Unite Students release trading update and Q1 fund valuations

Unite Students have experienced continued strong demand with 86% of beds sold for the 2024/25 academic year (2023/24: 90%).

Unite Students Morriss House in Nottingham | PBSA News
Unite Students Morriss House in Nottingham.

Owner, manager and developer of student accommodation Unite Students has announced 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 31 March 2024.

The current trading update for the 2024/25 lettings performance has shown that demand for Unite Students’ accommodation remains strong, with good progress in sales since its preliminary results. Across the Unite Group’s portfolio, 86% of rooms are now reserved for the 2024/25 academic year, ahead of its typical leasing pace and slightly below the record reservation rates last year (2023/24: 90%).

Demand from universities continues to grow with a further 1,000 beds secured via nomination agreements since its preliminary results. Demand from international students remains robust despite recent changes to UK visa rules for dependents of postgraduate taught students. International direct-lets for 2024/25 currently account for 13% of rooms, broadly in-line with the 15% let at the same stage last year.

The ongoing strength of student demand supports the Group’s confidence in delivering rental growth of at least 6% and full occupancy for the 2024/25 academic year. Unite’s balanced approach to rental growth will ensure sustainable returns over the long term, while also remaining good value for students.

The property update shows that the Group has achieved planning approvals on two development projects in recent weeks. The 500-bed Freestone Island project in Bristol, which is located close to the University of Bristol’s new Temple Quarter Enterprise Campus, has now received full planning consent. The Group expects to acquire the land in the coming weeks, which supports delivery of the scheme in time for the 2026/27 academic year.

Meridian Place, Stratford has received resolution to grant planning permission at committee with full planning consent anticipated to be secured in the coming months. Unite now expects to deliver the 952-bed scheme for the 2028/29 academic year, following delays in its planning timetable.

At the Group’s joint venture with Newcastle University – Castle Leazes – a planning application has now been submitted to demolish the existing buildings. Unite expects to submit a planning application for around 2,000 new beds in April, which supports entry into the joint venture in Q4 this year.

“Student demand is strong for the 2024/25 sales cycle, reflecting the continued appeal of our fixed-priced, all-inclusive offer and a growing shortage of high-quality student homes. Together with our alignment to the UK’s strongest universities, this supports a positive outlook for rental growth for the 2024/25 academic year and underpins our property valuations. We continue to progress the delivery of our record £1.3bn development pipeline, securing planning approvals on two schemes in London and Bristol. These projects will deliver much needed new student homes in two of the UK’s strongest university cities.”

Joe Lister, Chief Executive Officer, Unite Students

The Group has announced that it is tracking further opportunities for development, university partnerships, and acquisitions in London and strong regional markets at attractive returns. It also expects to add to its pipeline in H1 2024.

Unite’s disposals update highlights that the Group continue to recycle capital to improve the quality of their portfolio and provide funding for reinvestment in new growth opportunities. It is in the advanced stages of selling a £180m portfolio (Unite share: £75m), which is expected to complete during Q2.

As part of the Spring Budget, the Government announced the abolition of the Multiple Dwellings Relief (MDR) for residential property transactions in England with effect from 1 June. MDR provided relief for Stamp Duty Land Tax when purchasing two or more dwellings valued at £250,000 or less, which benefitted several of Unite’s properties.

The Group’s independent valuers have fully reflected the increase in purchasers’ costs in the 31 March fund valuations, which has resulted in a £61m (2.0%) and £6m (0.3%) reduction in value for USAF and LSAV respectively. USAF is more significantly impacted due to the lower average value of dwellings (cluster flats or studios) for its portfolio.

Valuations for the Wholly Owned portfolio at 30 June will also reflect the loss of MDR. In isolation, the Group expect the removal of the MDR to reduce the Group’s EPRA NTA by around £70m (16p) in the first half, equivalent to a 1.3% reduction in asset values at Unite share.

The quarterly fund valuations show that at 31 March 2024, USAF’s property portfolio was independently valued at £2,982m – a 0.5% reduction on a like-for-like basis during the quarter. The valuation loss reflects the one-off impact of MDR being abolished, partially offset by quarterly rental growth of 1.7%. Property yields were unchanged over the quarter at 5.3%. The portfolio comprises 27,922 beds in 71 properties across 19 university towns and cities in the UK.

LSAV’s property portfolio was independently valued at £1,938m, a 0.8% increase on a like-for-like basis during the quarter. The valuation increase in LSAV is driven by quarterly rental growth of 1.3%, partially offset by the abolition of MDR. Property yields were unchanged over the quarter at 4.5%. LSAV’s investment portfolio comprises 9,716 beds across 14 properties in London and Aston Student Village in Birmingham.