Unite Share Discussion Threads

[rambutan2] 29/7/2020 19:18

Presentation and webcast links:

[maddox] 13/7/2020 09:05

Unite has acquired a new 300-bed development site in central Edinburgh 'delivering a development yield in line with the Company's enhanced 8.5% target for provincial markets'.

It appears that Unite are taking full advantage of the Covid-19 impact on the wider-Commercial Property Sector to pick-up prime sites at a reduced prices.

Unites' existing development pipeline of 5000+ beds will be delivered on a target initial yield of 6.8%. Whereas they are now targeting enhanced returns on new developments with yields on cost of 7.5% in London and 8.5% in provincial markets and 100 basis points lower for University partnerships. The Covid cloud may thus have a silver lining for Unite.

[bothdavis] 08/7/2020 21:53

I hope so, still not convinced all students who said they will take up Uni places will do so...

[maddox] 08/7/2020 14:48

Unite (UTG) also provided today a further market update along with the fund valuation RNS. The deadline for accepting an offer of a university course was the 18 June. As you will be aware there has been much speculation as to students deferring due to Covid-19 and likely social distancing disruption to their ‘student experience’. However, this appears not to have occurred, the key points being:

>> UCAS data showed a 1% increase in the number of applicants with an offer to start University this Autumn compared to 2019/20;

>> This reflects a 3% increase in acceptances by UK 18-year olds as increased participation rates more than offset the demographic impact of fewer young people in the population.

>> The number of students with a deferred start date was down 1% compared to 2019/20 as of 18 June.

This clearly demonstrates the resilience and contra-cyclical nature of the market on which the PBSA sector depends.

Unite are targeting a 90% occupancy for next academic year (2019/20 was 98%). Currently, bookings stand at 81% whereas they were 90% booked at the same time last year. However, the cancellation of A-Level exams and additional uncertainty over the awarding of results (appeals process and re-sit exams) that there is likely to be a last minute rush for accommodation.

IMHO I think Unite will get closer to the previous 98% occupancy - whilst there is a greater risk that they don’t I’m sure they will be doing their level best to beat the 90%.

[maddox] 08/7/2020 14:21

in addition to Unite’s wholly owned student digs Unite runs two student property funds of which they own a percentage. Unite report their independent quarterly valuations of their funds today - there has been virtually no change in value since the last quarter. The two funds are:

USAF – Unite own 22% - like-for-like asset value decline of 2.2% for the half year; and,

LSAV – Unite own 50% - like-for-like asset value decline of 1.5% for the half year.

The decline being driven by the loss of rental income as a result of Covid-19. There is clearly a read across to Unite's directly held PBSA. This decline of 1.5% - 2.2% is in contrast to the magnified c. 30% decline in Unites share price (1325p to 924p).

[maddox] 29/6/2020 12:21

I really should have also mentioned Unite's management - which are clearly excellent.

It's when a crisis strikes that you can really gauge the quality of the management team. Unite acted quickly and decisively in response to Covid-19, taking the lead in the market, and 'did the right thing' in releasing students from the rent obligations. They took sensible steps to conserve cash and de-risk the business to weather the uncertain conditions. Further, they have taken the lead again in gaining a 'Covid Secure' designation for their properties.

Having taken stock, conducted some market research, reassessed the market have now taken advantage of the attractive opportunities Covid has made available. 10 out of 10, perfect.

In uncertain times it is immensely reassuring to have such competent managers in control.

[maddox] 27/6/2020 10:19

Hi Oxman,

Unite certainly has the advantage of scale - being the largest player in a market always confers some competitive advantage, say price setting and scale economies. However, Unite has some other significant advantages, specifically:

> Capital Structure: The two off-balance sheet funds give it access to substantial fire power for development funding and takeovers; and

> University Relationships: The 52% of their portfolio covered by nomination agreements bears witness to this, Universities see Unite as a trusted partner that they can do long-term deals with.

This last point is going to become far more significant for London development.

