Unite Share Discussion Threads

[maddox] 24/10/2023 22:59

Ha Ha I assume your post is aimed at Blackhorse-down strawberry. I doubt he'll see your post as he's posted widely and indiscriminately to try and support his latest trade.

I follow WJG as operating in PBSA, as I also follow ESP and DIGS, but not invested. He started ramping around 20 Sep, WJG share price c. 41p so about 12% down currently.

Unlike UTG, WJG are solely focussed on property development which is suffering due to high interest rates that means no one wants to buy their developments. If WJG can pull through into a more benign interest environment then they are probably a steal at the moment - but too risky for me.

[maddox] 05/10/2023 08:30

Trading Update for Q3

Highlights

>> 99.7% occupancy for the 2023/24 academic year (2022/23: 97.9%)

>> Rental growth of 7.3% for the 2023/24 academic year

>> Property values broadly stable in Q3 (USAF: +0.2%, LSAV -0.2%)

>> Development pipeline 5,600 beds.

Market back drop is highly supportive as under-supply of student accommodation is growing, exacerbated by private HMO owners leaving the market. With rental sector experiencing huge demand and above inflation rental increases PBSA offers a better value and high quality choice.

As a REIT all this should flow through to yield. A huge amount of capital has flowed out of the market and into Gilts but as interest rates approach their peak - the attraction should be waning.

[blackhorse23] 05/10/2023 07:14

Moving to WJG , better value

[speedsgh] 13/9/2023 12:14

New 800-bed development in Glasgow -

Unite Students, the UK's leading owner, manager and developer of student accommodation, today announces that it has entered an option agreement to acquire a new 800-bed development scheme in central Glasgow, subject to planning.

The new development will help address the acute shortage of student accommodation in Glasgow, which is home to three institutions within the UK's top 75 universities, and increases Unite's portfolio in the city to 3,000 beds. The Group expects to deliver the scheme as a university partnership with at least half of the beds to be let on a multi-year nominations agreement to a leading university.

The scheme has a total development cost of £95 million and is expected to deliver a yield on cost of around 7.5%. Planning approval is targeted during H1 2024, enabling delivery for the 2026/27 academic year. The Group expects to fund the project from capital recycling through disposals.

Development pipeline update

We have continued to make good progress on delivery of our committed development pipeline since our interim results. Morriss House in Nottingham reached practical completion in August and is fully let for the 2023/24 academic year.

Following our £300 million equity issue, work has started on-site at our Temple Quarter development in Bristol. The planning process for Meridian Square in Stratford is also progressing in line with expectations with approval targeted in Q4 2023.

Michael Burt, Unite Students Group Investment Director, commented:

"Our latest development will create new supply of high quality, affordable student accommodation in Glasgow to support the continued growth of our university partners. We are also making good progress in delivering the two new developments funded from the proceeds of our recent capital raise. Our development pipeline now totals 5,600 beds in the strongest university cities, as we work to address the urgent need for new student housing at a time when the private rental sector is in retreat."

[maddox] 01/9/2023 12:34

The Chronic Investor asks:
'Is the student accommodation market in a bubble?'



I find the IC increasingly journalistic rather than analytic - so despite the click-bait title - it cites plenty of evidence that the supply/demand imbalance is set to further widen.

Specifically, it quotes research 'Student accommodation website StuRents calculates that there is currently a shortage of 283,000 student beds in the UK, and forecasts that this will rise to 621,000 by 2026 based on the number of PBSA buildings in the planning stages and further surges in student numbers.'

And IC concludes 'But the size of the gap between the number of beds and the number of students looks high enough to carry the sector for at least a few years.'

Unite recently reported that the supply of new PBSA beds had fallen from c. 27-32k per annum over the previous four years to 19k in 2022 and projected 12k in 2023. So, I'd suggest that their conclusion is somewhat an understatement.

