Unite Share Discussion Threads

[maddox] 27/7/2017 15:28

Hi bothdavis,

Don't know where you got the £32m figure from? How about editing your post and I'll delete this line in mine.

Firstly, and most important from a student safety viewpoint all 132 of Unite's properties have been judged, by local fire and rescue services, to be safe for occupation.

However, Unite have 6 buildings out of 132 that have the Grenfall Tower-type aluminium/composite cladding. On four of them it is cosmetic (less than 25%) and two are 75% cladded. Should they need to replace the cladding the estimated cost is £1m - £2m in capital cost and between £0.5m - £1.5m in lost revenue.

This is a small financial impact and a small price to pay to ensure their students are safe,

Regards, Maddox

[bothdavis] 27/7/2017 13:41

Cladding Risk at Student Halls

The largest provider of student accomadation may need to close 600 rooms and spend 32 million replacing cladding after the Grenfell Tower fire.

Unite, which owns 49,000 beds in 24 cities, said that tests on 132 of its buildings found that six in Bristol, London, Portsmouth and Leeds did not come up to standards.

Fire officials concluded that after some alterations the buildings were safe, but a second test was being conducted into the panels.

Unite said that if the second test found that the panels needed replacing, it could also result in lost earnings of as much as £1.5 million.

[maddox] 10/7/2017 11:29

Ahead of the half-year results, due on the 26th July, today we have the Quarterly Fund Valuation Report that gives a good early indication of performance. As well as Unite’s wholly owned student digs Unite run a couple of student property funds of which they own a percentage:

The two funds are:
USAF – Unite own 23%
LSAV – Unite own 50%

These funds are independently valued for their large financial institution investors, and the good news is that USAF is up 0.9% and LSAF up 0.5% during the quarter. Also, quoted:

‘Reservations for Unite's portfolio stand at 89% for the coming 2017/18 academic year, compared to 87% at the same time last year, and is supportive of achieving target occupancy of 98% across the portfolio and rental growth of 3.0% - 3.5% for the full year.’

So solid progress is likely to be reported on the 26 July with strong demand and the outlook is positive for the full year. I note Mr Market likes the news and has marked the shares up 11p to 651p as I post.

Regards Maddox

[maddox] 20/3/2017 10:18

In response to Unite's latest £34m acquisition through it's USAF managed fund, Proactive Investors quote Broker Liberum:

"We believe Unite offers one of the best combinations of capital and income growth in the sector, with forecast total returns of 12% p.a., and trading at a 10% discount to NAV. Forecast growth is anticipated to come from RPI linked rents and a secure development pipeline. While the cycle of yield compression may be over for student accommodation, we believe Unite's prospects for income growth remains attractive, and that the capitalisation of that gain to NAV will continue to support total returns," it said,

'Shares in UNITE dipped 3p to 633.50p. Liberum has a price target of 720p.'

[...]

[jonwig] 10/3/2017 06:38

Maddox - you'll know more about UTG than I do, but my impression is that it's as much a property developer as a rent-taker. Property developers tend to command lower ratings (more risk when downtrun comes), and the company's gearing is there to finance development rather than leverage rental income. Hence dividends tend to be lower.

[maddox] 09/3/2017 15:30

I'm already over-exposed to this sector so cannot contemplate further investment, but really like the WJG business model. As you say, the fact that they utilize their client's capital is very attractive. But overall I prefer Unite's asset backing - the LTV is c.35% so very conservatively financed with high covenants and long-term.

I've long thought that Unite's yield might be a key factor in the lack of PI following. Property investors tend to be looking for income and Unite's share price never makes them look good value. Was that a factor for you?

[jonwig] 09/3/2017 13:55

Hi Maddox - held DIGS first, then ESP. I soon had doubts about ESP (over-expansion, stretched management? - anyway, it's been a bit dull). WJG builds stuff and gets staged payments - ie. de-risked construction. It also manages student lets for investors who don't want the hassle.

Both these companies are protected from a sector downturn, I think. London will be most in demand for DIGS, and WJG is diversifying into build-to-rent. Both are debt free. UTG seems to be vertically integrated so it has exposure to the sector at every stage. Also has debt, though LTV 30% isn't a big issue. It certainly seems well-managed, so - good luck, should do OK.

[maddox] 09/3/2017 13:10

Hi jonwig,

Yep, thanks for posting - nice to have some company. Why have you chosen DIGS and WJG over Unite?

[jonwig] 09/3/2017 10:16

You seem to be alone here Maddox! I have a lot of exposure to the sector (DIGS and WJG) otherwise would be in this too.

DIGS say that Woburn Place is in need of extensive redevelopment taking over a year. Clearly there will be a future uplift in value, and DIGS is a London specialist. Both sides come out of this well-satisfied I imagine.

[maddox] 09/3/2017 10:00

Another insightful RNS from Unite - a disposal of a student property in London for £135m. This time the buyer is another quoted specialist student property REIT GCP Student Living (DIGS). GCP will be getting an initial yield on purchase of 4.5%. What is interesting is that the property was in Unite's books valued at 6% lower which puts it on a yield of 4.7% indicating how conservatively valued UTG's assets might be.