The London Plan will require that proposed developments have pre-agreed University backing(nomination agreements)and that 35% meet an affordability requirement (Draft London Plan, Dec 2019 p79). The plan runs out to 2041.



The plan also envisages a need for 3,500 PBSA beds per annum. So Unite is thus in an extremely advantageous position to develop a strong PSBA London pipeline.

Regards, Maddox

[its the oxman] 26/6/2020 09:42

Hi Maddox, just wish I bought more here at 700p and less empiric, probably short term thinking as the others are at more significant nav discounts, surprised all have not bounced similarly. Guess there is something to being the market leader.

[maddox] 25/6/2020 09:29

Hi Oxman,

Yep, Unite would normally find it impossible to get London developments on a 7.5% yield on costs, previously 5.5% would have been attractive. The fact that they are able to take advantage speaks volumes. The PSBA market is negatively correlated with Commercial Property and Unite's capital structure gives them access to the financial resources they need in the midst of a crisis.

All very positive.

[its the oxman] 25/6/2020 08:51

If unite can achieve 90% occupancy for this coming year that looks very positive , and subsequent years should improve further. Investment case looking out over the next 5 years looks compelling, improved returns from todays money raise just makes it better.

[maddox] 24/6/2020 17:17

Very interesting trading update and fundraising announced after market close today. The timing of the release is usually an alarm signal. However, the trading update is highly positive in the circumstances:

'UK student demand is expected to be robust, reflecting the clear desire of young people to attend University, weaker employment prospects and fewer gap year opportunities for school leavers. The Company has growing visibility over 2020/21 income through 80% of beds either contracted or reserved. The Company is targeting occupancy of 90% for 2020/21, supported by nomination agreements expected on over 50% of beds.'

And every cloud has a silver lining, the £300m funds to be raised will be used to take advantage of opportunities created by Covid - and with enhanced returns.

'The Net Proceeds will allow the Company to pursue three additional schemes in central London and prime provincial cities for 2023/2024 delivery at a total development cost of approximately £250 million. They consist of two developments and one forward funded acquisition, which are currently under offer at yields on cost 50-75bps above pre-Covid-19 levels. The Company is targeting enhanced returns on new developments with yields on cost of 7.5% in London and 8.5% in provincial markets and 100 basis points lower for University partnerships. This reflects the Company's expectations for reductions in land and construction prices.'

No doubt, the share price fall today will have been driven by FIs selling to raise funds to purchase new shares in the book-building.

It would appear that Unite are going to emerge from this Covid Crisis stronger than they entered it.

[maddox] 20/6/2020 10:13

More on the risk of Covid-19 to students:

BBC Radio 4 Today Programme interview with David Spiegelhalter, Statistician and Chair, Winton Centre for the People’s Understanding of Risk, Cambridge.

“If we look at school kids there has been three deaths, fewer than die of flu each year. If we look at fifteen to twenty four year olds, there is about seven million of them, thirty two deaths nearly all of those people with pre-existing medical conditions. So there is about one in a million healthy people that have died from Covid.” “This is that same risk that everyone faces every day from dying from non-natural causes, and we find that quite tolerable.”

“we have to distinguish between the risk to young people, that is extraordinarily low, and the risk to others."

1:54:00 right at the end to the programme.

The focus should be on creating a big campus bubble and then protecting the staff that might be vulnerable and those that might spread the virus outside of the uni bubbles. Let the students have a normal university experience and normal tuition they are at virtually zero additional risk from Covid unless they have pre-conditions.

[maddox] 15/6/2020 11:47

Jo Johnson Con MP, former UK Universities Minister(and Bojo's bother)interviewed on BBC Radio 4 Today Programme 15 June - he sees a 'hostile environment' for foreign students coming to the UK, listen 2:34:00 in:



"there is a lot of red tape and off-putting regulations that reduce our competitiveness in the market for international students, we should remove that because international students are good for our universities, good for our economy and also good for the learning environment of our domestic students - there really isn't anything not to like."

