Unite Share Discussion Threads

[maddox] 12/4/2021 08:08

Positive update this morning, and optimistic outlook:

'2021/22 reservations

We have seen a strong sales performance since our preliminary results on 16 March, reflecting increased confidence from both UK and international students as lockdown restrictions begin to ease. Across the Group's total property portfolio, 73% of rooms are now reserved for the 2021/22 academic year with the deficit in sales to prior year continuing to narrow over recent weeks (2020/21: 80%).'

This is then reflected in the portfolio valuations. As at 31 Mar 2021 the two funds are:

USAF – Unite own 22% - like-for-like asset value increased 0.5% during the quarter; and

LSAV – Unite own 50% - like-for-like asset value increased 1.3% during the quarter.

Overall UTG are forecasting a "2-3% rental growth in 2021/22."

So looks like we're going in the right direction and back to normality.

[madengland_] 08/4/2021 16:34

Looks like the CFO has filled his ISA

[madengland_] 29/3/2021 10:41

Thanks Maddox, looks like the crowd are waking up to the value.I'd appreciate another little drop so I can fill the isa after 6/4.

[maddox] 27/3/2021 12:43

Knight Frank says that rising demand for university places points to a positive outlook for UK PBSA. As reported by PropertyIndustryEye:

'Analysing UCAS’s latest data on student numbers, global property consultancy Knight Frank said that it “makes for positive reading, despite the pandemic”.

More than 728,000 students applied to start a full-time undergraduate course at UK universities in the 2020/21 academic year – nearly 22,500 more applicants than the previous year and only the second year-on-year increase in applications in the last five years.

There was also an increase in the number of applications from outside the UK, which climbed 7.5% compared to 2019 levels.

Higher application volumes supported a rise in total acceptances, with the number of students enrolling on a university course up by 5.4%.

Matthew Bowen, Head of Residential Investment Research at Knight Frank, said:

“The data suggests that initial fears of a sharp decline in enrolment – particularly from overseas as a result of campus closures – have not transpired. It also supports the principle that student numbers typically increase in times of economic downturn as some applicants take the opportunity to retrain or upskill.”'

'Continuing a trend which has been evident since 2012, Knight Frank said that enrolment across higher tariff universities – which typically demand higher exam grades for entry – was up 13.2%. By comparison, medium and lower tariff universities saw acceptances increase by 3.7% and 1.1% respectively.'

'Looking beyond the UK, applications from outside the EU increased by 17.1%, driven by strong demand from the usual recruitment markets such as China (+21.5%) and India (+25.5%). Applications from within the EU were down by almost 40%, a factor that is likely a result of changes to fees in the wake of Brexit.

Bowen concluded: “Overall, this has resulted in a slight downturn in international student applications at this stage, though overall growth in UK-domiciled applications and prospective students from outside the EU gives much reason to be optimistic in the medium term.”'



The full report can be downloaded here:

[maddox] 27/3/2021 12:35

Bloomberg reports that 'Private equity firms are ramping up their investments in the U.K.’s student accommodation market, pumping hundreds of millions of pounds into a resilient sector with an eye on high rental returns in post-Brexit, post-Covid Britain.'

'More than one-third of deals for student property in 2021 so far have been financed by private equity, compared to about 15% in total between 2016 and 2019, according to data compiled by real estate advisers Jones Lang Lasalle Inc.'

[madengland_] 25/3/2021 20:22

Thanks for posting

[speedsgh] 25/3/2021 12:20

www.sharecast.com/news/broker-recommendations-/broker-tips--7851254.html

Analysts at Berenberg upgraded student accommodation provider Unite Group from 'hold' to 'buy' on Wednesday, stating increased visibility had provided the stock with re-rating potential.

Berenberg said as the UK real estate sector normalises, Unite, the largest owner and operator of purpose-built student accommodation in the UK, remained "well-placed", with the analysts expecting to see a normalisation of operations, combined with long-duration demand tailwinds, development completions and operating margin improvements to justify a re-rating of the shares, which currently trade at roughly 25% below pre-Covid-19-pandemic levels.

The German bank said Unite had outperformed expectations in 2020, despite significant rent concessions being made, and highlighted that following recent management commentary and comments from Boris Johnson, which suggested that any steps taken to ease lockdown measures were irreversible, operational visibility across the student accommodation subsector had improved "materially".

"When this is taken alongside demographic, societal and supply tailwinds, we expect occupational demand to increase materially ahead of the next academic year and remain resilient over our forecast horizon," said the analysts, who rolled forward their model and increased their price target on the stock from 1,000.0p to 1,250p.

"Combined with Unite’s best-in-class portfolio, we expect these tailwinds to result in resilient, secure, inflation-plus EPS growth and a re-rating of the shares, which remain circa 25% below February 2020 peaks."

[speedsgh] 22/3/2021 18:37

Planning approval received for Derby Road, Nottingham development which will provide 700 beds, an increase of 13% from the 620 beds originally planned...

