Unite Students issue trading update and Q1 fund valuations

Purpose-built student accommodation (PBSA) developer and operator Unite Students recently announced an update on current trading and quarterly property valuations.

Unite has recently announced the successful completion of the Capital Raise | PBSA News
Unite has recently announced the successful completion of the Capital Raise.

The update spans across the Unite UK Student Accommodation Fund (USAF) and the London Student Accommodation Joint Venture (LSAV).

USAF has agreed terms, and been granted full credit approval, for a new £400m secured loan to refinance the £380m June 2023 USAF bond maturity.

Based upon prevailing market interest rates, Unite expect an all-in cost of debt of approximately 5% to 5.5%.

This is consistent with their guidance for a 3.6% cost of debt in 2023 on a see-though basis.

The 2023/24 lettings performance has seen continuous progress in sales since Unite’s preliminary results, with 90% of rooms now sold for the 2023/24 academic year (2022/23: 78%).

Demand remains strong from both University partners and students booking accommodation on a direct-let basis with reservations ahead of 2022/23 in almost all markets.

This is supportive of the company’s guidance for full occupancy and rental growth of 6% to 7% for the 2023/24 academic year (2022/23: 99% and 3.5%).

“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% to 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 pBsa 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.”

Richard Smith, Chief Executive Officer, Unite Students

For the quarterly fund valuations, USAF’s property portfolio was independently valued at £2,888m; unchanged on a like-for-like basis during the quarter.

LSAV’s property portfolio was independently valued at £1,918m, reflecting a (0.1%) decrease on a like-for-like basis during the quarter.

The valuation movement in the quarter is driven by increased rental growth with offsetting increases in property yields.

The USAF and LSAV portfolios are now valued at weighted average yields of 5.1% and 4.2% respectively, increased by 5bps and 10bps respectively from 31 December 2022.

Unite Students is committed to four development schemes, totalling £339m, and delivering a blended yield on cost of 6.7% for the PBSA elements.

The £200m remaining costs to complete these projects will be funded through the Group’s cash and committed debt headroom of £437m.

Unite is also tracking a pipeline of other new development opportunities offering beneficial returns for the business.

The Unite Students Group hope to commit to a number of these schemes this year.