Purpose-built student accommodation (PBSA) owner, manager and developer Unite Students has recently released an update on current trading and quarterly property valuations for the Unite UK Student Accommodation Fund (USAF) and the London Student Accommodation Joint Venture (LSAV) as at 30 June 2023.
2023/24 lettings performance
Unite Students’ sales have continued to progress strongly for the 2023/24 academic year with 98% of rooms now sold. Demand remains strong from both university partners and students booking accommodation on a direct-let basis.
Nominations agreements cover 56% of total beds for 2023/24 representing an increase of around 2,000 beds compared to the prior year, as universities increasingly rely on partners to meet their accommodation needs.
This is supportive of full occupancy and rental value growth of around 7% (previously 6% to 7%) for the 2023/24 academic year.
Unite Students development pipeline
Unite Students is committed to four development schemes with a total development cost of £339m and blended yield on cost of 6.7% for the student accommodation elements. The £179m remaining costs to complete these projects will be funded through Unite’s cash and committed debt headroom of £393m at 30 June.
“Reservations for the 2023/24 academic year remain at record levels, with 98% of rooms now sold, reflecting strong demand from both students and universities and the attractiveness of our fixed-priced all-inclusive offer. This supports an improvement in our rental growth guidance to around 7% for the 2023/24 academic year.
“Our strong leasing performance will continue to support our property valuations as the market adjusts to an environment of higher interest rates. The supply of purpose-built student accommodation cannot keep pace with growing student demand at the same time as HMO landlords are leaving the sector.
“Unite is uniquely positioned to address this housing need through our best-in-class operating platform, university relationships, development and asset management capabilities.”Richard Smith, Chief Executive Officer, Unite Students
During the quarter, USAF completed a new £400m secured loan, refinancing its £380m bond which matured in June 2023. The seven-year loan has a fixed rate of 5.4% and is consistent with the company’s previous guidance for a 3.6% overall cost of debt this year on a see-though basis.
Quarterly fund valuations
At 30 June 2023, USAF’s property portfolio was independently valued at £2,923m – a 1.2% increase on a like-for-like basis during the quarter. The valuation increase in USAF is driven by quarterly rental growth of 2.2% and a five-basis point increase in property yields. The portfolio comprises 27,924 beds in 71 properties across 19 university towns and cities in the UK.
Unite Students’ LSAV’s investment portfolio was independently valued at £1,940m, a 1.1% increase on a like-for-like basis during the quarter. The valuation increase in LSAV is driven by quarterly rental growth of 2% and a four-basis point increase in property yields. LSAV’s investment portfolio comprises 9,716 beds across 14 properties in London and Aston Student Village in Birmingham.
The USAF and LSAV portfolios are now valued at weighted average yields of 5.1% and 4.3% respectively.
Unite Students expect the valuations of its wholly owned portfolio for 30 June 2023 to be broadly consistent with the USAF and LSAV valuation movements over the first half of the year.