Unite's share price is already well below the last reported NAV of 647p - if this 6% underestimation of asset values is consistent across the portfolio the NAV would be 710p.


HTTP://www.investegate.co.uk/unite-group-plc--utg-/rns/disposal/201703080700088013Y/

[maddox] 04/3/2017 14:06

Investors Chronicle have tipped Unite this week, following the results:

Bull points:

>> Record reservation levels

>> Strong earnings visibility

>> Solid rental growth

>> Reit status boosting the dividend

Bear points:

>> Uncertainty over foreign student numbers

>> Strong competition for land

IC View: 'Earnings growth in the next few years is likely to be significant. And while there may be doubts about the number of overseas students arriving, there is still a huge shortage of purpose-built space.' 'And yet the shares are trading at a noteworthy discount to forecast net asset value. Buy.'

HTTP://www.investorschronicle.co.uk/2017/03/02/tips-and-ideas/share-tips/tips-of-the-week/unite-making-more-beds-HFw1JGvRVMXAsAfT4KfiYJ/article.html

[maddox] 23/2/2017 14:06

Extremely solid full year results from Unite the highlights being:

>> Final dividend up 26% to 12p (2015: 9p) making 18p for the year up 20% overall;

>> EPRA Net Asset Value up 12% to 646p per share;

>> Like-for-like rental growth 3.8% for the full year (2015: 3.8%);

>> The statutory reported profit is £201.4 million (2015: £388.4 million), down on 2015 due to the large property revaluation gain taken into the 2015 figures; and

>> Conservatively financed loan-to-value LTV of 34%.

The outlook for Unite is positive as well:

>> Current reservations at record levels for 17/18 academic year at 73%;

>> No material impact seen or anticipated from Brexit;

>> Supply/Demand imbalance continues with 185k more applicants than university places in 16/17;

>> Unite forecast rental growth of 3 - 3.5% in 2017.

Mr Market appears to have liked these results with the share price at 626p at close from 611p the previous night's close.

Regards, Maddox

[maddox] 17/2/2017 15:00

.... and now a strategically significant disposal.

Following a huge £227m purchase of assets comes and even bigger £295m disposal. A few points of significance:

>> Unite have been able to sell a ready-made student property portfolio to a large US investment fund Brookfield Asset Management;

>> This transaction demonstrates the continuing demand from large institutional investors for this asset class; and

>> This deal further highlights Unites' unique capability to transact deals of substantial scale.

This deal effectively restores Unites financial capacity bringing Unites LTV down to a conservative 34%. One wonders what else Unite has up its sleeve?

Regards Maddox

[maddox] 14/2/2017 11:08

I think that the 'penny is starting to drop' as to the strategic significance of this last deal.

[maddox] 10/2/2017 10:31

Unite have made a substantial £227m acquisition of Aston Student Village comprising 3067 beds over five properties on the campus of Aston University in central Birmingham. Although it doesn't say so I presume bought from Aston University.

HTTP://www.investegate.co.uk/unite-group-plc--utg-/rns/acquisition/201702100700065451W/

Reflecting this hot sector of the property market and quality of the asset the yield on purchase is 5% - but Unite intend to grow this to over 6%. I'd pick out a couple of points of significance:

>> The yield of 5% is pretty good as it's as good as guaranteed as these properties are the only accommodation offered to Aston's c. 11,000 students;

>> The deal reflects UTG's access to substantial funding;

>> UTG's existing scale of operation and infrastructure puts it in a strategically strong position in the likely consolidation of the sector; and

>> This deal will put Unite as prime candidate for similar deals by other universities looking to realize the value in their student accommodation assets.

Whilst, we're foregoing the 3% development yield gain on this new approach we'll be seeing the benefit far earlier in NAV and EPRA earnings. It's also worth noting that Unite is still very conservatively financed with loan-to-value (LTV) rising to 38% from 35% previously; and with the ability to sell its developed properties into either of its two managed funds (USAF or LSAF). Unite has unique advantages to compete effectively in this attractive sector of the property market.

Regards, Maddox

[maddox] 27/1/2017 11:57

More good news....

Unite has secured planning consent for two city centre developments in Birmingham and Sheffield totalling 1,186 student bedrooms. These latest consents take the total development pipeline to be delivered in the next three years to 6,500 beds, providing further visibility to our earnings growth outlook.

HTTP://www.investegate.co.uk/unite-group-plc--utg-/rns/planning-consents/201701260700091445V/

[maddox] 10/1/2017 22:33

As well as its fully owned property Unite run a couple of student property funds of which they own a percentage. As well as earning management fees from these funds, there is also the possibility for a performance based bonus. So great news today, rental growth is continuing to drive the property fund portfolio values up - and Unite will receive a £6m bonus!

The two funds are:

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

These funds are independently valued - as announced today:

'At 31 December 2016, USAF's property portfolio was independently valued at £2,288 million, representing a like-for-like increase of 0.6% during the quarter and 5% over the full year. The portfolio comprises 27,441 beds in 76 properties across 24 University towns and cities in the UK.

