TIDMUTG
RNS Number : 1457M
Unite Group PLC (The)
10 January 2023
PRESS RELEASE
10 January 2023
THE UNITE GROUP PLC
('Unite Students', 'Unite', the 'Group', or the 'Company')
TRADING UPDATE AND Q4 FUND VALUATIONS
Unite Students, the UK's leading owner, manager and developer of
student accommodation, today announces 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.
Highlights
-- Guidance reiterated for adjusted EPS at the top end of 40-41p
range for FY2022, and a total accounting return of around 8%
-- Strong start to the 2023/24 sales cycle with 70% of beds sold (2022/23: 60%)
-- Targeting rental growth of at least 5% for 2023/24 (previously 4.5-5.0%)
-- Committed development pipeline of two schemes, totalling
1,421 beds and GBP200m in future capex, fully funded from existing
facilities
-- Q4 like-for-like valuation decreases of 1.4% and 2.8% in USAF
and LSAV respectively, and increases of 4.6% and 5.6% for
FY2022
Richard Smith, Chief Executive of Unite Students, commented
:
"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.
"Despite the challenging economic environment, the business
remains well positioned thanks to increasing student numbers and
growing demand for high-quality, purpose-built student
accommodation 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."
Current trading
2022 earnings guidance
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, we reiterate our guidance for adjusted EPS to be at the
top end of our 40-41p range for FY2022.
2023/24 reservations
Demand for the Group's accommodation has been strong in the
first part of the sales cycle.
Across the Group's 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 our strongest
markets we have seen an increasing number of students looking to
secure accommodation earlier in the sales cycle than previous
years. We 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 our business, we now expect to deliver income growth
of at least 5% for 2023/24 (previously 4.5-5.0%).
We recognise the cost-of-living pressures being faced by
students and parents and are confident that our fixed price,
all-inclusive offer will continue to provide value for money
compared to alternative options in the purpose-built student
accommodation (PBSA) and houses in multiple occupation (HMO)
sectors. Our 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.
Development pipeline
The Group is committed to two development schemes, Derby Road in
Nottingham, completing in 2023, and Jubilee House in Stratford,
totalling GBP200 million 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 our Jubilee
House scheme for GBP73 million. 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 the second
quarter of 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, we expect to
sell the academic space to a third party.
We are reviewing future development starts in our secured
pipeline to ensure projects deliver earnings accretion in an
environment of higher funding costs. Given the strength of demand
from students and universities, we expect to commit to additional
development projects during 2023.
Funding
We have observed a slight easing in funding market conditions
over the past quarter and lenders remain supportive of the Group
and the student accommodation sector. The Group has recently
extended its Revolving Credit Facility (RCF) by GBP150 million to
GBP600 million in total, at terms in line with the existing
facility. At year-end, the wholly-owned Group had GBP397 million of
cash and debt headroom, comprising GBP29 million of cash balances
and GBP368 million of undrawn debt.
The GBP100 million L&G loan facility in LSAV, which is due
to mature in January 2023, will be repaid at maturity from existing
reserves within LSAV. We continue to make good progress in
refinancing the GBP380 million June 2023 bond maturities in USAF
(Unite share: GBP108 million), with demand from a range of
lenders.
The Group has had its Baa2 (Positive outlook) and BBB (Stable
outlook) credit ratings affirmed by Moody's and Standard &
Poor's respectively.
Quarterly fund valuations
At 31 December 2022, USAF's property portfolio was independently
valued at GBP2,888 million, reflecting a 1.4% decrease on a
like-for-like basis during the quarter. Over the year as a whole,
valuations for USAF increased by 4.6% on a like-for-like basis. The
valuation decrease in the quarter was driven by an increase in
property yields of 13bps to a weighted average of 5.0%, which more
than offset the positive impact of rental growth. Over the past 12
months, valuation growth was driven by rental growth and a 7bps
reduction in property yields on a like-for-like basis.
LSAV's property portfolio was independently valued at GBP1,921
million, reflecting a 2.8% decrease on a like-for-like basis during
the quarter. Over the year as a whole, valuations for LSAV
increased by 5.6% on a like-for-like basis. The valuation decrease
in the quarter was driven by an increase in property yields of
18bps to a weighted average of 4.1%, which more than offset the
positive impact of rental growth. Over the past 12 months,
valuation growth was driven by rental growth with yields broadly
stable.
We expect the valuation of our wholly owned portfolio at 31
December 2022 to reflect an increase in property yields comparable
to the USAF portfolio in H2 2022. This is expected to support a
total accounting return of around 8% for FY2022.
Drivers of LfL valuation movement (Q4 2022)
-------------------------------------------------
Valuation Rental Yield Other Total
Dec 2022 growth movement
----- ---------- ----------- ------------ ---------- ----------
USAF GBP2,888m 1.3 % (2.7) % 0.0 % (1.4) %
LSAV GBP1,921m 1.7 % (4.5) % 0.0 % (2.8) %
Drivers of LfL valuation movement (FY2022)
-------------------------------------------------
Rental Yield Other Total
growth movement
----- ---------- ----------- ------------ ---------- ----------
USAF 4.2 % 1.1 % (0.7) % 4.6 %
LSAV 5.6 % (0.2) % 0.2 % 5.6 %
S
For further information, please contact:
Unite Students
Joe Lister / Mike Burt Tel: +44 117 302 7005
Unite press office Tel: +44 117 450 6300
Powerscourt
Justin Griffiths / Victoria Heslop Tel: +44 20 7250 1446
About Unite Students
Unite Students is the UK's largest owner, manager and developer
of purpose-built student accommodation (PBSA) serving the country's
world-leading higher education sector. We provide homes to 70,000
students across 156 properties in 23 leading university towns and
cities. We currently partner with over 60 universities across the
UK.
Our people are driven by a common purpose: to provide a 'Home
for Success' for the students who live with us. Unite Students'
accommodation is safe and secure, high quality, and affordable.
Students live predominantly in en-suite study bedrooms with rents
covering all bills, insurance, 24-hour security and high-speed
Wi-Fi. We also achieved a five-star British Safety Council rating
in our last audit.
We are committed to raising standards in the student
accommodation sector for our customers, investors and employees.
This is why our Sustainability Strategy includes a commitment to
become net zero carbon across our operations and developments by
2030.
Founded in 1991 in Bristol, the Unite Group is an award-winning
Real Estate Investment Trust (REIT), listed on the London Stock
Exchange. For more information, visit Unite Group's corporate
website www.unitegroup.com or the Unite Students site
www.unitestudents.com
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END
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