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CIBT Group Provides Answers to Frequently Asked COVID-19 Related Questions

May 26, 2020

Vancouver, BC, May 26th, 2020 – CIBT Education Group Inc. (TSX: MBA, OTCQX International: MBAIF) (“CIBT” or the “Company”) provides the following answers to questions frequently asked by our shareholders with respect to the impact of COVID-19 on the Company.

Present situation:

 

Q: Is the pandemic affecting rent collection at properties in the GEC® student apartment portfolio?

A: In the traditional rental apartment scenario, some tenants are facing financial hardship and are under the pressure of unemployment. Some are unable to pay rent, which in turn affects the landlord’s cashflow management and their ability to meet the mortgage payment for the property.

CIBT Education Group is pleased to report that, thus far, the pandemic has caused only a limited and acceptable level of adverse business effects to most GEC® properties with long-term rental students for several reasons:

  • Students usually budget a year in advance for their annual tuition fees and housing expense.
  • Certain rents are bundled and pre-paid with the tuition.
  • A number of students receive assistance from their parents or government student loan programs.
  • For international students, a majority of their overseas-study costs are paid by or with the assistance of their parents.
  • Breaching a contract and defaulting on a relatively small sum may cause consequences to a student’s study permit and their ability to stay in Canada.

 

Q: Is the pandemic affecting the occupancy rate at various GEC® long term stay properties?

A: GEC® provides students with reliable and secure rental apartment-style housing. The units are marketed by the GEC® marketing team, through reservation platforms, and through a large network of schools associated with GEC®.

 

At the beginning of the virus outbreak, some students were rushing to go back to their home countries, while many chose to stay in Canada. In early April, the country of residence for many international students started to face a more difficult situation than in Vancouver, and the exodus of students quickly subsided. By late April, many students had changed their minds and elected to stay in Vancouver instead. Furthermore, many students who were planning to return home during the summer holiday period have decided to extend their stay in Canada at GEC® properties. We are expecting a steady occupancy rate this summer.

 

Q: Why is the demand for student rentals strong, despite the current COVID-19 pandemic?

A: The pandemic has caused hardship to domestic and international students who were living in dormitory-style residences across the globe. The traditional dormitory-style facilities incorporate a co-living design, which causes many students to share a communal kitchen, shower stalls and lounge area. Students face a high-risk of COVID-19 community transmission in such an environment. For safety reasons, students were required by universities to vacate their dormitory and return after the summer, while many countries have imposed travel restrictions and quarantine measures upon arrival. As a result, students faced early termination of their school residences while many of them were unable to return home due to travel restrictions.

In comparison to the traditional dormitory-style design, all GEC® properties are either rental apartments or hotels. GEC® long-term stay properties resembled the elements of a traditional apartment with self-contained kitchen, living room and bedroom. Our hotel property has both single and twin rooms, and certain rooms are equipped with a kitchenette. Therefore, unlike conventional dormitories, the design of GEC® properties could reduce the chances of community transmission.

In addition to closures of dormitory / co-living style housing at universities across the country, we have also noticed that home-stay parents are also cancelling reservations made by students for fear of virus transmission in their family home.

GEC® is working with local universities and colleges to offer their students accommodation at GEC® properties at a discounted rate supplemented by early move-in incentives. This arrangement helps those students affected by the social distancing policy. GEC® has also allocated self-contained units to doctors and nurses for short term stay contracts ranging from one to three months for healthcare workers afraid to go home after work for fear of transmitting the virus to their family members.

These actions are helping GEC® properties maintain a high level of occupancy.

 

Q: What about the short-term stay properties, such as the GEC® Granville Hotel and Suites?

A: As a result of the implementation of travel bans around the world and the suspension or reduction of flights, our short-term-stay hotel has experienced cancellations from visitors and tourists. GEC® has one hotel property operating in downtown Vancouver.However, with the aid of the GEC® marketing and recruitment platform supported by hundreds of schools in Metro Vancouver, GEC® stepped up its marketing effort at the start of the pandemic in Canada by recruiting students displaced by universities and colleges for the GEC® Granville Hotel. Also, two floors at this hotel property were converted and isolated for the use by frontline healthcare workers working at the nearby St. Paul’s Hospital and Vancouver General Hospital.

These measures have allowed GEC® Granville Hotel to maintain a steady cash flow as compared to some hotel brands which outright shut down operations in mid-March.

 

Q: Is the pandemic affecting the occupancy rate at the short term stay property – GEC® Granville Hotel?

A: GEC® is renting regular apartments and not dorms.  Our demised and self-contained units allow us to adapt to market changes. GEC® leveraged its strategically designed business model and recruiting and marketing platforms, and converted its short-term stay facility (hotel property) into student accommodations, immediately replacing hotel cancellations with new bookings.

 

Looking ahead:

Q: Are the students coming back after the COVID-19 pandemic?