LSAV's property portfolio was independently valued at £1,009 million, up 0.5% on a like-for-like basis in the quarter and 4% over the full year. LSAV's portfolio comprises 6,197 beds across 14 properties in London and three properties in Edinburgh.

The increase in like-for-like valuations is driven by rental growth in the quarter. Valuation yields have remained stable in the quarter with 9 basis points of yield compression across the year. The USAF portfolio is valued at an average yield of 5.6% and LSAV's portfolio at 4.9%.

As a result of the strong total return in USAF during 2016, Unite expects to earn a net performance fee in the region of £6 million. The fee will be paid in units in the first quarter of 2017.'

HTTP://www.investegate.co.uk/unite-group-plc--utg-/rns/usaf-and-lsav-valuation-update/201701100700087258T/

Regards Maddox

[maddox] 03/1/2017 14:11

Interesting RNS from Norges Bank Holdings - it appears that whilst they hold 3.09% of Unite Group - they have leant 0.9% to the shorters. Now Norges Bank is in fact the Central Bank of Norway - and they are managing what I believe is the largest sovereign wealth fund on the planet. All that North Sea Oil and only 5.2m Norwegians.

So you wouldn't think that Norges Bank (the state bank of that moral superpower Norway) would need to nickle and dime it with those nasty hedge funds?!? The fees from stock lending must be insignificant against the decline in the capital value of their 3.09% holding. OK, so they are long-term investors and so the shorting driven share price dip may not matter on a longer term view.

However, I just wonder whether Norges Bank has a different cunning plan - to increase their holding taking advantage of the now lower price and increased liquidity? As the amount of short positions declared above 0.5% totals 4.52% Norges Bank represents 20% of that on loan and this stock can be recalled. So they appear to be in an influential market position.

Anyway I'm just speculating but ....

Regards and a Happy New Year!

Maddox

[maddox] 30/12/2016 18:47

As reported in Landlord News.....

'A new survey has revealed that rents paid by students look certain to increase, due to a housing shortage in many key university cities in the UK.

Data released by student rentals platform Studenttenant.com has assessed the demand for property in locations around the top universities in Britain. It has revealed that many students beginning their studies struggle to find suitable living accommodation beforehand.'

Https://landlordnews.co.uk/demand-student-accommodation-exceeding-stock/

[kpwf] 09/11/2016 21:14

Hi Maddox

Yes I'm a UTG shareholder.

In my opinion the shares (trading at a discount to the last reported NAV) are currently undervalued when you compare them with other shares in the sector which trade at a premium. Based on recent forecasts the dividend should increase following conversion to a REIT and I am still expecting good increases in NAV going forward bearing in mind that dividends should be fully covered by EPRA EPS. An increase in NAV combined with a reduction in the discount should hopefully drive a reasonable increase in the share price.

As a private investor this is just my personal opinion and I might be completely wrong, but I remain a long term holder.

[maddox] 09/11/2016 09:47

Hi KPWF,

Are you a UTG holder and what are your views?

Cheers Maddox

[kpwf] 08/11/2016 20:13

Hi Maddox

Yes I think you're right. It must be adjusted EPRA EPS as a percentage of EPRA NAV. That seems to tie in with consensus estimates for FY16.

[maddox] 08/11/2016 14:37

Hi KPWF,

Thanks for your question. I can see what your saying but if an EPS yield of 4.5% - a yield on what? It would be difficult to get to a yield figure of 4.5% based on rental income. The Net Operating Income margin is c.76% and EPRA earnings are c. 40% of Gross Rental Income. So perhaps its Adjusted EPRA EPS on EPRA NAV per share?

Then at 620p EPRA NAV per share (30th June) a 4.5% yield = 27.9p with a 65% pay-out ratio = 18p dividend versus 15p for last year - which looks about right. However, the EPRA NAV is likely to be higher and the dividend likewise by a corresponding amount. MHO only of course.

Why don't you email Unite and seek clarification?

Regards, Maddox

[kpwf] 08/11/2016 11:59

Maddox - please see my previous post. The trading update refers to an EPS yield of 4.5% and not yield growth of 4.5%.

Is this just based on EPRA earnings?

[maddox] 08/11/2016 11:52

Another positive trading update from Unite this morning covering the current 2016/17 academic year.

Key points:

>> Occupancy 98%

>> Rental growth + 3.8%

>> On track for EPS yield growth of 4.5% for 2016.

>> Market - 2016/17 sees record student numbers up c.40k

The growth in student numbers is further exacerbating the existing under-supply of student accommodation. Another positive point is that the growth has been strongest in Unite's target locations. With a positive outlook and development pipeline of a further 5,500 beds transparency of future growth in NAV and income is excellent and with Reit conversion will be seeing a likely 10% increase in the payout ratio.

The future is of course uncertain but it's difficult to find any points of concern that would explain the recent fall in the share price. As I post the share price is 566p against last reported NAV of 620p as at 30 June.

Regards, Maddox