Unite (LON:UTG) is already a stalwart core holding within my portfolio (renowned investor Peter Lynch’s term). It has and continues to deliver consistent value growth and more recently good income growth too.  However, it’s Unite’s solidity that has great appeal – it owns physical assets in a very stable sector, namely student property. For what is my largest holding this share provides wonderfully predictable performance and peace of mind.

So, whilst Unite isn’t the most exciting story-stock I’m currently looking at a 24% total shareholder return, calendar year 2017 to date, and I’m projecting an average total shareholder return of c. 17% p.a. over the next three yearsHowever, there were some interesting strategic revelations at their recent Capital Markets Day that may make these projections quite conservative. 

Significantly, Unite’s Capital Markets Day [1] was held at the Aston University Campus.  They bought the whole of Aston’s student accommodation, Aston Student Village [2] , in Feb 2017 for £227m.  This was the first deal of this nature and could be the spark to consolidation of the sector.  This is a very large potential opportunity for Unite (LON:UTG) as there is nearly as much student property owned by the university sector (280,000 beds) as in the private sector (300,000 beds).  Whether the universities see the need to monetise their assets I have little hard information; but looking for potential drivers I discovered that the universities’ pension fund deficit is a mammoth £17.5bn!

Another key piece of news at the Capital Markets Day was that they have eight opportunities totaling 6,000 – 8,000 under active evaluation’. These deals might be either:

  • Sale of student property to Unite but with commitments to upgrade and nomination agreements;
  • On-campus development in partnership with the university; or
  • Off-campus development in partnership with the university, supported by a nomination agreement. 

The theme for the Capital Markets Day was all about Unite's 'university partnerships. This supported by the fact that 60% of Unite’s purpose built student accommodation is pre-let to universities to house their first-year students under what are called ‘nomination agreements’.  

Unite are clearly positioning themselves as the prime candidate for similar deals - for which they are ideally positioned:

  • The Aston deal reflects Unite’s access to substantial funding…

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