[maddox] 22/3/2021 15:06

Investors Chronicle 17 Mar 2021 has a positive write-up and buy recommendation on UTG but no share price target. They make a favourable comparison with Empiric (ESP) based on UTG 21/22 advance bookings at 66% to ESP's 20%. With this reflecting UTG's less reliance on overseas students.

[maddox] 22/3/2021 14:55

I can't remember the last Broker Research I've seen on UTG.

The Brokers Analysts are apparently undecided on UTG:

Strong Buy........1
Buy...............1
Neutral...........7
Sell..............0
Strong Sell.......1
.................10
Source: Share.com

I've no idea as to the timeliness of the data here.

Regards, Maddox

[madengland_] 21/3/2021 20:36

I've not seen anything as yet although must confess I don't pay too much attention to them. Long term this feels a great buy

[speedsgh] 17/3/2021 10:19

Does anyone have any post-results broker comments/notes/forecasts for 2021 that they might be able to share? TIA

[maddox] 16/3/2021 08:36

Yes, highly positive outlook and confident tone - justifiably, given their highly competent handling of the Covid challenge. Thankfully, they reflect the key points I made in my StockSlam pitch:

>> Students are as keen as ever to have the experience of University life;

>> Strong International demand is set to return - pleasingly, with India featuring; and

>> There is an increased recognition by Universities that they could benefit from partnerships.

Whilst, it's going to take 2021 to recover lost ground, the future looks better and Unite even better positioned for the post-Covid market. This last point, very much plays to Unite's strengths. Unite emerges from Covid with a substantially enhanced reputation - demonstrating commercial acumen, organisational excellence and social responsibility.

Let's look at London - a prime destination for students, as an example. The new London Development Plan will require future PBSA to be built with the sponsorship of a London University and have 30% affordable accommodation. Unite has an evident record of successful University partnerships (covering 60% of their accommodation) and is 'affordably' positioned on price to compete with HMOs (often very shabby private student rental flats and houses). Unite is thus ideally positioned for the London market ahead of other more premium-priced operators.

As centrally located office and retail development suffers - premium development land will be more attractively priced, and building costs suppressed. There is thus a highly attractive opportunity to build top-quality, affordable and profitable additions to Unite's portfolio in London.

Regards, Maddox

[madengland_] 16/3/2021 08:12

Well Maddox today's results and stated divi intent should go down well.

[maddox] 15/3/2021 13:07

Hi me,

Couldn't agree with you more. The prospects and market dynamics are not changing as rapidly or as dramatically as the share price might suggest. However, I wonder whether UTG's resilience might actually be counting against it - there are far larger yields available elsewhere if that's what FIs are seeking.

If you are brave an optimistic on a retail recovery you could see New River Reit (NRR) on 9% plus as attractive. Similarly, British Land (BLND) is offering 4% if you think we're not going to be working from home on a permanent basis.

UTG is a bit of a hybrid offering resilience, growth and income might not be appealing atm.

Any other thoughts?

[madengland_] 15/3/2021 11:18

Very surprised how volatile this share is on a day to day

[speedsgh] 07/3/2021 20:19

QD view: student digs top of the class for COVID rebound? -

[maddox] 05/3/2021 19:39

Thanks you're very welcome, great to have good company on here.

Yes, it's always educational to see how a management team reacts to an unforeseen crisis. It's an acid test moment for me. If they are able to quickly assess the problem, take appropriate decisions and actions then it really builds confidence.

It didn't take Unite' Team long to get ahead of the situation, take decisive measures and implement them. Clearly an uncomfortable situation but they've come through it with credit and an enhanced reputation.

They also took advantage of Covid to secure three more prime development sites at lower prices. If the effect of the pandemic is to reduce the demand for prime city center office development then their prospects are further enhanced.

[madengland_] 05/3/2021 08:06

95% collection, and a reduction in hit to EPS. Pleasing.UTG have acted well throughout the pandemic

[madengland_] 26/2/2021 12:31

Thanks Maddox

[speedsgh] 26/2/2021 11:14

Cracking write-up, Maddox. Thank you for sharing.

[maddox] 25/2/2021 17:34

My StockSlam pick is a property company specialising in Purpose Built Student Accommodation (PBSA) –called Unite (LON:UTG) . It is by far the largest in this sector with c. 75,000 beds a Mkt Cap £3.4bn and features in the FT250. Its shares peaked at £13.38 in Feb 2020 but was then hit by Covid-19 and is now down at 963p (down about 27%). This price I think presents a good short-term buying opportunity with the end of Covid restrictions in sight.

Student Accommodation is a resilient investment, its asset backed and its market is uncorrelated with the general economy. Student Accommodation was the best performing property asset class during the Global Economic Crisis of 2008/9. One of Unite’s strengths is that 55% of its beds are guaranteed to be occupied by its agreement with Universities.

Unite (LON:UTG) is a REIT (Real Estate Income Trust), which allows exemption from UK corporation tax on its rental profits and to qualify as a REIT it has to distribute 90% of its income to investors by way of dividends. Which should be attractive to income seekers, but Unite's yield is relatively low, this is because it is expected to grow, both by its development pipeline and also by acquisition. It took over the markets' third largest player Liberty Living in 2019.

