Unite Share Discussion Threads

[ben gunn] 07/10/2016 11:48

Maddox
Back down once more since 4th.
As I see it the miserable level of dividend may come to an end since the balance sheet is preposterously strong- market may then re-rate it.

[maddox] 04/10/2016 09:48

Unite has taken off like a rocket this morning up 14.5p 2.26% as I post. Cannot find any news item or RNS to explain this. Anybody have any clues? Regards Maddox

[maddox] 26/7/2016 09:22

Strong set of H1 results & a positive outlook.

EPRA earnings up 22% to £36.1m, EPRA eps up 15% to 16.3p, EPRA NAV up 7% to 620p. Interim div up 9% to 6p/share. Loan to Value 35% - very conservative leverage. IFRS profit including revaluation gains down at £106.7m (2015 £208.3m) due to big uplift last year. Conversion to REIT in 2017.



Ironically, UTG was the share I was most confident was Brexit-proof but took the largest hit!! Whatever, nothing of concern in these figures and outlook statements very positive:

'Despite the uncertainty caused by the result of the EU referendum, the fundamentals of our business and the student accommodation sector remain strong.

The demand;supply outlook for student accommodation remains favourable and our earnings growth trajectory is underpinned by our efficiencies of scale and a high quality development pipeline, focused on cluster flat accommodation with a lower price point, where the rental growth outlook is strongest.'

Regards, Maddox

[maddox] 24/7/2016 16:48

Comment in Investors Chronicle -

'There are other (real estate) sectors that really have little exposure to the referendum. One is student accommodation. Building purpose-built units for overseas students reflects the demand for decent accommodation from students coming from Hong Kong, China, and Russia, and elsewhere. Just 5 per cent come from the EU, and with the cap lifted on overseas student numbers, together with a weak pound, the attractions are there to see. Crucially, companies such as Unite (UTG), Empiric Student Property (ESP), and GCP Student Living (DIGS) have had little trouble raising funds to develop their portfolios.'

[maddox] 11/7/2016 13:12

Hi mlangton,

Unite had a London focused strategy following 2008/9 GEC but more recently moved exclusively out to top regional Cities. This is based on a required initial yield on completed development of >8%. However, it might just be that London is becoming viable again?

I'm looking forward to the 26th results - Unite always provide a lot of insights into the market dynamics and I'm sure that they will have plenty to say this time round. The trading update alongside their fund valuations suggested that Brexit offers little of concern and may offer some opportunities - although very much not my choice of outcome.

Regards, Maddox

[mlangton1] 11/7/2016 12:26

Thanks Maddox, yes every cloud etc. I like the fact that UTG has a widespread portfolio and is not reliant on what happens in London, and has a strong, reliable and growing demand. There is an argument for avoiding central London I think. Obviously the property/land is the most expensive (possibly in Europe) but the high fees for student accommodation forces many to look elsewhere in the UK, where we are well represented.

[maddox] 08/7/2016 08:44

RNS today
Positive update and valuation uplifts on their student property funds - albeit independently valued prior to 23rd June - driven by rental growth and a positive outlook statement 'expect to see continued high demand for purpose-built student accommodation'

Regards, Maddox

[maddox] 06/7/2016 00:06

Hi mlangton,

Couple of points for your consideration:

aa) Student accommodation is a very different species to commercial property (office and retail primarily);

bb) The cost of developing student property will be dropping along with the fall in commercial property development activity; and

cc) More land will be available at more reasonable prices for student accommodation development.

The financial viability of student property development in Central London was becoming marginal in competition with commercial property development. IMHO the linking of the post-Brexit travails of commercial property with student accommodation is miss-placed. Every cloud as they say.....

Regards, Maddox

[maddox] 30/6/2016 22:36

Yes you did and thanks for the reply - my post does seem to have disappeared. My nephew studied in Liverpool and loved the city.

I also said welcome aboard - it would seem very well-timed!

I'm very positive on UTG as you will see if you read my previous posts. I started loading up with UTG in the last global economic crisis, so have little worries with my investment in the current climate.

Back then student accommodation was seen as an exotic asset class and it had much higher and far more expensive debts. Whereas now it is very conservatively debt leveraged with longer-term lower-cost debt. It is thus well-placed to thrive even in the current turmoil.

