Empiric Regulatory News (ESP)

21 August 2018

Empiric Student Property plc

("Empiric" or the "Company" or, together with its subsidiaries, the "Group")

INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2018

Empiric Student Property plc (ticker: ESP), the owner and operator of premium student accommodation across the UK, is today reporting its half year results for the six months ended 30 June 2018.

Financial Performance

· Property portfolio valued at £945.2 million at 30 June 2018 (31 December 2017: £890.1 million), up 6.2%, including a 3.0% like-for-like valuation increase

· Net asset value ("NAV") per share growth of 1.1% to 105.54 pence (31 December 2017 104.37 pence)

· Adjusted earnings per share ("EPS") of 1.50 pence (H1 2017: 1.05 pence), resulting in dividend cover for the period of 60.0%

· Dividends declared of 2.5 pence per share, in line with 5.0 pence target for 2018

· Administration expenses reduced to £4.9 million (H1 2017: £7.6 million), on track to meet full-year target of £10 million

· Gross margin of 62.3% (H1 2017: 60.4%), reflecting good progress with reducing property costs

· Gross annualised rent on 87 operating properties of £66.6 million for the 2017/18 academic year (31 December 2017: £65.3 million for 85 operating properties)

· Net debt of £314.8 million at 30 June 2018 (31 December 2017: £298.1 million), resulting in a loan-to-value ratio ("LTV") of 34.2% (31 December 2017: 32.9%), in line with our long-term target of 35.0% and maximum of 40.0%. Aggregate cost of debt of 3.1% with a weighted average term to maturity of 5.8 years

Operational Performance

· Bookings of 87% at 14 August 20185, putting us on track for full occupancy of 97% for the 2018/19 academic year (Note: Bookings of 87% at 14 August 2018 is contained within the Interim Report. Bookings increased to 89% at 20 August 2018 as set out in the analyst presentation on 21 August).

· Like-for-like income growth of above 6.0% for the 2018/19 academic year, resulting from an average annualised student rental growth of 2.0% and increase in the weighted average lease term from 48.5 weeks to 50.5 weeks at the date of this report

· Facilities management for one third of our assets will be in-house for the start of the 2018/19 academic year, with all of our facilities management in-house from 1 April 2019

· 100% of our direct let properties will be let and maintained under the Hello Student® brand for the start of the 2018/19 academic year

· Wide range of other operational improvements, including rationalising staff numbers in Hello Student®, refocusing marketing spend and bringing administration of utilities in-house, helping to ensure our business is fit-for-purpose for the long term

· 95 assets with 9,398 beds contracted at 30 June 2018 (31 December 2017: 94 assets with 9,158 beds), in 29 prime university cities and towns

· 87 operating or revenue-generating assets at the period end (31 December 2017: 85 assets), with an average valuation yield of 5.7% and average yield on cost of 6.5%

· Acquired one standing asset with 240 beds, for £10.6 million

· All developments due to be completed for the 2018/19 academic year are progressing satisfactorily

Board and Management Changes

· Lynne Fennah appointed to dual roles of Chief Operating Officer and Chief Financial Officer from 1 July 2018, formalising her responsibility for our operations

· Mark Pain appointed as Non-Executive Chairman with effect from 1 September 2018

Post Period End Highlights

· On 21 August 2018, the Board declared a dividend of 1.25 pence per ordinary share in respect of the quarter ended 30 June 2018, which is to be paid on 14 September 2018 to shareholders on the register on 31 August 2018

· On 14 August 2018 the Group drew down the first £20 million of its £70 million three-year revolving credit facility

Notes

1 Valuation is net of head lease adjustment, see Notes for detail.

2 As at 31 December 2017.

3 Gross annualised rent includes commercial revenue and marketed student revenue at full occupancy (the Group considers student occupancy levels of 97% and above as fully let).

4 Six months to 30 June 2017.

Stuart Beevor, Acting Non-Executive Chairman, commented:

"This has been a positive six months for the Group and while there is more to do, we are confident that we are on track to deliver our target levels of performance for the full year and beyond.

