Unite valuations fall in first half as it targets lower occupancy

(Sharecast News) - Student accommodation developer, owner and manager Unite Group updated the market on its valuations as at 30 June on Wednesday, reporting that the United Student Accommodation Fund (USAF) was valued at £2.79bn - unchanged over the quarter.
The FTSE 250 company said that portfolio comprised 30,209 beds, in 79 properties across 22 university towns and cities in the UK.

Its London Student Accommodation Joint Venture (LSAV), meanwhile, was independently valued at £1.32bn - also unchanged over the quarter.

That portfolio comprised 8,354 beds across 12 properties in London, and the Aston Student Village in Birmingham.

Unite said the fresh valuations represented a 2.2% fall for the USAF portfolio and a 1.5% reduction for the LSAV portfolio over the first half of the year on a like-for like basis, which it put down to deductions relating to zero summer income, and the expected impact of Covid-19 disruption on income in the 2020-2021 academic year.

Overall, the USAF portfolio was valued at an average yield of 5.3%, and the LSAV portfolio at an average yield of 4.4%, both of which were "broadly unchanged" over the quarter.

In light of current market uncertainty created by Covid-19, the valuations were being reported on the basis of 'material valuation uncertainty', the board said, in line with recent RICS guidance.

Looking at its current trading, Unite said reservations across the group for the 2020-2021 academic year were currently at 81%, down from 90% at the same time a year ago.

That, the firm explained, reflected delays by some students and universities in making their accommodation choices, adding that it was expecting a "higher than usual" volume of sales activity later in the booking cycle.

The company was targeting 90% occupancy for 2020-2021, down from 98% year-on-year, underpinned by the income security provided by its multi-year nomination agreements.

Overall, it was expecting a 10% to 20% reduction in rental income for the new academic year compared to 2019-2020, prior to the impact of cancellations in 2019-2020 due to the pandemic.

Taking a broader look at the higher education sector, Unite noted that most undergraduate applicants had now chosen their preferred university for the 2020-2021 academic year, following the 18 June deadline for accepting an offer.

It said UCAS data showed a 1% increase in the number of applicants with an offer to start university this autumn, compared to 2019-2020, reflecting a 3% increase in acceptances by UK 18-year olds as increased participation rates more than offset the impact of fewer young people in the population.

The number of students with a deferred start date was down 1% compared to 2019-2020 as at 18 June, which the board said reflected a "clear desire" of young people to attend university, as well as weaker employment prospects and fewer gap year opportunities for school leavers.

"UCAS applications data and our own research underlines that students are keen to start or get back to university as soon as it's safe to do so," said chief financial officer Joe Lister.

"We have growing visibility and confidence over our income for the 2020/21 academic year, reflective of the strength of our university relationships and underlying student demand for our offering.

"This is demonstrated by the stability in our valuations for USAF and LSAV in the second quarter."

At 0824 BST, shares in Unite Group were down 0.22% at 922p.