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UCAS figures out today for January deadline applications, show an 8% YoY increase. The 18 YO upward demographic through to 2030 was well known, but looks like the pandemic/ job market is accelerating it. GLA
Unite has published a Student Survey this morning:
httpS://www.investegate.co.uk/unite-group-plc--utg-/rns/unite-students--student-survey/202102170900023116P/
The up-shot is that we can expect a rapid recovery in Unite's trading, once Covid-19 restrictions allow. The findings are:
>> 77% students struggled with mental health and wellbeing as a result of Covid-19, but 84% say engaging in university life has been positive for their mental health;
>> Students' biggest challenge this year is the lack of face-to-face teaching, practical experience or facilities;
>> Traditional face-to-face university experience is key for students: 86% are keen to get onto university campus once it is safe to do so; 75% agree that living in university accommodation and being on campus is as important a part of the University experience as lectures and tutorials; and
>> Four in five (79%) students would like a return to face-to-face tuition after the Easter break.
This based on a survey of 2000 students.
Covid-19 has been very instructive: It has demonstrated just how robust the demand is for the University experience. Going to University is clearly a culturally entrenched 'right of passage' for the UK's young adults.
It has often been postulated that on-line learning would disrupt this tradition. Covid-19 has provided the opportunity to test this hypothesis. Whilst, on-line learning has clearly allowed for the continuing of teaching during the Covid-19 Lockdowns - but is certainly not a substitute for the Uni experience.
These are two extremely significant points for anyone assessing the risks of investing in this sector.
Regards Maddox
Expecting plenty of applicants next year following the DfE's recent statement for next years exams which includes-
'more generous grading than usual, in line with results from summer 2020, so that this year's cohort is not disadvantaged'
Unite is also a play for the FTSE 100 , it would have been on the reserve list with the December review but Russel have now moved away from this system.
Unite has acquired a new 300-bed development site in central Edinburgh 'delivering a development yield in line with the Company's enhanced 8.5% target for provincial markets'. This follows three new sites recently acquired in London.
It appears that Unite are taking further advantage of Covid-19 impact on the wider-Commercial Property Sector to pick-up prime sites at a reduced prices.
Unites' existing development pipeline of 5000+ beds will be delivered on a target initial yield of 6.8%. Whereas they are now targeting enhanced returns on new developments with yields on cost of 7.5% in London and 8.5% in provincial markets and 100 basis points lower for University partnerships. The Covid cloud may thus have a silver lining for Unite.
BBC Radio 4 Today Programme interview with David Spiegelhalter, Statistician and Chair, Winton Centre for the People’s Understanding of Risk, Cambridge.
“If we look at school kids there has been three deaths, fewer than die of flu each year. If we look at fifteen to twenty four year olds, there is about seven million of them, thirty two deaths nearly all of those people with pre-existing medical conditions. So there is about one in a million healthy people that have died from Covid.” “This is that same risk that everyone faces every day from dying from non-natural causes, and we find that quite tolerable.”
“we have to distinguish between the risk to young people, that is extraordinarily low, and the risk to others.
Https://www.bbc.co.uk/sounds/play/m000k8bv 1:54:00 right at the end to the programme.
The focus should be on creating a big campus bubble and then protecting the staff that might be vulnerable and those that might spread the virus outside of the uni bubbles. Let the students have a normal university experience and normal tuition they are at virtually zero additional risk from Covid unless they have pre-conditions.
Jo Johnson Con MP, former UK Universities Minister(and Bojo's bother)interviewed on BBC Radio 4 Today Programme 15 June - he sees a 'hostile environment' for foreign students coming to the UK, listen 2:34:00 in:
https://www.bbc.co.uk/sounds/play/m000k2s0
"there is a lot of red tape and off-putting regulations that reduce our competitiveness in the market for international students, we should remove that because international students are good for our universities, good for our economy and also good for the learning environment of our domestic students - there really isn't anything not to like."
"As a country we should be going all-out to attract them, they are one of the strongest elements of soft power we have as a country, and if we're serious about Global Britain, we should be seeking to maximise the number of Intl students in our system not try and put them off."