Empiric has attractive assets in the right locations, giving us a portfolio that would be difficult to replicate. We also have a strong leadership team, with a clear plan for maximising the performance of those assets. As the operational transformation takes effect, and the financial results reflect that transformation, management is able to extend its focus to the further enhancement of NAV growth. This will be achieved through deploying the proceeds of the sale of non-core assets into development and forward funding projects in our core locations.

Our total return target remains at 10% p.a. based on our expectations for the performance of our stabilised operating portfolio and development programme."

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

The Company's LEI is 213800FPF38IBPRFPU87.

Further information on Empiric can be found on the Company's website at www.empiric.co.uk.

Notes:

Empiric Student Property plc is a leading provider and operator of modern, direct-let, nominated or leased student accommodation across the UK. Investing in both operating and development assets, Empiric is a multi-niche student property company focused on, (i) providing good quality first year accommodation managed through its Hello Student® operating platform in partnership with universities, (ii) offering a variety of second and third year purpose built accommodation options for individual students and those wanting a group living environment, and (iii) continuing to expand the Group's existing premium, studio-led accommodation portfolio which is attractive to international and postgraduate students.

The Company, an internally managed real estate investment trust ("REIT") incorporated in England and Wales, listed on the premium listing segment of the Official List of the Financial Conduct Authority and was admitted to trading on the main market for listed securities of the London Stock Exchange in June 2014.

Meeting for investors and analysts and audio recording of results available

A meeting for investors and analysts will be held at 9.00am today at:

Newgate Communications

Sky Light City Tower

50 Basinghall Street

London, EC2V 5DE

In addition, later in the day an audio recording of this meeting and the presentation will also be available to download from the Company's website: www.empiric.co.uk

CHAIRMAN'S STATEMENT

This was an important six months for the Group, as the actions taken by the executive team have begun to deliver the performance improvements the Board targeted. We are therefore on track to meet our principal objectives for the 2018 financial year.

Performance and Business Review

At the time of our full year results in March, we set out a plan to transform the Group's financial and operational performance. I am pleased to report that the executive team has made good progress with implementing this plan. Their actions have reduced costs while maintaining service levels and improving our operations, systems and forecasting, giving us a business that is increasingly fit for the future.

To achieve the financial performance the Group should be delivering, we need to maximise the revenue we generate from our assets and rigorously control costs. Bookings for the 2018/19 academic year are progressing well and stood at 87% at 14 August 2018. This compares with 78% at the same point last year and 76% at our trading update on 5 July 2018. We have enhanced our processes for converting bookings into signed leases and benefited from improved information on the performance of each building, allowing us to quickly take corrective action. As a result, we continue to target full occupancy of 97% for the 2018/19 academic year.

We aim to increase our annual gross margin from the 57% achieved in 2017 to 70% by 2019, with significant progress towards that target this year. The gross margin in the first half of 2018 was 62.3%, as we saw the benefits of a number of cost-control measures, including rationalising staff numbers in Hello Student®.

The Hello Student® brand is fundamental to our ability to maximise revenue from our assets and all of our direct let properties will be let and marketed as Hello Student® from 1 September 2018.

Our project to bring facilities management in-house is going well. Facilities management for one third of our assets will be in-house from 1 September 2018, with all facilities management in-house from 1 April 2019.

We have also successfully reduced administrative expenses and are on track to deliver our targeted expenditure of £10 million, 26% lower than the previous year.

More information on the improvements to our operational and financial performance during the period can be found in the Management Report below.

Dividends

Our dividend target for 2018 is 5.0 pence per share. We have declared two interim dividends in respect of the six months to 30 June, which totalled 2.5 pence per share, in line with our full year target. We continue to expect the 2019 dividend to be fully covered by adjusted earnings, with substantial progress towards this during 2018. The total dividend for the first half was 60% covered by adjusted earnings, in line with our expectations.

