RNS Number : 7523R
Unite Group PLC (The)
08 July 2022
8 July 2022
THE UNITE GROUP PLC
('Unite Students', 'Unite', the 'Group', or the 'Company')
TRADING UPDATE AND Q2 FUND VALUATIONS
Unite Students, the UK's leading owner, manager and developer of
student accommodation, today announces an update on current trading
and quarterly property valuations for the Unite UK Student
Accommodation Fund ('USAF') and the London Student Accommodation
Joint Venture ('LSAV') as at 30 June 2022 .
We have continued to make good progress in sales during Q2, with
strong demand from both UK and international students. Across the
Group's entire property portfolio, 90% of rooms are now sold for
the 2022/23 academic year, ahead of pre-pandemic reservation levels
(2021/22: 81%, 2020/21: 80%, 2019/20: 89%). We have also seen
positive progress in pricing, particularly in the second half of
the sales cycle as concerns around the impact of the Omicron
Covid-19 variant have eased. This progress has been driven by
inflation-linked rental uplifts for our multi-year nomination
agreements and the strength of demand for direct-let beds.
Given the strong sales performance to date, we are increasingly
confident in delivering occupancy of 97% for the 2022/23 academic
year and achieving rental growth at or just above the top end of
our guidance of 3.0-3.5%.
We continue to monitor Covid-19 cases, travel restrictions for
international students and the potential for further lockdowns,
particularly in China. There are no Covid restrictions on UK Higher
Education and Government guidance emphasises that universities
should prioritise delivery of face-to-face teaching. Demand also
remains strong from international students across multiple markets
and we expect that international students will be able to travel to
the UK for the start of the 2022/23 academic year in September,
consistent with our experience for the 2021/22 academic year.
As previously guided, we are well protected but not immune from
the impacts of inflation on our cost base. We have a high degree of
visibility over our two largest costs, staff and utilities, which
together account for around 60% of our combined operating costs and
overheads. Our utility costs are fully hedged through 2022 and 2023
and for a substantial portion of 2024. In addition, a recently
completed review of our operating model, will deliver further
efficiencies, which partially mitigate wider cost pressures.
The Company also benefits from growing recurring income through
asset management fees from USAF and LSAV, linked to NOI and NAV,
which offset around two thirds of the Group's share of
We have limited near-term refinancing requirements with less
than 10% of see-though debt maturing before late 2024. Interest
rates are fixed or capped for 85% of our existing investment debt
and we have forward hedged GBP300 million of future debt issuance,
at rates meaningfully below prevailing market levels. As a result
of rising interest rates on the variable portion of our debt, our
see-through borrowing cost has increased to 3.3 % at the end of H1
(December 2021: 3.0%).
Quarterly fund valuations
At 30 June 2022, USAF's property portfolio was independently
valued at GBP2,967 million, a 3.5% increase on a like-for-like
basis during the quarter. The valuation increase in USAF is driven
by rental growth of 0.8% and a 13 basis point reduction in property
yields. The portfolio comprises 29,042 beds in 71 properties across
19 university towns and cities in the UK. The average value per bed
is approximately GBP102,000.
LSAV's investment portfolio was independently valued at GBP1,942
million, a 4.0% increase on a like-for-like basis during the
quarter. The valuation increase in LSAV is driven by rental growth
of 1.1% and a 12 basis point reduction in property yields. LSAV's
investment portfolio comprises 9,716 beds across 14 properties in
London and Aston Student Village in Birmingham. The average value
per bed is approximately GBP200,000.
The USAF and LSAV portfolios are now valued at weighted average
yields of 4.9% and 3.9% respectively. Valuation growth in the
quarter reflects the continued strong demand for high quality
student accommodation assets from institutional investors,
including the acquisition of Student Roost by GIC and Greystar
announced in May. As a result, we also expect the valuations of our
wholly owned portfolio for 30 June 2022 to reflect yield
compression of approximately 10-15 basis points over the first
USAF unit acquisition
During the second quarter, Unite increased its investment in
USAF through the acquisition of GBP141 million of units through
participation in an equity raise and acquisition of existing units
in the secondary market. In aggregate, the purchases, which were
priced in-line with USAF's March 2022 NAV, increase Unite's USAF
ownership to 28.2% on a pro-forma basis (31 December 2021: 22.0%).
This investment equates to an increase in Unite's see-through GAV
of GBP184 million at an effective property yield of 5.1%.
The acquisitions increase Unite's exposure to USAF's
high-quality portfolio in strong regional markets. It also
substantially redeploys the proceeds from the disposals announced
earlier in the year at attractive risk-adjusted returns.
The proceeds of the USAF equity issue, which in aggregate amount
to GBP78 million, will be deployed into asset management
opportunities and sustainability projects across the portfolio, to
deliver uplifts in NOI through increased rental income and lower
utility costs. Recent examples of asset management initiatives
include the major refurbishment of 1,000 USAF beds in Manchester,
which are due to complete this September.
Joe Lister, Unite Students Chief Financial Officer, commented
"We continue to make good progress with bookings for the 2022/23
academic year with reservations now ahead of pre-pandemic levels,
demonstrating the strength of student demand. This momentum
underpins our confidence in a return to full occupancy for the
2022/23 academic year and rental growth at or just above the top
end of our guidance of 3.0-3.5%. We are well protected against
inflationary pressures through annual re-pricing of our income and
cost hedging but, like others, are not immune from the impact of
rising costs and interest rates. We continue to see significant
investor demand for student accommodation, reflecting the sector's
positive outlook, as demonstrated by valuation increases for USAF
and LSAV in the quarter."
For further information, please contact:
Joe Lister / Michael Burt Tel: +44 117 302 7005
Unite press office Tel: +44 117 450 6300
Justin Griffiths / Victoria Heslop Tel: +44 20 7250 1446
About Unite Students
Unite Students is the UK's largest owner, manager and developer
of purpose-built student accommodation, serving the country's
world-leading Higher Education sector. We provide homes to 74,000
students across 172 properties in 25 leading university towns and
cities. We currently partner with over 60 universities across the
Our people are driven by a common purpose: to provide a 'Home
for Success' for the students who live with us. Unite's
accommodation is safe and secure, high quality and affordable.
Students live predominantly in ensuite study bedrooms, with rents
covering all bills, insurance, 24-hour security and high-speed
Wi-Fi. We also achieved a five-star British Safety Council rating
in our last audit.
We are committed to raising standards in the student
accommodation sector for our customers, investors and employees.
This is why our new Sustainability Strategy, launched in 2021,
includes a commitment to become net zero carbon across our
operations and developments by 2030.
Founded in 1991 in Bristol, Unite Group is an award-winning Real
Estate Investment Trust (REIT), listed on the London Stock Exchange
and a member of the FTSE 100 Index. Unite is invested in and
operates two specialist funds and joint ventures with institutional
investment partners: the GBP3 billion Unite UK Student
Accommodation Fund (USAF) and the GBP2 billion London Student
Accommodation Vehicle (LSAV).
For more information, visit:
Unite's corporate website www.unite-group.com
The student site www.unitestudents.com
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