He's written a report published by the Policy Institute at the University of London and Harvard Kennedy School:
https://www.kcl.ac.uk/news/how-government-can-help-universities-bounce-back-after-covid-and-brexit
A sensible move last year reversed "the frankly disastrous decision" (made in 2012 by then-Home Secretary Theresa May - also responsible for the Windrush Scandle) that forced overseas students to leave four months after finishing a degree. He argues that the Post-Study Work Visa should be doubled from the current two years to four to make us competitive again against Canada, Australia and others.
"This would be a total game-changer, this would be sensational for the ability of our Universities to go an market UK higher education."
JJ sites his brother as a supporter and he has received his report.
To put the risk that Covid presents to students I'll point to this analysis by David Spiegelhalter, Statistician, communicator about evidence, risk, probability, chance, uncertainty, etc. Chair, Winton Centre for Risk and Evidence Communication, Cambridge.
https://medium.com/wintoncentre/how-much-normal-risk-does-covid-represent-4539118e1196
It shows that the risk of death that Covid presents to 20 - 24 year olds is lower than the normal risk of death that they face. The chance that a young adult of that age will die in that same year is normally low at c. 3 in 10,000. The risk from Covid is even lower at c. 1 in 10,000. Now you are probably thinking Covid is a new risk factor so you should add these risks together. But no, these figures are averaged across the group - whereas the risk is likely to be concentrated in those with underlying health conditions. So there will be overlap in these risks and the threat to healthy individuals will thus be even lower.
Putting the Covid risk further into perspective we have another report:
http://www.youngpeopleshealth.org.uk/wp-content/uploads/2019/09/AYPH_KDYP2019_FullVersion.pdf
This shows that more than half (56%) of the normal risk that students face is from potentially preventable causes - that largest category being suicide, followed by accidents, transport accidents, then drug abuse and lastly assault. It thus appears that Covid-19 presents far less a risk than other risk factors and the extreme social distancing measures that are going to ruin their uni experience are not proportionate. They want to meet new people, socialise, have fun, party, and put the world to right into the early hours of the morning.
If universities don't provide students with the full-fat student experience they will not want to spend the money going away - its not just about the studying or the qualification - it's the whole experience that matters.
Regards Maddox
Thanks Maddox
Universities have until the end of June to clarify their 'offer' for 20/21 and most are understandably holding back from announcing until the last minute to see what changes. UK Visa offices in the main markets have re-opened, so that removes one blockage that could have been an issue and the number of institutions that are accepting online English language testing to prove capability is increasing day by day.
International Students still want to come (in fact interest in the UK is higher than ever - see below), and don't seem to be put off by the prospect of quarantine on arrival, although I can't see that being in place by then. If it is, institutions and PBSA providers are putting in place discounted/ free rents for that period and practical support as necessary.
Also got to remember the geopolitical situation. The main alternative markets - the US and Aus are currently locked in disputes with China and in the case of the US especially, they have significant domestic issues that will drive students elsewhere. If BJ can keep out of the spat that US and Aus are having , the UK should do OK this year, so long as there is some face to face campus provision. Lectures are out, but seminars and tutorials likely to be face to face. Ignore the sensationalist reporting on Cambridge a couple of weeks ago - students will be on the ground there, too.
I've worked in International Education and Student Accommodation for 25 years and whilst no-one in the sector is saying international numbers won't be lower this year, the domestic pipeline is strong due to a rising 18 year old demographic and the higher ranked institutions (around which UTG focused their strategy a few years ago), should still do well.
DYOR of course, but long term, this is a strong hold for me.
Correction: Last sentence should read 'Campus style Universities shouldn't find segregation a particularly difficult task.'
'A new survey of international students by the British Council has found that nearly 14,000 fewer students from eight countries – including China, Singapore and Malaysia – are likely to come to the UK in 2020/21 in the wake of the coronavirus pandemic.
The decline of 20% in students from east Asia would amount to a 12% fall in overall international student numbers, causing a £460m loss of income from tuition and living expenses such as accommodation.
While the fall in student numbers appears smaller than some institutions are anticipating, one worrying sign from the survey is that nearly 40% of those coming from China – the UK’s biggest source of overseas students – have yet to decide.
“Prospective international students are facing a lot of uncertainty, but many are clearly trying to find a way to keep their overseas study plans,” said Matt Durnin, the author of a report for the British Council.
“There is a window of opportunity over the next two months to create a greater sense of certainty about the upcoming academic year. If responses are clear and quickly communicated to prospective students, UK higher education will face a much more manageable scenario.”