Portfolio and Valuation

During the period we added one standing asset to the portfolio, Emily Davies Hall in Southampton, for £10.6 million excluding costs. At the period end, this asset was independently valued at £11.2 million, an overall increase of 5.7%. More information about the portfolio and the valuation can be found in the Management Report below.

Financing

The Group remains prudently financed, with an LTV of 34.2% at the period end, in line with our 35.0% long-term target and well within our limit of 40.0%.

At 30 June 2018 we had undrawn facilities of £70 million which ensures we have sufficient resources to fund our development plans, which are set out below.

Strategic Priorities

Empiric has attractive assets, with a gross value of £945.2 million. Our priority in the near term is to continue to implement our transformation programme, so we maximise the profitability of our standing assets and realise the value of our developments.

The principles underlying the Company's 2025 Plan guide the investment thesis for the business. Increasing the density of investment through the acquisition of diversified stock in a number of core locations remains the right strategy. The pace and scale of investment envisaged under the Plan has been adapted to suit Empiric's circumstances.

In our 2017 Annual Report, we said that we were reviewing every asset, to determine whether we could enhance returns by disposals and reinvestment of the proceeds, taking account of the transaction costs involved. That review is now complete, and we have identified a number of non-core assets which we will dispose of. In this regard the assets will achieve the best price if they are sold fully-let at the latest rental level. Hence, we believe the start of the new Academic Year is the right moment to commence a measured programme of tailored disposals of properties either singly, or in small groups.

This strategy will enable the proceeds to be deployed into new standing assets, or in the development and forward funding of new high-yielding core assets, taking into account our target of achieving a fully covered dividend in 2019.

Board, Management and Staff

We were deeply saddened by the death of our Chairman, Baroness Brenda Dean, on 13 March 2018. She made a substantial contribution to Empiric and more widely during an illustrious career, and is greatly missed.

Recruiting a new Non-Executive Chairman has been an important focus for the Board in recent months. Following a thorough and independent process, we were delighted to announce on 26 July 2018 the appointment of Mark Pain with effect from 1 September 2018. Mark will also chair the Nominations Committee and be a member of the Remuneration Committee. Mark has a strong financial, customer and shareholder focus and a wealth of board experience, and we are confident he will make a significant contribution to the Group's future success. On Mark's appointment, I shall step down as Acting Non-Executive Chairman and resume my role as a Non-Executive Director and Chairman of the Remuneration Committee.

Lynne Fennah was appointed to the dual roles of Chief Operating Officer and Chief Financial Officer from 1 July 2018. This formalised Lynne's responsibilities, recognising the Group's continued positive financial and operational progress since she took charge of our day-to-day operations in December 2017. Tim Attlee remains Acting Chief Executive Officer and Chief Investment Officer.

The improved performance in the period is testament to the hard work and dedication of our people. On the Board's behalf I want to thank everyone at Empiric for their contribution.

Outlook

This has been a positive six months for the Group and while there is more to do, we are confident that we are on track to deliver our target levels of performance for the full year and beyond.

The uncertainty surrounding the outcome of Brexit negotiations are of concern, but the full consequences will not be clear for some time. We will continue to monitor the situation closely, but to date we have not seen any direct adverse impact.

Empiric has attractive assets in the right locations, giving us a portfolio that would be difficult to replicate. We also have a strong leadership team, with a clear plan for maximising the performance of those assets. As the operational transformation takes effect, and the financial results reflect that transformation, management is able to extend its focus to the further enhancement of NAV growth. This will be achieved through deploying the proceeds of the sale of non-core assets into development and forward funding projects in our core locations.

Our TR target remains at 10% p.a. based on our expectations for the performance of our stabilised operating portfolio and development programme.

Stuart Beevor

Acting Non-Executive Chairman

21 August 2018

MANAGEMENT REPORT

This has been an encouraging six months for the Group, as we focused on implementing our plans to improve operational and financial performance across the business.

Operations

Maximising revenue is a key focus. The enhancements we have made to our management information, including the greater insights and analysis provided by the new Hello Student® website (see below), have allowed us to optimise rents to drive bookings. This gives us a more sustainable level of rents across the portfolio, increasing the potential for like-for-like rental growth for the 2019/20 academic year. We have also refocused our marketing spend by targeting our activity and reducing wastage, helping us to reduce our marketing costs and improve effectiveness.