Regards Maddox

[mlangton1] 30/6/2016 20:19

Did I see a post asking which city? Seems to have disappeared into the ether.
I'm in Liverpool Maddox. Every shop, office, pub or warehouse that closes down is immediately converted into student accomm. UNITE is very well represented, and I believe their flats are oversubscribed, as most 1st year students want "official" landlords. I'd imagine thats the case elsewhere.
My other investments, mostly gold explorers are picking up after a wretched few years. I'm comfortable having some that will benefit from the uncertainty of the times we are living through-more QE, possible negative interest rates etc, and others, like UTG, who are hopefully immune to the turmoil.

[mlangton1] 28/6/2016 19:48

Hi Maddox, and thanks for the reply. Been watching UTG and meaning to buy for some time, but kept putting it off for some reason. Bought my first after the overdone drop last Friday am and will add more as funds become available. It's possibly my first stock that is actually making money- been throwing money down the jam tomorrow drain of junior gold explo co's. My home town is becoming a Unite dominated, student swamped city as I'd imagine other places are too. Their accom is very expensive with seemingly growing demand, so high hopes for share price and dividend growth.

[maddox] 28/6/2016 10:26

Hi mlangton,

If you wish to have a discussion - start one - what is your interest in UTG? Are you imvested of considering?


OK, I've put my money where my mouth is and leveraged up with more Unite.

Regards, Maddox

[maddox] 27/6/2016 11:25

One of the great attributes about Unite is its resilience - Student Property was the best performing asset class during the last recession. It is highly unlikely that Brexit will affect the attractiveness of the high quality education on offer - and its just become more affordable due to the fall in Sterling.

This is against a back-drop of an existing significant under-supply of student accommodation. I note that Empiric have released a positive trading update this morning.

[mlangton1] 24/6/2016 08:20

Is there a more active message board elsewhere? TIA.

[maddox] 18/5/2016 21:43

Just thought I'd update my investment rationale on Unite as I do regularly.

Firstly, their market is solid and growing and not subject to economic turbulence. Secondly, Unite is asset-backed with 36% loan to assets - very conservatively financed. Hence I judge it as low risk.

Strategically, Unite is the market leader in terms of size, which is always an advantage and it manages more student beds than it directly owns - thus has scale economies. It also manages two student property funds, in which it has a stake, and from which it earns additional fees, those extra beds they manage, and investment management fees and bonuses for superior performance.

With a pipeline of secured property developments stretching out two years - providing transparency of future NAV growth - mitigates the usual investment uncertainty.

On a p/e of 24 and yield of 2.87% UTG doesn't look particularly cheap and I doubt it ever will. However, the yield will certainly get a kicker from the conversion to a REIT. So IMHO I believe that this asset backed, low risk investment, with underpinned NAV growth is under-appreciated and this may in time drive the share price to a premium to NAV. My share price target is 700p to Dec 2016.

Regards, Maddox

[maddox] 17/5/2016 21:36

Couple of announcements:

Unite have acquired another site for development - this time for 480 beds in Portsmouth. These are due for delivery in 2018 and will add to the 2,200 beds it already manages there that are let out via the University.



Unite manages the UK's largest student accommodation fund 'USAF'(Unite Student Accommodation Fund) of which they own 23%. They are raising funds through issuing a bond raising £135m at an interest rate equivalent to 2.744%. Such a low interest rate will bring down the cost of the fund's debt a tad and extend the average debt maturity to eight years. The funds will be used to repay maturing existing debt and for further investments. This move thus both increases the funds capacity to invest and yet lowers the funds financing risk - a very neat move.

[maddox] 02/5/2016 18:06

Unite has been tipped in the Investors Chronicle BUY at 600p. Key points: currently trading at a discount to f/cast NAV of 657p 31/12/2016 and 709p 31/12/2017 (Liberum figs). Prospective yield 4% from conversion to REIT. A strong and growing student market - BREXIT proof.

Regards, Maddox

[maddox] 27/4/2016 10:24

Unite have secured another site for development in Liverpool with planning permission for 713 student beds - but Unite think that this can be upped to over 1000 beds. This is scheduled to open for the 19/20 academic year - so a nice bit of forward visibility of NAV growth. Their target return on cost is >8% for regional developments.

Another point is that the £70m cost will be funded from internal resources - that I'm interpreting to mean that they will be staying within their conservative <40% loan-to-value financing. This despite the anticipated increase in dividend yield as they convert to a REIT.

NAV growth and increasing yield - what's not to like.

Regards, Maddox

[maddox] 14/4/2016 09:03

More positive news.