[speedsgh] 29/7/2023 06:08

LGIM provides landmark £400m facility to Unite -

[maddox] 26/7/2023 06:19

If you missed the Results presentation yesterday, here is the recording:



Loads of great insight into the market in addition to the financials etc.

[maddox] 25/7/2023 17:31

Yes, £300m raised at 905p and the share price has recovered closing at 962p - so a nice 6.3% gain for subscribers - £4m of which was retail money. We now have a healthy £600m development pipeline, rising rents and some (at long last) Uni deals to look forward to.

[speedsgh] 25/7/2023 12:53

It seems Unite had little trouble in raising the £300m they were looking for. I can't say that I am surprised.

[maddox] 24/7/2023 19:41

Reflecting on Unite's statements and fundraise - the extent of student accommodation crisis was evident last year - I get the impression that the Unis have now finally woken up the impact this will have on constraining their intake for 23/24.

The widening mismatch between demand and supply has been foreseeable for years - when the development climate was far more benign - cheap capital and low build-cost inflation. Now this problem is going to be far more difficult and expensive to resolve - and cannot be resolved quickly. This does however play into the hands of Unite in their negotiation with Unis to provide them with the student beds that they require.

[maddox] 24/7/2023 16:23

After market close - UTG have just released their 1H23 Results and are looking to raise £300m via a placing and separate retail offer via Primary Bid. The funds will be used:

'The Placing will enable Unite to continue to invest in its market-leading platform and enhance future earnings growth. The Company intends to use the net proceeds of the Capital Raise (the "Net Proceeds") to commit to two new PBSA development schemes and accelerate asset management initiatives to enhance future returns.'

'Background to the Capital Raise' - Selective edits - link below.

'The Board believes the current market environment offers a compelling multi-year opportunity to accelerate the Company's growth.'

'structural factors continue to drive a demand/supply imbalance for the Company's product. Demographic growth will see the population of UK 18-year-olds increase by 140,000 (19%) by 2030. Application rates to university have also grown steadily over recent years, reflecting the value young adults place on a higher level of education and the life experience and opportunities it offers. Demand from international students also continues to grow, as reflected in the 2% increase in undergraduate applications for the 2023/24 academic year.'

'The Company also sees opportunities to secure new development opportunities at attractive returns and is in advanced discussions for a number of schemes in London and prime regional markets. Moreover, the Company has seen a growing willingness from universities to explore more strategic options to grow and improve their accommodation offer, given the vital role it plays in helping them to attract and grow student numbers. This includes a number of advanced discussions for strategic partnerships with universities for the development of new accommodation on- and off-campus, as well as the stock transfer and refurbishment of existing university accommodation.'



I've been anticipating the Unis to be looking for partnerships for a long time - looks like it might now be happening.

[maddox] 10/7/2023 06:56

A highly positive Q2 trading update from Unite just published:

Richard Smith, Unite Students Chief Executive Officer, commented:

"Reservations for the 2023/24 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. This supports an improvement in our rental growth guidance to around 7% for the 2023/24 academic year. Our strong leasing performance will continue to support our property valuations as the market adjusts to an environment of higher interest rates."

The strong demand has lifted the value of the two property funds that UTG manages and partly ownes, these are:

>> USAF – Unite own 28.2% - like-for-like asset value increased 1.2% during the quarter; and

>> LSAV – Unite own 50% - like-for-like asset value increased 1.1% during the quarter.



The performance isn't being reflected in the share price as Financial Institutions move their money out of the UK stock market and into fixed rate investments; attracted by the rising interest rates. On Friday's close of 847p the prospective yield is 4.38% currently. Last Wednesday's UK Gilt auction priced the latest issue maturing in 2025 at 5.668% - the highest rate since 2007. So, yield seekers have a no risk alternative home for their funds. However, UTG offers growth and a growing yield which Gilts don't - so the attraction is short-term.

The high demand for student property, widening undersupply and attractive yield on development underpins a long-term growth trajectory for Unite.