These efforts have contributed to a material increase in bookings. At 14 August 2018 bookings were at 87%, up from 78% at the same point in 2017. Converting bookings to signed leases is critical, so we have also tightened our processes. Any bookings that are more than two weeks old are removed from the system, helping to highlight buildings where action is needed to increase bookings. The number of signed leases is closely tracking booking rates, showing the effectiveness of this approach.

As a VAT exempt business, we are unable to reclaim input VAT, which makes in-housing services financially compelling. Facilities management is our largest single cost and our plan to in-house this function is going well. This will save us the providers' profit margin and VAT, generating savings after recruiting staff and other costs. All the contracts with our providers have been terminated and the first significant cost savings will arise in the fourth quarter of 2018, with one third of the properties coming in-house for the start of the 2018/19 academic year. All of our facilities management will be provided in-house from 1 April 2019. We have appointed GVA to advise on the process and have two secondees from GVA to support the transition. In addition, improved management reporting has tightened our control of ad hoc expenditure by our outsourced providers, with a corresponding benefit to our property costs during the period.

We have brought the administration of utilities in‑house from 1 July 2018 and have entered into fixed price contracts from 1 October 2018 onwards to reduce costs.

We started the period with 62 assets branded as Hello Student® and ended it with 63. By the start of 2018/19 academic year, all of our direct let properties will be branded Hello Student®. This will enable us to manage costs ourselves, give us full control over the marketing of those assets and the interaction with students, and provide us with live data on our entire portfolio, helping us to drive occupancy and revenue.

Our people are important to us, and the work we are doing is helping to instil our culture across the Group. This has sharpened our people's focus on the business, and noticeably improved engagement and responsiveness. As well as driving direct performance benefits, this means we are better prepared for significant actions such as bringing facilities management in-house.

We launched the new Hello Student® website towards the end of last year. The site has a more flexible design and allows our in-house team to make updates and promotions in real time. Enhanced analytics allow us to regularly review the number of hits for a given property page and track how those translate into enquiries, viewings, bookings and signed leases. For the period February to June 2018, the website drove an average of 160 bookings per week across the Hello Student® portfolio. Over the same period, visits to the website were up over 30% compared with 2017.

We have made good progress with streamlining our administrative costs, including reducing the number of head office roles and using fewer consultants and contractors. We are now starting to look at bringing our human resources and IT functions in-house. The finance team, which we restructured during 2017, has bedded in well and is providing essential support and information to the executive team.

Financial Performance

Revenue from our assets was £31.3 million (H1 2017: £24.5 million), an increase of 27.8%. The growth was primarily driven by the increase in the number of operating assets from 75 to 87 and higher average rents.

Property expenses rose from £9.7 million to £11.8 million, again reflecting the increase in operating assets, partially offset by the benefits of our rigorous cost control. This resulted in a gross margin of 62.3%, up from 60.4% for the first half of 2017 and 56.6% for 2017 as a whole.

Our focus on reducing costs resulted in administrative expenses of £4.9 million (H1 2017: £7.6 million). Administrative expenses in the first half of 2017 included a number of one-off costs, including the settlement agreement with the previous Chief Financial Officer and the cost of temporary finance staff, to support our migration to a new accounting platform. We continue to target administrative expenses of £10 million for 2018.

Operating profit under IFRS was £28.2 million (H1 2017: £20.2 million). This included an aggregate revaluation uplift of £13.6 million, net of property acquisition costs, on our property portfolio at the period end (H1 2017: £13.0 million).

Net financing costs for the period were £6.5 million, net of interest earned and fair value gain on interest rate swaps of £0.05 million (H1 2017: £5.7 million and £0.02 million, respectively).

