects are completed.

Debt-to-capital is currently above the sector average (56% vs. 46%), but this is expected to improve once development projects are completed

Source: FRC / Company

FRC Projections and Valuation

Recent M&A Transactions

Source: FRC / Various

Rental assets offer inflation-protected income, with low volatility, making them attractive to pension funds and institutions

Major institutional investors are spending billions to acquire large portfolios of residential rental properties 

These transactions indicate Price-to-Revenue multiples in a tight range of 12.5x–14.4x

Although student housing is classified separately, we use residential /multi-family property data above as a proxy because it behaves similarly in terms of occupancy dynamics and rental cash flows .

Sector Multiples and Ratios

Source : S&P Capital IQ, FRC

GEC’s EV/R and EV/EBITDA exceed that of education management peers but remain below real estate peers

Relative to REITs, GEC is trading at 7x forward revenue (sector: 11x) and 14x forward EBITDA (sector: 19x), a 31% discount on average

Source : FRC

We are lowering our EPS estimates due to higher-than-anticipated G&A expenses in FY2025

Source : FRC

As a result, our fair value estimate declined from $1.22 to $1.09/share

We are reiterating our BUY rating, and adjusting our fair value estimate from $1.22 to $1.09/share. Despite property write-downs and a modest revenue decline in FY2025, margins improved, and market fundamentals indicate property values are bottoming with potential upside in 2026. Trading at a significant discount to REIT peers, we believe GEC offers an attractive entry point into Vancouver’s constrained affordable rental market, with additional upside potential from possible legal recoveries.

Risks

We believe the company is exposed to the following risks:

• Real estate development and financing
• Potential for delays in project development and construction
• Cost overruns
• Permitting
• Profitability is highly dependent on the health of the rental market in Vancouver
• Vacancy and rental rate fluctuations
• Leveraged balance sheet

Maintaining our risk rating of 3 (Average)

APPENDIX