Unite have received planning permission for a further development in Coventry city center for 391 student beds:

'The site is located on Hales Street in the Lady Herbert’s Garden Conservation Area, only a short walk to Coventry University campus and close to public transport links.
The scheme will have a total development cost of around £25 million.
The property will consist of 3 blocks, made up of 79 studio and cluster flats totalling 391 bedrooms and will range in height up to a maximum of 11 storeys.
Unite Students currently operates three properties in Coventry, providing a home for approximately 1,200 students in the city.'

looks good:




Regards, Maddox

[maddox] 13/4/2016 22:25

'The Unite Group plc, the UK's leading developer and manager of student accommodation, announces that Mark Allan is leaving the business and Richard Smith will be promoted to Chief Executive Officer, with effect from 1 July 2016.'

Just want to say what a fantastic job Mark Allan has done at Unite over the past seventeen years. It certainly hasn't always been plain sailing particularly back in the dark days of the Global Economic Crisis. As someone with (for me) a significant amount of money invested it has been great to know that such a competent and professional Management Team has been at the tiller.

Best wishes Mark.

Cheers, Maddox

[maddox] 13/4/2016 22:08

As well as its fully owned property Unite run a couple of student property funds of which they own a percentage as well earn management fees, specifically:

USAF - Unite own 23%
LSAV - Unite own 50%

These funds are independently valued - as announced on 7th April - and growing very nicely:

'At 31 March 2016, USAF's property portfolio was independently valued at £2,132 million representing an increase of 2.8% during the quarter. The portfolio comprises 26,813 beds in 75 properties across 24 University towns and cities in the UK.

LSAV's investment portfolio was independently valued at £750 million, up 1.5% in the quarter. LSAV's investment portfolio comprises 4,636 beds across 12 properties in London and three properties in Edinburgh.

The increase in valuations is driven primarily by rental growth and eight basis points of yield compression in USAF and five basis points of yield compression in LSAV in the quarter. The overall USAF portfolio is now valued at an average yield of 5.65% and LSAV's portfolio at 4.97%.

The valuations reflect the recently announced changes to stamp duty rates, although the impact of this is relatively small as much of the USAF and LSAV portfolios are eligible for multiple dwelling relief which substantially offsets the higher rate of stamp duty. This will also be the case for Unite's wholly owned portfolio.'

On this last para - it's wonderful that that nice Mr Osborne is encouraging those nasty buy-2-letters out of Unite's market.

Regards, Maddox

[wirralowl] 04/3/2016 16:39

Hi again Maddox,

Many thanks indeed for share your knowledge on UTG and I'd agree it is very much a sector under the radar, as well as UTG1 I also hold ESP & DIGS.

My calculation of c.4-5% dividend, was based on the fact that to qualify as a REIT a company is required by law to maintain dividend payout ratios of at least 90%. Simplistically, the forecast EPS on Stockopedia for 2017 (29.8p) x 0.9 = predicted dividend of 26.82p. Divided by the share price at the time of my post of c610p would equate to a yield of 4.4%. Appreciate though there's much more to it than this, and I also note that EPS has been very lumpy in the past, so might be difficult to forecast with any real accuracy?!

Furthermore, I noted also comment in last week's IC, which mentioned our CEO anticipating dividend growth of '20% a year for the next 4 years' and Peel Hunt analysts suggesting Unite's dividend yield could eventually be over 6%!(based on a price of 605p at the time of the article).

BR,
WO

[maddox] 29/2/2016 21:30

Hi Wirral Owl,

Yep, Unite have reported a 37% total shareholder return for the year - which is difficult to argue with. However, I'd caution against you expecting to see a 4-5% yield at the point that you invest. I doubt that Unite is ever likely to look that cheap, as Mr Market is likely to give the shares a premium in consideration of:

>> Rental yield growth which has been consistently between 3-4%;

>> Portfolio growth 1,200-2,200 beds per annum;

>> Very stable market demand for student property;

IMHO this asset class is undervalued - it's defensive in nature yet generating consistent growth that looks pretty reliable projected over a 3/5 year time horizon. It's this predictable uncorrelated performance that is driving the likes of the Welcome Trust to substantially increase its investment in the sector:

'19 Jan 2016 - Goldman Sachs has joined forces with the Wellcome Trust, a British charitable foundation, in a £2bn student accommodation joint venture'

So I can foresee Unite's share price rising to reflect these factors and the yield decreasing towards 2% (sp > 730p). This is not a prediction or a tip, the future is uncertain, but just my opinion.

Regards, Maddox