Unite Group reports strong sales for new academic year

Student accommodation specialist Unite Group reported a robust sales performance for the upcoming academic year on Monday, with 98% of rooms already sold.

The FTSE 100 company said that was an improvement compared to last year, where 91% of rooms were sold by the same time.

It said demand for student accommodation remained high, with both university partners and students booking directly showing strong interest.

Nominations agreements, which involve universities relying on partners such as Unite to meet accommodation requirements, now covered 56% of total beds for the 2023-2024 academic year, making for a 4% increase from the previous year.

Unite said the trends supported its expectations of full occupancy and rental value growth of around 7% for the academic year, surpassing its previous projection of between 6% and 7%.

In the 2022-2023 academic year, Unite achieved 99% occupancy and rental value growth of 3.5%.

Looking at its pipeline, Unite said it remained committed to four development projects, with a combined development cost of £339m and a yield-on-cost of 6.7% for the student accommodation elements.

The remaining costs of £179m required to complete the projects would be funded through the company's cash reserves and committed debt headroom of £393m as at 30 June.

On the funding front, the firm said that during the last quarter, the Unite UK Student Accommodation Fund (USAF) secured a new £400m loan, replacing the maturing £380m bond that was due in June.

It said the seven-year secured loan carried a fixed rate of 5.4%, and aligned with the company’s previous guidance of a 3.6% overall cost of debt for 2023 on a see-through basis.[

As at 30 June, the independent valuation of USAF's property portfolio stood at £2.923bn, reflecting a 1.2% increase on a like-for-like basis during the quarter.

The board said the growth in valuation was driven by a 2.2% increase in quarterly rental income and a five-basis point expansion in property yields.

It said the portfolio consisted of 27,924 beds across 71 properties, located in 19 university towns and cities across the UK.

The London Student Accommodation Joint Venture (LSAV), meanwhile, boasted an investment portfolio comprising 9,716 beds across 14 properties in London and the Aston Student Village in Birmingham.

It was independently valued at £1.94bn, representing a 1.1% increase on a like-for-like basis during the quarter.

Unite said the valuation uplift was primarily attributed to a 2% rise in quarterly rental income and a four-basis point increase in property yields.

The USAF and LSAV portfolios now commanded weighted average yields of 5.1% and 4.3%, respectively.

Unite said it expected that the valuations of its wholly-owned portfolio as at 30 June would show similar movements to those observed in USAF and LSAV during the first half of the year.

“Reservations for the 2023-2024 academic year remain at record levels, with 98% of rooms now sold, reflecting strong demand from both students and universities and the attractiveness of our fixed-priced all-inclusive offer,” said chief executive officer Richard Smith.

“This supports an improvement in our rental growth guidance to around 7% for the academic year.

“Our strong leasing performance will continue to support our property valuations as the market adjusts to an environment of higher interest rates.”

Smith said the supply of purpose-built student accommodation could keep pace with growing student demand at the same time as houses in multiple occupation (HMO) landlords were leaving the sector.

“Unite is uniquely positioned to address this housing need through our best-in-class operating platform, university relationships development and asset management capabilities.”

Reporting by Josh White for Sharecast.com.