The Covid Impact: Covid-19 has hit Unite’s business - they released students from their contracts very early on, also given discounts and rental free periods. Typically, they would achieve 98% occupancy – but managed only 89% in 2020. So Covid has hit its income and consequently its property values have fallen.

Unite has published a Student Survey this morning:



The findings are:

>> 77% students struggled with mental health and wellbeing as a result of Covid-19, but 84% say engaging in university life has been positive for their mental health;

>> Students' biggest challenge this year is the lack of face-to-face teaching, practical experience or facilities;

>> Traditional face-to-face university experience is key for students: 86% are keen to get onto university campus once it is safe to do so; 75% agree that living in university accommodation and being on campus is as important a part of the university experience as lectures and tutorials; and

>> Four in five (79%) students would like a return to face-to-face tuition after the Easter break.

This based on a survey of 2000 students.

Covid-19 has been very instructive: It has demonstrated just how robust the demand is for the 'university experience'. Going to University is clearly a culturally entrenched 'right of passage' for the UK's young adults.

It has often been postulated that on-line learning would disrupt this tradition. Covid-19 has provided the opportunity to test this hypothesis. Whilst, on-line learning has clearly allowed teaching to continue during the Covid-19 Lockdowns - it is certainly not a substitute for the uni experience. Students want the 'real-life' full-fat university experience - it's not just about learning ( ;-)

These are two extremely significant points for anyone assessing the risks of investing in this sector. So, I’m expecting a full recovery in demand once Covid-19 restrictions are removed.

The market back-ground is supportive: The market is under-supplied, there is a short-fall of c. 243k beds of those required for first years and international students - that universities like of offer 'in-hall' accommodation.

Secondly demand is growing: Demographics are positive - the number of 17/18 year olds is increasing - and, a higher proportion of them are opting to go to university.

The Government has at long last recognised the value of international students to the UK. The Govt has changed the rules to now allow foreign students studying in the UK to stay-on to work for a further two years. Also, the Govt are targeting to increase the number of international students by c. 33% to 600k by 2030 - from c. 450k previously.

In addition to income Unite also offers growth: It has a development pipeline of 5000+ new beds to be delivered by 2024. It raised £300m in June 2020 by way of a placing at 870p – now you might think that this was to repair the balance sheet – but no it was to take advantage of depressed land prices and fund the acquisition of three more prime development sites. It has a strong balance sheet with a 33% debt to asset value ratio.

To summarise: Covid-19 presents the opportunity to get on-board this high quality REIT that offers the prospects of both growth and income. With the end of Covid restrictions now in-sight I’m expecting to see a full recovery in demand for Unite's accommodation and a bounce in the share price. But, due to its resilient market, this is a share I’m very happy to hold in the face of a possible UK recession.

Maddox

(Declaration: I am very long Unite (LON:UTG))
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and in answer to some questions:

Watkin Jones (LON:WJG) is a great business but I haven't invested. I particularly like that they de-risk their business by pre-selling their developments and thus finance their developments using the customer's cash - perfect.

I favour Unite (LON:UTG) because it retains its developed PBSA assets and is thus inexorably growing in size and efficiency. WJG OTOH has to keep expanding its development operations in order to grow - this will at some point cause difficulties.

£UTG has a further advantage over Empiric Student Property (LON:ESP) and CPG Student Living (LON:DIGS) in its unique capital structure that provides substantially greater financial deal capacity. Its property development and management company is supported by two own managed property funds. This distinguishes it strategically from it's competitors, the funds are:

USAF £2.8bn – Unite own c.22%; and

LSAV £1.3bn – Unite own 50%.

This means that Unite (LON:UTG) is not restrained by its own balance sheet debt capacity (a conservative 33% debt to value), once the yield on a developed property matures it can sell the property into the funds and re-finance its development pipeline. The funds can also be leveraged in takeovers, such as Aston University's Campus and Liberty Living.

The financial firepower that this structure provides is a key strategic advantage in what is likely to be a consolidating sector.

\\\\\\\\\\\\\\\
Cladding - Grenfell tragedy

Unite have been hit by this dreadful scandal but are in a good position to quickly fix it. They have 19 buildings with unsafe cladding, which will be removed within the next 12 months at a total estimated cost of about £15 - £20m.

[speedsgh] 25/2/2021 11:30

Hi Maddox. Maybe you could post your write-up here after a few days once Stocko subscribers have had a chance to digest? I would certainly be interested to read it. Regards

[maddox] 25/2/2021 10:59

I've written-up and fleshed out my StockSlam pitch on Stockopedia:

www.stockopedia.com/content/my-stock-slam-pick-unite-group-utg-a-post-covid-recovery-opportunity-764584?order=createdAt&sort=desc&mode=unthreaded

Apologies to non-subscribers but you'll be very familiar with the points made.

Now that the 'road to freedom' is now in view UTG's re-rating appears to have started. The next issue beyond-Covid will be the dyer state of the UK economy. Once Mr Market starts to look for resilient performers that are uncorrelated with the economy UTG will look a very attractive prospect.

[madengland_] 23/2/2021 10:22

The post pandemic stock rotation has definitely started in all earnest