[maddox] 16/5/2023 10:04

'International students boost UK economy by £41.9 billion'

'A new report, The costs and benefits of international higher education students to the UK, published jointly by Universities UK International (UUKi), the Higher Education Policy Institute (HEPI) and Kaplan International Pathways in collaboration with London Economics, reveals the growing importance of international students to local economies throughout the UK.'



If correct that figure is colossal - it could put the Universities Sector right at the top in terms of generating foreign earnings for the UK. After taking account of the impact on public services the net benefit is still £37bn. For comparison the Legal Services Sector 's foreign earnings were £5m in 2017 (Law Society figs).

The Govt has unfortunately turned once more against international students in their vain efforts to reduce immigration. This time targeting Post Grads bringing relatives - presumably that would bar a husband or wife? Why they include students in the immigration figures I don't understand. A previous report had found that virtually all university students returned home and was not a pathway for immigration.

The report also highlights that the benefits are well distributed across the regions of the UK. Hopefully, this might positively influence local planners reviewing PBSA applications.

[maddox] 12/5/2023 10:16

A good long read -

'How can universities address the student housing crisis?'



Puts some colour on the pressure on private Landlords causing them to leave the student rental sector.

[maddox] 12/4/2023 09:44

Highly positive Q1 trading update today:

Richard Smith, Unite Students Chief Executive Officer, commented:

" We continue to make strong progress with bookings for the 2023/24 academic year with 90% of rooms already sold, demonstrating the strength of student demand and the attractiveness of our fixed-priced all-inclusive offer. Reservations are significantly ahead of recent sales cycles, reflecting strong demand from both new and existing students as well as new nomination agreements with universities. This progress reinforces our confidence in delivering rental growth of 6-7% for the 2023/24 academic year. Rental growth also continues to support our property valuations as the market adjusts to a higher funding cost environment.
The supply of purpose-built student accommodation cannot keep pace with growing student demand at the same time as HMO landlords are leaving the sector. We are therefore tracking a number of new development opportunities at attractive returns, which we are uniquely positioned to deliver through our university relationships and development capability. "

Picking-out the key points:

>> Demand is out-stripping supply: the implication is full-utilisation can be anticipated looking at the forward bookings.

>> Pricing power: UTG is able to increase rents to mitigate inflation and interest rate rises. Despite the rises UTG is very competitively priced due to wider market rental price acceleration. Pricing power is extremely important for investors in an inflationary economic environment.

>> Development Pipeline: IMHO the pressure is mounting on Unis to resolve the growing accommodation crisis. This will provide the long-anticipated partnership opportunities for UTG. Something to keep an eye on.

Hopefully, with the development cost-pressures ameliorating we will see a further acceleration in the development pipeline - to meet the evident demand. Whilst pressures on yield cause property valuations to pause - new development and partnership deals are the likely pathway to growth.

[maddox] 23/3/2023 11:02

Thanks speedsgh,

I'd refer back to my post 856 on 28 Feb. Demand for PSBR is rising faster than it's being built whilst HMO provision is falling. I expect the pace of build to recover this year but it'll clearly take many years to close the undersupply.

One contributing factor is that students and PBSA appear to be unpopular - leading to difficulty gaining planning permission. This is a problem for UTG as for other developers in meeting the huge demand.

[speedsgh] 23/3/2023 09:21

Excerpt from IC article...



Beds and sheds

Speaking of Unite, its 2022 was markedly different from its peers in the Reit world. While others swung to losses due to valuation hits, it managed to grow its profits and revenue thanks to a valuation bump and increased rental income. The student accommodation sector is seen by investors as somewhat immune to the real estate market downturn due to the surging demand and the continued dearth of supply.

Unite’s results show it is confident about being the company to fill this supply shortage. It is currently committed to four development schemes, totalling 2,123 beds at a cost of £339mn, and says it “expects to commit to further development activity during 2023”. Some of this could come out of the ‘development pipeline’, which it is sitting on but hasn’t yet committed to building out by breaking ground.

