REG - Unite Group PLC - TRADING UPDATE AND Q1 FUND VALUATIONS

UniteAnnouncement

09/04/2024 07:00

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RNS Number : 7473J  Unite Group PLC (The)  09 April 2024

PRESS RELEASE

9 April 2024

THE UNITE GROUP PLC

('Unite Students', 'Unite', the 'Group', or the 'Company')

TRADING UPDATE AND Q1 FUND VALUATIONS

 

STRONG DEMAND AND RENTAL GROWTH UNDERPINNING PROPERTY VALUES

 

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 31 March 2024.

 

Highlights

·    Continued strong demand with 86% of beds sold for the 2024/25
academic year (2023/24: 90%)

·    Confident in delivering rental growth of at least 6% for the 2024/25
academic year

·    Planning approvals for 1,450 new beds in London and Bristol

·    Property values stable in Q1 (USAF: (0.5%), LSAV 0.8%) with rental
growth offsetting the loss of Multiple Dwellings Relief

 

Joe Lister, Unite Students Chief Executive Officer, commented:

"Student demand is strong for the 2024/25 sales cycle, reflecting the
continued appeal of our fixed-priced, all-inclusive offer and a growing
shortage of high-quality student homes. Together with our alignment to the
UK's strongest universities, this supports a positive outlook for rental
growth for the 2024/25 academic year and underpins our property valuations.

 

"We continue to progress the delivery of our record £1.3 billion development
pipeline, securing planning approvals on two schemes in London and Bristol.
These projects will deliver much needed new student homes in two of the UK's
strongest university cities."

 

Current trading

2024/25 lettings performance

Demand for the Group's accommodation remains strong, with good progress in
sales since our preliminary results. Across the Group's portfolio, 86% of
rooms are now reserved for the 2024/25 academic year, ahead of our typical
leasing pace and slightly below the record reservation rates last year
(2023/24: 90%). Demand from universities continues to grow with a further
1,000 beds secured via nomination agreements since our preliminary results.
Demand from international students remains robust despite recent changes to UK
visa rules for dependents of postgraduate taught students. International
direct-lets for 2024/25 currently account for 13% of rooms, broadly in-line
with the 15% let at the same stage last year.

 

The ongoing strength of student demand supports our confidence in delivering
rental growth of at least 6% and full occupancy for the 2024/25 academic year.
Our balanced approach to rental growth will ensure sustainable returns over
the long term, while also remaining good value for students.

 

Property update

We have achieved planning approvals on two development projects in recent
weeks. Our 500-bed Freestone Island project in Bristol, which is located close
to the University of Bristol's new Temple Quarter Enterprise Campus, has now
received full planning consent. We expect to acquire the land in the coming
weeks, which supports delivery of the scheme in time for the 2026/27 academic
year.

 

Meridian Place, Stratford has received resolution to grant planning permission
at committee and we anticipate securing full planning consent in the coming
months. We now expect to deliver the 952-bed project for the 2028/29 academic
year, following delays in our planning timetable.

 

At Castle Leazes in Newcastle, our joint venture with Newcastle University, a
planning application has now been submitted to demolish the existing
buildings. We expect to submit a planning application for around 2,000 new
beds in April, which supports entry into the joint venture in Q4 this year.

 

We are tracking further opportunities for development, university partnerships
and acquisitions in London and strong regional markets at attractive returns
and expect to add to our pipeline in H1 2024.

 

Disposals update

We continue to recycle capital to improve the quality of our portfolio and
provide funding for reinvestment in new growth opportunities. We are in the
advanced stages of selling a £180 million portfolio (Unite share: £75
million), which is expected to complete during Q2.

 

Multiple Dwellings Relief (MDR)

As part of the Spring Budget, the Government announced the abolition of MDR
for residential property transactions in England with effect from 1 June. MDR
provided relief for Stamp Duty Land Tax when purchasing two or more dwellings
valued at £250,000 or less, which benefitted a number of our properties.

 

Our independent valuers have fully reflected the increase in purchasers' costs
in the 31 March fund valuations, which has resulted in a £61 million (2.0%)
and £6 million (0.3%) reduction in value for USAF and LSAV respectively. USAF
is more significantly impacted due to the lower average value of dwellings
(cluster flats or studios) for its portfolio.

 

Valuations for the Wholly Owned portfolio at 30 June will also reflect the
loss of MDR. In isolation, we expect removal of MDR to reduce the Group's EPRA
NTA by around £70 million (16p) in the first half, equivalent to a 1.3%
reduction in asset values at Unite share.

 

Quarterly fund valuations

At 31 March 2024, USAF's property portfolio was independently valued
at £2,982 million, a 0.5% reduction on a like-for-like basis during the
quarter. The valuation loss reflects the one-off impact of MDR being
abolished, partially offset by quarterly rental growth of 1.7%. Property
yields were unchanged over the quarter at 5.3% . The portfolio comprises
27,922 beds in 71 properties across 19 university towns and cities in the UK.

 

LSAV's property portfolio was independently valued at £1,938 million, a 0.8%
increase on a like-for-like basis during the quarter. The valuation increase
in LSAV is driven by quarterly rental growth of 1.3%, partially offset by the
abolition of MDR. Property yields were unchanged over the quarter at 4.5%.
LSAV's investment portfolio comprises 9,716 beds across 14 properties
in London and Aston Student Village in Birmingham.

 

                           Drivers of LfL capital growth (Q1)
       Valuation  Rental growth     Loss of Multiple Dwelling Relief  Yield movement  Capital growth*

       Mar 2024                                                       (bps)
 USAF  £2,982m    1.7%              (2.0%)                            -               (0.5%)
 LSAV  £1,938m    1.3%              (0.3%)                            -               0.8%

 

* Capital growth presented net of capital expenditure

 

ENDS

 

 

 

 

For further information, please contact:

 

Unite Students

Joe Lister / Mike Burt / Saxon
Ridley                            Tel: +44 117 302
7005

Unite press
office                                                           Tel:
+44 117 450 6300

 

Powerscourt

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 (PBSA) serving the country's world-leading
higher education sector. We provide homes to 70,000 students across 157
properties in 23 leading university towns and cities. We currently partner
with over 60 universities across the UK.

Our people are driven by a common purpose: to provide a 'Home for Success' for
the students who live with us. Unite Students' accommodation is safe and
secure, high quality, and affordable. Students live predominantly in en-suite
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 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, the Unite Group is an award-winning Real Estate
Investment Trust (REIT), listed on the London Stock Exchange. For more
information, visit Unite Group's corporate website www.unitegroup.com
(http://www.unitegroup.com/) or the Unite Students'
site www.unitestudents.com (https://www.unitestudents.com/)

 

 

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