A: Students committed to a two-year diploma program or four years of university are unlikely to give up what they have accomplished during the past years because of a virus outbreak. Vacation plans may be cancelled and lifestyles may be modified, but lifelong education plans are not easily abandoned. Furthermore, tens of millions of students graduate from high school each year around the world. We expect that a percentage will become the new influx of international students and they will add to the existing group of students already studying abroad like clockwork. For the education and housing businesses, as long as students are pursuing their lifelong career goals through education, they will need a place to live. In addition, Vancouver is experiencing a high-tech boom. GEC® properties can be modified and made available for tech workers to rent while they are employed here.

 

Q: What are the consequences of double-occupancy?

A:  GEC® properties are “rental apartments,” self-contained and properly demised. No GEC® property is dormitory-style, unlike most public university and college student accommodations. If we have an outbreak within one of our units, we will vacate that unit and change the occupancy from two persons to one person only.  Each unit with an outbreak would be sanitized, which allows us to contain the situation.

 

Q: Are schools permanently switching from on-campus to online?

A: Education is more than learning a subject, it is about interactions, lifestyle and exchange of ideas with others. Online education has been around for 20 years and was never meant to replace traditional education. The popularity of online education will grow but it doesn’t replace the desire for international students to study abroad, interact with the local culture, see new things and meet new friends from around the world. An online sightseeing tour will never replace travel and tourism. It is the experience that counts.

 

Furthermore, provincial Ministries of Education and Immigration Canada do not recognize online courses as an official format of delivery. An exception has been made only for the duration of the pandemic.  After campuses have reopened, the Post Graduate Work Permit and the credit transfer policies will fall back to the in-class model only.

 

Q: What is the size of the international education market in Canada?

A: According to the Canadian Bureau for International Education (CBIE), international students make up a significant part of the local demand for rental housing. At the end of 2019, over 600,000 international students were living in Canada, an increase of about 13% since 2018.

 

Q: Will the pandemic destroy the education business, or the desire of international students to study abroad?

A: CIBT Education Group Inc., the parent company of Global Education City Holdings Inc., owns Sprott Shaw College and Sprott Shaw Language College. Sprott Shaw College has been operating since 1903 and enrols over 5,000 students per year, predominantly domestic students. Sprott Shaw Language College educates over 6,000 international students per year. With a diverse mix of students from 42 countries, the customer base is widespread without over-concentration of students from any one country.

Education is a life-changing, long term and non-impulsive decision. Better education leads to better career choices in the future. The pandemic will delay plans, but it will likely not permanently change a student’s lifelong plan.

 

Q: Is the demand for rental apartments getting better or worse?

A: The rental vacancy rate in Metro Vancouver was around 1% in 2019. The pandemic has not improved the vacancy rate. It is expected that fewer people will rush into buying properties in light of the current economic situation, which swould be expected to mean relatively higher demand for rental apartments. Rental real estate has generally remained relatively strong during recessions.

As noted above, 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.

 

About CIBT Education Group:

CIBT Education Group Inc. is one of the largest education and student housing investment companies in Canada focused on the global education market since 1994. Listed on the Toronto Stock Exchange and U.S OTCQX International, CIBT owns business and language colleges, student housing properties, recruitment centres and corporate offices at 45 locations in Canada and abroad. The total annual enrollment for the group exceeds 12,000 students. Its education providers include Sprott Shaw College (established in 1903), Sprott Shaw Language College, Vancouver International College and CIBT School of Business. Through these schools, CIBT offers business and management programs in healthcare, hotel management, language training, and over 150 career, language and vocational programs. CIBT owns Global Education City Holdings Inc. (“Global Education”), an investment holding and development Company focused on developing education related real estate such as student hotels, serviced apartments and education centres. The total portfolio and development budget of projects under Global Education’s GEC® brand is over C$1 billion.  The various GEC® properties provide accommodations to over 1,500 students and other tenants. CIBT also owns Global Education Alliance (“GEA”) and Irix Design Group (“Irix Design”). GEA recruits international students on behalf of many elite kindergartens, primary and secondary schools, colleges and universities in North America. Irix Design is a leading design and advertising company based in Vancouver, Canada. Visit us online and watch our corporate video at www.cibt.net.

 

Toby Chu

Chairman, President & CEO

CIBT Education Group Inc.

Investor Relations Contact: 1-604-871-9909 extension 318 or | Email: info@cibt.net

 

FORWARD-LOOKING STATEMENTS

Some statements in this Q&A contain forward-looking information (the “forward-looking statements”) about CIBT Education Group Inc. (“CIBT”) and its plans and expectations. Forward-looking statements are statements that are not historical facts. Forward-looking statements in Q&A release include, without limitation, the statement as to the expectation of a steady occupancy rate this summer, the expectation that a new influx of international students will arrive, and that GEC® will continue to provide students a safe, clean and healthy environment in which to study and live. The forward-looking statements are subject to various risks, uncertainties and other factors that could cause CIBT’s actual results or achievements to differ materially from those expressed in or implied by forward-looking statements. Forward-looking statements are based on the beliefs, opinions and expectations of CIBT’s management at the time they are made, and CIBT does not assume any obligation to update its forward-looking statements if those beliefs, opinions or expectations, or other circumstances should change, except as may be required by law.