My StockSlam pick is a property company specialising in Purpose Built Student Accommodation (PBSA) –called Unite (LON:UTG) . It is by far the largest in this sector with c. 75,000 beds a Mkt Cap £3.4bn and features in the FT250. Its shares peaked at £13.38 in Feb 2020 but was then hit by Covid-19 and is now down at 963p (down about 27%). This price I think presents a good short-term buying opportunity with the end of Covid restrictions in sight.
Student Accommodation is a resilient investment, its asset backed and its market is uncorrelated with the general economy. Student Accommodation was the best performing property asset class during the Global Economic Crisis of 2008/9. One of Unite’s strengths is that 55% of its beds are guaranteed to be occupied by its agreement with Universities.
Unite (LON:UTG) is a REIT (Real Estate Income Trust), which allows exemption from UK corporation tax on its rental profits and to qualify as a REIT it has to distribute 90% of its income to investors by way of dividends. Which should be attractive to income seekers, but Unite's yield is relatively low, this is because it is expected to grow, both by its development pipeline and also by acquisition. It took over the markets' third largest player Liberty Living in 2019.
The Covid Impact: Covid-19 has hit Unite’s business - they released students from their contracts very early on, also given discounts and rental free periods. Typically, they would achieve 98% occupancy – but managed only 89% in 2020. So Covid has hit its income and consequently its property values have fallen.
Unite has published a Student Survey this morning:
https://www.investegate.co.uk/...
The findings are:
>> 77% students struggled with mental health and wellbeing as a result of Covid-19, but 84% say engaging in university life has been positive for their mental health;
>> Students' biggest challenge this year is the lack of face-to-face teaching, practical experience or facilities;
>> Traditional face-to-face university experience is key for students: 86% are keen to get onto university campus once it is safe to do so; 75% agree that living in university accommodation and being on campus is as important a part of the university experience as lectures and tutorials; and
>> Four in five (79%) students would like a return to face-to-face tuition after the Easter break.
…
