Unite Students, an owner, manager and developer of purpose-built student accommodation (PBSA) provides an update on current trading for the Group and quarterly property valuations for the Unite UK Student Accommodation Fund (‘USAF’) and the London Student Accommodation Joint Venture (‘LSAV’) as at 31 December 2022.
As previously guided, higher than expected rental income in term 1 of the 2022/23 academic year has more than offset the impact of higher interest costs in the second half of the financial year. As a result, guidance is reiterated for adjusted EPS at the top end of 40-41p range for FY2022.
Demand for the Group’s accommodation has been strong in the first part of the sales cycle. Across the entire property portfolio, 70% of rooms are now sold for the 2023/24 academic year, significantly ahead of the prior year and pre-pandemic levels (2022/23: 60%). In its strongest markets, the Group has seen an increasing number of students looking to secure accommodation earlier than previous years. Unite Students have also seen increased demand from universities who see quality accommodation as a key part of their proposition to prospective students. Reservations under nomination agreements account for 52% of available beds for 2023/24, up 2ppts versus the same stage in the 2022/23 sales cycle.
As a result of this strong demand and the need to offset cost pressures in the business, Unite Students now expect to deliver income growth of at least 5% for 2023/24 (previously 4.5-5.0%).
The Group recognises the cost-of-living pressures being faced by students and parents and are confident that its fixed price, all-inclusive offer will continue to provide value for money compared to alternative options in the purpose-built student accommodation (PBSA) and HMO sectors. Its offer provides important price certainty on utilities and additional product and service features, such as on-hand maintenance teams and 24/7 security, in locations close to campus.
“We have seen a strong start to the 2023/24 sales cycle, reflecting the appeal of our high-quality portfolio and fixed-price, all-inclusive offer, which provides students with significant savings and certainty on their bills. Reservations are significantly ahead of recent sales cycles, reflecting strong demand from new and existing students as well as new nomination agreements with universities. We now expect to deliver rental growth of at least 5% for the 2023/24 academic year, which will help offset the cost pressures we are facing through higher utility and staff costs. Growing income also offers support to our property valuations as the market adjusts to an environment of higher funding costs.”Richard Smith, Chief Executive, Unite Students
Unite’s development pipeline
Unite Students is committed to two PBSA development schemes – Derby Road in Nottingham, completing in 2023, and Jubilee House in Stratford, totalling £200m in future capital commitments and delivering a blended yield on cost of 6.5% for the PBSA elements.
In December 2022, the Group acquired the land for its Jubilee House scheme for £73m. The PBSA element of the fully consented scheme is expected to be delivered in time for the 2026/27 academic year, with construction due to start in Q2 2023. The development will be delivered as a university partnership, with at least half of the available beds let under a nomination agreement. The mixed-use scheme will deliver 65,000 sq ft of academic space, let for an initial 35-year term to the Secretary of State for Levelling Up, Housing and Communities. Following completion and subject to market conditions, the Group expects to sell the academic space to a third party.
Unite Students are reviewing future development starts in its secured pipeline to ensure projects deliver earnings accretion in an environment of higher funding costs. Given the strength of demand from students and universities, the Group expects to commit to additional development projects during 2023.
“Despite the challenging economic environment, the business remains well positioned thanks to increasing student numbers and growing demand for high-quality, PBSA across our markets. Moreover, our alignment to the strongest universities and the capabilities of our best-in-class operating platform mean we remain confident of continuing to deliver strong operational results.”Richard Smith, Chief Executive, Unite Students