TIDMUTG
RNS Number : 0019Z
Unite Group PLC (The)
09 January 2024
PRESS RELEASE
9 January 2024
THE UNITE GROUP PLC
('Unite Students', the 'Group', or the 'Company')
TRADING UPDATE AND Q4 FUND VALUATIONS
STRONG DEMAND WITH RECORD RESERVATIONS AND STABLE 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 December 2023.
Highlights
-- Continued strong demand with 71% of beds sold for the 2024/25 academic year (2023/24: 70%)
-- Confident in delivering rental growth of at least 5% for 2024/25 academic year
-- Guidance maintained for 2023 adjusted EPS at the upper end of 43-44p range
-- Property values broadly stable in Q4 (USAF: +2.1%, LSAV -0.7%)
Joe Lister, Unite Students Chief Executive Officer,
commented:
"We have seen a strong start to the 2024/25 sales cycle,
reflecting the continued appeal of our fixed-priced, all-inclusive
offer. The letting performance highlights the ongoing strength of
demand from students and universities and underpins a positive
outlook for rental growth for the 2024/25 academic year.
"We will continue to play a leading role in increasing the
supply of much needed student accommodation at a time when HMO
landlords are leaving the market at pace and the new supply of
purpose-built student accommodation slows. We are committed to
working closely with our university partners to ensure students
have access to high quality, affordable accommodation."
Current trading
2023 earnings guidance
Higher than expected rental income in term 1 of the 2023/24
academic year has offset the impact of higher operating costs in
the second half of the financial year. As a result, we maintain our
previous guidance for adjusted EPS at the upper end of our 43-44p
range.
2024/25 lettings performance
Demand for the Group's accommodation has again been strong,
reflecting the continuing shortage of high-quality student
accommodation. Across the Group's portfolio, 71% of rooms are now
reserved for the 2024/25 academic year, in-line with the record
levels seen last year (2023/24: 70%). We have been encouraged by
particularly strong demand from university partners with 4,000
extra beds reserved compared to the same stage of the 2023/24 sales
cycle.
The ongoing strength of student demand increases our confidence
in delivering at least 5% rental growth in the 2024/25 academic
year sales cycle. We are mindful of cost-of-living pressures for
students and parents and remain focussed on offering
value-for-money accommodation, while also delivering sustainable
rental growth to mitigate margin pressure from rising staff and
utility costs and to support significant ongoing investment into
our properties.
Property update
We are now on site with four development schemes in London,
Bristol, Edinburgh and Nottingham, totalling 2,000 beds, for
delivery between 2024 and 2026. In addition, our Meridian Square
project in London is expected to go to planning committee in late
January and remains on track for delivery for the 2027/28 academic
year.
We are tracking further development opportunities in London and
strong regional markets at attractive returns and expect to add to
our pipeline in H1 2024.
We continue to recycle capital to improve our portfolio quality
and provide funding for reinvestment in new growth opportunities.
Our disposal activity is progressing well and we expect to dispose
of GBP150-200 million of regional assets in H1 2024 (Unite share:
GBP75-100 million).
Building safety
We completed cladding remediation works on 16 buildings across
the estate in 2023. As previously guided, the Group continues to
prioritise projects based on our external risk assessments and will
make provisions for remediation costs on a further 10 buildings at
31 December 2023, the cost of which will be incurred over the next
12-18 months.
We recently reached agreement with a contractor to recover 75%
of our remediation costs relating to five buildings, a portion of
which will be recognised in the Group's year-end balance sheet. We
ultimately expect to recover 50-75% of total cladding remediation
costs through claims from contractors, although the settlement and
recognition of these claims is likely to lag costs incurred to
remediate buildings. This will result in a greater level of net
spend in the earlier years of the programme.
Net of amounts recognised under claims, the Group expects to
incur an additional c.GBP69 million provision (Unite share: c.GBP26
million) in the second half of 2023.
Quarterly fund valuations
At 31 December 2023, USAF's property portfolio was independently
valued at GBP2,992 million, a 2.1% increase on a like-for-like
basis during the quarter. The valuation increase in USAF is driven
by quarterly rental growth of 2.8% and a 3 basis point increase in
property yields to 5.3%. Over the past 12 months, valuation growth
of 3.6% was driven by rental growth more than offsetting 21 basis
points of yield expansion. 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 GBP1,922
million, a 0.7% decline on a like-for-like basis during the
quarter. The valuation decrease in LSAV is driven by quarterly
rental growth of 2.5% and a 15 basis point increase in property
yields to 4.5%. Over the past 12 months, the valuation is unchanged
with rental growth offsetting 39 basis points of yield expansion.
LSAV's investment portfolio comprises 9,716 beds across 14
properties in London and Aston Student Village in Birmingham.
The weaker valuation performance for LSAV in Q4 reflects its
higher London weighting when compared to USAF (85% and 14% by value
respectively), where greater increases in property yields have had
a more significant negative impact on valuations. We expect the
valuation of our wholly owned portfolio at 31 December 2023, which
is 33% weighted to London by value, to be broadly stable over
H2.
Drivers of LfL capital growth (Q4)
------------------------------------------------------------
Valuation Rental growth Yield movement Other Total
Dec 2023
--------- ------------ ------------- -------------- -------------- -------------
USAF GBP2,992m 2.8 % (0.6 %) (0.1 %) 2.1 %
LSAV GBP1,922m 2.5 % (3.4 %) 0.2 % (0.7 %)
LfL valuation movement
-------------------------------------------------------------------
H1 H2 FY2023
------------------ ----------------- ----------------------- -----------------------
USAF 1.2 % 2.3 % 3.6 %
LSAV 0.9 % (1.0 %) 0.0 %
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 or the Unite Students' site
www.unitestudents.com
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