Unite Group reports solid portfolio growth

FTSE 250 developer and manager of student accommodation Unite Group revealed the quarterly valuations of its UK Student Accommodation Fund (USAF) and London Student Accommodation Joint Venture (LSAV) on Wednesday, with growth in both operations.

At 31 March, USAF’s property portfolio was independently valued at £2.13bn, increasing 2.8% during the quarter. The portfolio comprised 26,818 beds in 75 properties across 24 university towns and cities in the UK.

LSAV’s investment portfolio was independently valued at £750m, up 1.5% during the quarter. That portfolio had 4,636 beds across 12 properties in London, and three in Edinburgh.

Unite Group said the increase in valuations was drives primarily by rental growth, and eight basis points of yield compression in USAF and five basis points in LSAV in the quarter.

The overall USAF portfolio was now valued at an average yield of 5.65%, and LSAV’s portfolio at 4.97%.

"The USAF and LSAV portfolios have shown further positive growth in the first quarter of the year.,” said Unite Students chief financial officer Joe Lister.

“Reservations for the 2016/17 academic year remain ahead of last year's run-rate and support a positive rental growth outlook. Continued investor appetite for the sector has supported a limited amount of further yield compression."

Unite Group confirmed the valuations reflected the recently-announced changes to stamp duty rates, though the impact of this was relatively small as much of the portfolios were eligible for multiple dwelling relief.

In a separate announcement, Unite announced that Mark Allan was leaving the business and Richard Smith would be promoted to chief executive officer from 1 July.

Allan was to take up the role of CEO at St Modwen Properties, after 17 years with Unite - including ten at CEO. He would remain in an advisory role until 31 October.

Smith initially joined Unite in 2010, becoming a member of the board in January 2012 when he was appointed managing director of operations.

Prior to that, he spent 18 years in the transport industry, working in the UK, Europe, Australia and North America.

He spent 13 years at National Express Group where he held a range of senior finance, strategy and operations roles.

"I would like to thank Mark for his outstanding performance as CEO since 2006. Unite's performance has been transformed under his tenure and he leaves the business well positioned to continue its growth and profitability. On behalf of the board, I wish him the very best for the future,” said Unite chairman Phil White.

"I am delighted to announce that Richard is succeeding Mark as chief executive officer. As managing director of operations, and an existing board member, Richard has been at the heart of Unite's market-leading offering for the last five years, working closely with the existing experienced executive team, and is already a very familiar face to investors‎.

"His background in finance, strategy and operations means he is ideally placed to continue Unite's proven strategy of: building the most trusted brand in the sector, operating the highest quality portfolio and maintaining the strongest capital structure. I am confident Richard will provide excellent leadership for the Group,” White added.