Unite Share Price (UTG)

Unite have landed a sizeable Uni deal - a joint venture with Newcastle University to develop 2000 beds.

Unite will act as developers and ongoing asset manager with a 51% ownership, putting in 51.2% of the £250m capital. The 51% share is all important in ceding overall control of the jv to Unite; this signifies the trust that Newcastle Uni is placing in Unite. Unite's strong reputation places them in pole position to secure such deals with Unis - deals which will be long-term and upon which the Uni's students' well-being will be dependent.

This is a nice Uni partnership deal that will hopefully be a model for others; the effect of which will be to accelerate development in a hugely under-provided market.

httpS://www.investegate.co.uk/announcement/rns/unite-group--utg/university-joint-venture-/8043328

After market close - UTG have just released their 1H23 Results and are looking to raise £300m via a placing and separate retail offer via Primary Bid. The funds will be used:

'The Placing will enable Unite to continue to invest in its market-leading platform and enhance future earnings growth. The Company intends to use the net proceeds of the Capital Raise (the "Net Proceeds") to commit to two new PBSA development schemes and accelerate asset management initiatives to enhance future returns.'

'Background to the Capital Raise' - Selective edits - link below.

'The Board believes the current market environment offers a compelling multi-year opportunity to accelerate the Company's growth.'

'structural factors continue to drive a demand/supply imbalance for the Company's product. Demographic growth will see the population of UK 18-year-olds increase by 140,000 (19%) by 2030. Application rates to university have also grown steadily over recent years, reflecting the value young adults place on a higher level of education and the life experience and opportunities it offers. Demand from international students also continues to grow, as reflected in the 2% increase in undergraduate applications for the 2023/24 academic year.'

'The Company also sees opportunities to secure new development opportunities at attractive returns and is in advanced discussions for a number of schemes in London and prime regional markets. Moreover, the Company has seen a growing willingness from universities to explore more strategic options to grow and improve their accommodation offer, given the vital role it plays in helping them to attract and grow student numbers. This includes a number of advanced discussions for strategic partnerships with universities for the development of new accommodation on- and off-campus, as well as the stock transfer and refurbishment of existing university accommodation.'

https://www.investegate.co.uk/announcement/rns/unite-group--utg/proposed-placing-of-new-ordinary-shares/7651606

I've been anticipating the Unis to be looking for partnerships for a long time - looks like it might now be happening.

Down 4% in 2 days - can't see any negative news etc... This stock is surprisingly volatile.

Highly positive Q1 trading update today:

Richard Smith, Unite Students Chief Executive Officer, commented:

" 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 6-7% 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 purpose-built student accommodation 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. "

Picking-out the key points:

>> Demand is out-stripping supply: the implication is full-utilisation can be anticipated looking at the forward bookings.

>> Pricing power: UTG is able to increase rents to mitigate inflation and interest rate rises. Despite the rises UTG is very competitively priced due to wider market rental price acceleration. Pricing power is extremely important for investors in an inflationary economic environment.

>> Development Pipeline: IMHO the pressure is mounting on Unis to resolve the growing accommodation crisis. This will provide the long-anticipated partnership opportunities for UTG. Something to keep an eye on.

Hopefully, with the development cost-pressures ameliorating we will see a further acceleration in the development pipeline - to meet the evident demand. Whilst pressures on yield cause property valuations to pause - new development and partnership deals are the likely pathway to growth.

Estate Agents Knight Frank have conducted a survey with UCSA that finds that Purpose Built Student Accommodation is better value than renting a room in HMO (house in multiple occupation). The gap was most extreme in London where it was found that students pay 33% less.

Students in HMOs are also going to be directly exposed to further gas and electricity price rises which must be a further concern.

htTPs://www.lettingagenttoday.co.uk/breaking-news/2022/8/agency-backing-purpose-built-student-accommodation-over-buy-to-let