The survey of prospective students found that 29% said they were likely to delay or cancel their plans to study. A majority of postgraduate applicants said they would rather postpone the start of their studies until January 2021 than begin with online teaching in autumn, while 46% of undergraduate applicants agreed.'
https://www.theguardian.com/education/2020/jun/08/universities-face-460m-loss-from-expected-drop-in-east-asian-students-coronavirus
A few points to highlight:
>> Universities need to get their act together is they want their foreign students to turn-up; and
>> Students find online learning unappealing.
>> A 12% fall in foreign student numbers is bad but a lot better than some previous estimates.
This is a survey however and students' attitudes and intentions might change rapidly for better or for worse. Hopefully, Unis will wake up and smell the coffee soon. Students are at very little risk from Covid-19, they don't need extreme social distancing measures. The measures that are needed are to shield other vulnerable people that might interact with them, such as elderly lecturers, administrators, wardens, cleaners etc. Campus style Universities should find segregation a particularly difficult task.
Regards Maddox
UTG were very quick to respond positively to the predicament that both Universities and Students faced as a result of Covid. By waiving their contracts they will have given great relief to Students that will have been facing major stresses. However, at that point there was huge uncertainty as to what this and Covid would cost Unite.
Today's update provides a much clearer picture, albeit uncertainty remains, and guess what - the impact isn't as bad as first estimates, or anyway near as bad as the share price appears to reflect. Also, the mitigation measures that Unite are taking are producing results:
>> Cost-savings measures of £12 - £15m (on-top of £6m Liberty synergy savings);
>> Pay cuts of 30% for Directors and bonuses deferred (20% cuts for Snr Mgrs);
>> Development pipeline deferred to save cash; and
>> Switching focus on recruiting UK Students to displace the anticipated fall in new Intl. Students in 20/21 academic year.
This accompanied by reassuring comments from Richard Smith, CEO:
"We are committed to doing the right thing for our customers, colleagues and other stakeholders, despite the unprecedented times we face." and "We will emerge stronger from this challenging time, building on our enhanced reputation with students and Universities."
Having confidence in the management team is an absolute must for me as an investor. How a team responds to an unforeseen crisis is an 'acid test' moment as it reveals whether they can make the right often difficult decisions quickly and implement them effectively.
Unite have risen to the challenge and are clearly managing the crisis effectively and communicating well. This is an excellent confidence builder in the midst of this awful crisis.
Hope you all are staying safe, well and Covid-free.
Maddox
Quarterly valuation update on Unite's funds.
As at 31 Mar 2020 the two funds are:
USAF – Unite own 22% - like-for-like asset value decline of 2.2% for the year; and
LSAV – Unite own 50% - like-for-like asset value decline of 1.5% for the year.
The property valuations are directly linked to the rental income that they deliver. Obviously income has and will be hit by Covid-19 and the decisions that Unite have taken in response, specifically:
>> Free cancellation of rental contracts for the final term for students wishing to return home;
>> Significant reduction of income over the summer break period.
Unite's proactive early decision to forego rental income among other's will have been welcomed by their tenants. As Joe Lister says,
"our actions will ensure that we emerge from this uniquely challenging period with our reputation with students and Universities, not only protected but enhanced"
So, Unite are doing exactly the right things in response to Covid-19.
UTG have announced today that students who have left their buildings due to Covid, will not be held to their remaining rental payments for the 19/20 academic year. Many Universities advising their students to return home where possible and given UTG has forward commitments for 50%+ of their beds through these Univs, they'll have been under pressure to be flexible. It'll be a hard year for them w. reduced income, but when this is all over they're still fundamentally a strong business and the market leader. Bit of a steal at these prices if you're in long term IMO.
Hi Guys,
In this market there is no knowing how low a shareprice might decline. However, the EPRA NAV at 31 Dec 2019 was 853p. Now this will be influenced by rental income and Covid-19 will have an impact. Now, their update on this on the 16th March stated that their sales for the next academic year remain at the same level as this time last year but there is going to be a negative impact on summer sales of otherwise vacant rooms. This is only 3% of revenue overall - so hardly significant in comparison with the sp collapse.
On the otherhand, we have greater clarity now on the exam situation for the A-level intake:
>> There will be no exams this year;
>> They will get their results in August 2020:
>> There will be an appeals process for students unhappy with what they are awarded.