When you pool this uncommitted and committed development pipeline together, it amounts to a total of 4,863 beds, with a total development cost of £850mn. A sizeable amount for a Reit with a completed portfolio of 29,585 beds.

To turn to a third sub-sector, warehouses – or sheds in industry parlance – started last year as commercial real estate’s hottest asset class due to investor excitement about their role in the rise of online shopping, before the deflating of that speculative bubble was followed by the wider real estate downturn. As such, sheds lost proportionately more value than any other asset class in 2022.

Despite this, the two largest UK-listed shed shifters, Segro (SGRO) and Tritax Big Box (BBOX), have both signalled in their most recent results that they are going full steam ahead with development. Over the course of 2022, the former invested £1.5bn into its already sizable £2.73bn development pipeline, which accounts for 18 per cent of the total value of the portfolio.

Tritax is similarly bullish – if not more so. Its “near-term development pipeline” comprises “the potential to deliver around 10.8mn square feet within the next 36 months, with the potential to add £87.6mn to contracted annual rent”. When you consider that Tritax’s current contracted annual rent stands at £224mn, you begin to get an idea of how much revenue it is looking to add to the company over the next three years.

Will these bets pay off? On the one hand, even with the recent pullback from Amazon on warehouse expansion, leasing data shows that warehouse demand is still near record highs while supply is still near record lows. On the other hand, 36 months is a long time. The question is whether the ecommerce need for warehouse assets will still be as acute in 2025.

The same questions could also be asked of Unite’s rampant student accommodation development. Still, as a general rule, we rate the Reits who are bullish enough to build for markets where there is demonstrable demand as better investment cases than those sitting on their hands during this downturn.

[maddox] 20/3/2023 08:44

Just thought I'd point out as we are amid a banking crisis: Back in 2008/9 Purpose Built Student Accommodation (PBSA) was a relatively new and novel asset class. It then became the best performing real estate asset class through the Global Economic Crisis (GEC).

PBSA is in huge demand and undersupply so highly resilient and also has a key strength in being uncorrelated with the general economy. That is not to say that the share price will reflect this - the huge share price volatility UTG exhibits is in stark contrast to its resilient qualities. I've concluded that this more reflects its investors than UTG as a business.

In 2008/9 I was thus able to buy at that time at around 50% of Net Asset Value.

[maddox] 04/3/2023 20:40

I'd recommend any browsers to look at the UTG results webinar, lots of great background:



Despite the current prevailing market gloom there is a very reassuring positive note in this webinar. For a start the accompanying presentation is titled 'Positioned for Growth':



As mentioned the market demand is very supportive and UTG sees opportunity of growth across three areas:

>> Internal investment: Up-grading and segmenting the existing portfolio delivering a target 7% on investment;

>> Pipeline of new development: 2123 beds (committed) and 2740 beds (not yet committed) and with additional Uni partnerships; and

>> New Buy-to-Rent(BtR)initiative: A new pillar for growth catering to young professionals (more to research on this one).

Based on this UTG are guiding to delivering an 8-10% accounting return. I'd suggest that UTG are very confident of being able to achieve that based on the core opportunities. If they do well and manage to land a few additional Uni opportunities and I'm sure they'll be aiming to beat that.

A few other observations:

The Uni. of Manchester has appointed three professional services consultancies to consult on a major investment and development strategy for its student accommodation. Real Estate Advisors CBRE will be supported by law firm Pinsent Masons and corporate finance advisors QMPF will advise on finance. Seems like a fairly comprehensive strategic review. Incidentally, UTG has just refurbished three sites in Manchester tailoring them for different customer groups.