"As a country we should be going all-out to attract them, they are one of the strongest elements of soft power we have as a country, and if we're serious about Global Britain, we should be seeking to maximise the number of Intl students in our system not try and put them off."

He's written a report published by the Policy Institute at the University of London and Harvard Kennedy School:



A sensible move last year reversed "the frankly disastrous decision" (made in 2012 by then-Home Secretary Theresa May - also responsible for the shameful Windrush Scandle) that forced overseas students to leave four months after finishing a degree. He argues that the Post-Study Work Visa should be doubled from the current two years to four to make us competitive again against Canada, Australia and others.

"This would be a total game-changer, this would be sensational for the ability of our Universities to go an market UK higher education."

JJ sites his brother as a supporter and he has received his report.

[maddox] 08/6/2020 09:15

Thx again Chucko, that's very good news.

I suspect the difference is that the students are not impressed by the online learning, social distancing measures and term delays being contemplated by some Unis. These are probably more a concern than Covid-19?

[chucko1] 08/6/2020 08:55

Agreed. Also, I know that Chinese schoolkids are NOT deferring their places at UK public schools. A lot went back to China, paying extremely high air fares, in March/April at the time China infection rates were trending far lower and the UK rates were exponential. But they are all coming back in September, or at least those are their current plans. Unsure why undergraduates would be markedly different.

[maddox] 08/6/2020 08:51

thx Chucko - amended the post.

[chucko1] 08/6/2020 08:43

"Campus style Universities should find segregation a particularly difficult task."

Or not?

[maddox] 08/6/2020 08:40

Further info on the prospects for the 20/21 Academic Year.

'A new survey of international students by the British Council has found that nearly 14,000 fewer students from eight countries – including China, Singapore and Malaysia – are likely to come to the UK in 2020/21 in the wake of the coronavirus pandemic.

The decline of 20% in students from east Asia would amount to a 12% fall in overall international student numbers, causing a £460m loss of income from tuition and living expenses such as accommodation.

While the fall in student numbers appears smaller than some institutions are anticipating, one worrying sign from the survey is that nearly 40% of those coming from China – the UK’s biggest source of overseas students – have yet to decide.

“Prospective international students are facing a lot of uncertainty, but many are clearly trying to find a way to keep their overseas study plans,” said Matt Durnin, the author of a report for the British Council.

“There is a window of opportunity over the next two months to create a greater sense of certainty about the upcoming academic year. If responses are clear and quickly communicated to prospective students, UK higher education will face a much more manageable scenario.”

The survey of prospective students found that 29% said they were likely to delay or cancel their plans to study. A majority of postgraduate applicants said they would rather postpone the start of their studies until January 2021 than begin with online teaching in autumn, while 46% of undergraduate applicants agreed.'



A few points to highlight:

>> Universities need to get their act together if they want their foreign students to turn-up; and

>> Students find online learning unappealing.

>> A 12% fall in foreign student numbers is bad but a lot better than some previous estimates.

This is a survey however and students' attitudes and intentions might change rapidly for better or for worse. Hopefully, Unis will wake up and smell the coffee soon. Students are at very little risk from Covid-19, they don't need extreme social distancing measures. The measures that are needed are to shield other vulnerable people that might interact with them, such as elderly lecturers, administrators, wardens, cleaners etc. Campus style Universities shouldn't find segregation a particularly difficult task.

Regards Maddox

[maddox] 03/6/2020 23:24

Interesting discussion on Radio 4 Today 1:34:00 in:



Clear divergence of opinion, on the one hand Julia Buckingham Brunel Chancellor, speaks on behalf of Universities UK "wonderful digital education being introduced, very exciting ... have wanted to do this for a long time." Whilst others clearly recognise what prospective students really want Richard Taylor, COO Loughborough Uni "student life must be enjoyable, they want to socialise, the campus university experience".

I think the students will dictate the outcome - mass deferral will spell financial distress for universities.