My interpretation:
>> They award A-Levels based on predicted grades;
>> They will use external exam boards to deal with/oversee appeals.
>> A-level students will be able to go to University in the Autumn.
As always DYOR - good luck and hope you make the right decisions.
Regards Maddox
Interesting to see whether the 2020 undergraduate admissions will now revert to unconditional offers from the Universities. If this is the case there could be a marked increase in earlier PBSA bookings if the clearing process is minimised.
Good points I must admit. Let us hope that the virus fall-out will have been contained by then.
Don't underestimate how reliant they will be on International (and especially Chinese) students. Will they be able to come by September? CN economy is taking a battering = fewer RMB for the middle classes to spend on a pricy, western education. UK so far not closed off borders but if they do, every University in the UK is going to have a major black hole in their 20/21 budgets.
Very surpised that the share dipped prior to the release of this report. Purely a relection of the general market coronavirus fears imo. Should see a deserved positive response today.
I feel vety confident with this share. There is little noise surrounding it but surely and steadily it marches on. No surprise that it is knocking on the door of the ftse 100
With the completion of the takeover of Liberty Living on 29 Nov an additional 72,6 million Unite shares were admitted to the stock market. This has thus lifted the market capitalisation significantly (Mkt cap ?on 16 Nov19 was £3.41bn (sp 1176p) on 7 Dec 19 mkt cap £4.49bn (sp 1234p).
???This together with the subsequent share price appreciation has led Unite's market capitalisation to rise to £4,84bn currently - where it is knocking on the door of the FT100 index.
The next quarterly review of the FT100 constituents will take place on the 11 March - so just three weeks away. As things currently stand Unite is larger than the bottom nine firms in the FT100 but ranks 6th from the top of the FTSE 250 index. So promotion is far from certain and Unite may just fall short and end up on the FT100 Reserve List.
On the other hand we may see a run-up in the share price as Financial Institutions position themselves to take advantage ahead of the Tracker Funds.
?Anyway nice to have a nag in this derby!
?Regards, Maddox
Good growth for PPHE it would seem.
Check out PPHE
It's amazing how, amongst the clamour to be found on some of the boards here, this share just climbs and climbs without any hype, ramping, de-ramping or whatever.
I guess this very post could be consider a 'hype' but I'm pretty sure it doesn't need it!
If anyone else knows a share under the radar, do share!
I've been waiting for the CMA to sign-off on the takeover of Liberty Living. Now received, this is a huge step forward for Unite - the number one in the market taking over the number three. It consolidates Unite's position as the market leader and delivers a significant operational scale-up and with it the prospects of efficiency gains.
What I was somewhat surprised by was the quality of the Liberty Living property portfolio, focused similarly to Unite, on top-flight universities and how good the fit is with Unite's own portfolio. There is certainly no drop in quality as a result of this takeover.
One aspect where Liberty were performing better than Unite is half-term lets - filling vacant rooms when the students are at home or on holiday. So there may be a few learning points to be taken on board along with the portfolio.
The deal also brings Liberty's owner, Canada Pension Plan Investment Board ("CPPIB"), on-board as an investor. It is having deep-pocketed long-term strategic investors that gives Unite the fire-power for similar large deals. This is a huge differentiator from the other purpose-built student accommodation (PBSA)specialist developers and managers.
So a fantastic deal in a market that still exhibits positive demand and rental growth. This set against an increasingly worrying macro-economic back-drop. The un-correlated nature of this sector of the property market is a highly attractive characteristic. If, as seems possible, the Treasury feels the need to drop interest rates - our asset-backed cash machine will look ever more a safe haven for financial institutions' money.
Needless to say the share price has performed strongly up 40% for the year to date (1129p as I post). So congratulations to all holders and I'm looking forwards to see how the portfolio integration proceeds and additional value is generated.
Regards Maddox
Further info.
The Govt now is aiming to increase the number of International Students to 600k from the current 450k over the next 10 years.
https://www.theguardian.com/politics/2019/sep/11/uk-work-visas-for-foreign-students-all-you-need-to-know
On the basis that PBSA beds are being built at a rate of 25,000 per year - and UK demand is still rising - it appears that the under-supply that supports rental growth is likely to be maintained.
Regards, Maddox