The BtR Sector looks attractive - Spareroom.co.uk CEO Matt Hutchinson is reporting that rents are rising faster than they've ever seen: 'we've been running Spareroom for nearly 20 years now. And we've never seen the rental market like it's been in the past 18 months. There's a sort of perfect storm of dwindling supply, incredible demand. And as a result, rents are going up and so paying record highs everywhere across the UK'. (BBCR4 Money Box 4Mar23) This probably explains UTG's new initiative in this area.

Readers of Chronic Investors need to be careful of their sloppy analysis. A highlight bullet point states that UTG's 2022 revenue has fallen on 2021. Correct but not fully explained - 2021 revenue included a £42m performance fee from their fund management activities - whereas rental revenue grew 15.6% y-o-y and adjusted earnings attributable to shareholders +48% and dividends also +48%.

[maddox] 28/2/2023 15:17

Great set of results from UTG - post-Covid bounce back and them some.

Despite the rising numbers of UK and foreign students - the PBSA sector is building far fewer new beds than previously - c. 15k last year (was ave. c.25k previously). Add to this a shrinking private HMO (homes in multiple occupancy) Sector - due to interest rates and increasing regulation - and the supply/demand imbalance is significant. It's now the main constraint to further Uni expansion.

So hopefully this will lead to more of the Uni/Unite development deals - that we've been long promised.

[maddox] 19/2/2023 17:57

Hi bd,

There are two dynamics at play firstly there is the business performance and prospects, which all look supportive, and secondly, the institutional demand for shares.

I'll just post Investors' Chronicle's Simon Thompson recent views on the PBSA sector:

'There is a long-term demand-supply imbalance for PBSA, too. This imbalance is expected to increase, with the predicted annual increase in the number of students exceeding the supply of new beds. Privately owned PBSA accounts for more than half of the 698,000 PBSA beds in the UK, but one quarter is unrefurbished, first-generation stock, built pre-1999. A number of these beds are reaching the end of their operational lives and will need replacing. However, only 24,600 new beds were delivered in the 2021-22 academic year, a modest 3 per cent rise on the prior year.

These dynamics explain why institutional investors remain attracted to UK PBSA as a mature, stable and income-producing asset class. Knight Frank reported £6.9bn of transactions in 2022, the highest investment volume on record.'

IC 25 Jan Review of Watkin Jones (WJG) Hold 102p

The 10 Jan UTG Trading Update was highly positive despite the property fund valuations taking a hit as a consequence of the higher yield expectation - reflecting the macro-economic backdrop rather than the Institutional demand mentioned by Simon Thompson.

On the second factor - demand from institutions - I'm still of the opinion that the Kwarteng/Truss LDI shock to pension funds is still influential. We've seen some recovery (995p as I post) but the demand to have higher levels of liquidity (by the Pensions Regulator amongst others) will have tempered demand for equities.

Hopefully, the results due on 28 Feb will draw in some new investors.

[bothdavis] 12/12/2022 10:05

So the reason for a drop today is......

Really can't fathom why the shareprice has not recovered further up its previous highs.

Have all the students stopped going to Uni?

[maddox] 01/12/2022 12:06

A reassuring opinion article in the FT: 'Student housing is the bubble that won’t burst'



Key points:

>> It's a property sector that is attracting significant Private Equity investment;

>> Take-over deals at high valuations (£280k per bed is cited);

>> Highly resilient demand - both domestic and international student demand growth;

>> Structural supply imbalance will persist for the rest of the decade; and

>> HMO landlords under-pressure.

So, all very supportive of PBSA sector valuations; and yet we're 24% below UTG's 52 Week High of 1207p. I suspect it's as a result of the recent Govt mini-budget from the Chancellor of the Exchequer, Kwasi Kwarteng. The subsequent margin call on LDI holders, pension funds and the like, caused them to indiscriminately dump their equity holdings in a panic to raise cash to pay the call. These would be the type of investment institution that would be attracted to UTG. I cannot find supporting evidence to substantiate this but it's my working hypothesis.