Profit before tax was £21.7 million (H1 2017: £14.5 million) an increase of 50%. No corporation tax was charged in the period, as the Group fulfilled all of its obligations as a REIT. This resulted in basic EPS of 3.60 pence (3.59 pence on a diluted basis) (H1 2017: 2.89 pence and 2.87 pence (diluted)).

The NAV per share as at 30 June 2018 was 105.54 pence, prior to adjusting for the interim dividend of 1.25 pence per share (31 December 2017: 104.37 pence, prior to adjusting for the interim dividend of 1.25 pence per share). The NAV is shown net of all property acquisition costs and dividends paid during the six months.

Dividends

Dividends

Details of the dividends declared and paid in respect of the period are shown in the table above.

Of the total dividend paid in the period, 1.04 pence per share was declared as property income dividends and 1.46 pence per share was declared as ordinary UK dividends (H1 2017: 2.098 pence and 0.952 pence respectively).

Our adjusted EPS, which we see as the most relevant measure when assessing dividend distributions, was 1.50 pence (H1 2017: 1.05 pence). This resulted in dividend cover of 60% (H1 2017: 34%) an increase of 76%. Adjusted EPS is defined under Key Performance Indicators below.

Financing

There were no changes to the Group's debt facilities during the period. As at 30 June 2018, the Group had committed debt facilities of £390.0 million, of which £320.0 million (31 December 2017: £303.8 million) had been drawn down. This resulted in an LTV at the period end of 34.2% (31 December 2017: 32.9%).

Of our total facilities, £191.1 million is at fixed interest rates and £198.9 million is at floating rates, with £35.5 million of the floating rate debt subject to interest rate caps or swaps. The aggregate cost of debt is 3.09%, with a weighted average term to maturity of 5.83 years at 30 June 2018. We fully complied with our covenants during the period.

During the second half of 2018, £30.6 million of our floating rate facilities are due for renewal. We will look to reduce our financing costs on the new facilities.

Portfolio

As at 30 June 2018, the Group owned, or was committed on, 95 assets representing 9,398 beds (31 December 2017: 94 assets comprising 9,158 beds). The portfolio included 87 revenue-generating properties at the period end (31 December 2017: 85), which will increase to 91 for the 2018/19 academic year, as a number of development projects reach completion.

The gross annualised rent for the 87 revenue generating properties is approximately £66.6 million (31 December 2017: £65.3 million), of which £1.7 million (representing 2.6% of the gross annualised rent) was attributable to commercial revenue (31 December 2017: £1.8 million, representing 2.8% of gross annualised rent).

At 30 June 2018, the average net yield on acquisition of the operating properties, or on cost for development assets that had reached practical completion, was 6.5% (31 December 2017: 6.7%). The average valuation yield as at 30 June 2018 was 5.7% (31 December 2017: 5.7%).

Acquisition

We acquired one standing asset during the period, the 240-bed Emily Davies Hall in Southampton. The property is made up of affordable accommodation arranged in three and four-bed apartments and broadens our offer in the city. The purchase price was £10.6 million, excluding costs.

Developments and Redevelopment

At the period end, we had the following pipeline of forward funded, direct developments and redevelopments:

All of our projects due for completion ahead of the 2018/19 academic year are progressing satisfactorily, which will result in a further five assets with 569 beds becoming income producing.

In addition to developing new assets, we continue to see the potential to increase capital values and income from a number of our operating assets through targeted redevelopment. We look to time these redevelopments to limit the impact on our income and dividend cover. At the present time we are considering redeveloping buildings comprising a total of 513 beds.

Valuation

Each property in the portfolio has been independently valued by CBRE, in accordance with the RICS Valuation - Professional Standards January 2014 (the "Red Book"). At 30 June 2018, the portfolio was valued at £945.2 million, an increase of 6.3% over the six months (31 December 2017: £890.1 million) and 3.0% on a like-for-like basis. The key driver for this valuation increase is the strong increase in our income growth and the profit we achieve on our development assets.

Total Return ("TR")

The TR for the six months to 30 June 2018 was 3.52%, (H1 2017: 2.80%). We continue to target a TR of 10% per annum. The definition of TR can be found under Key Performance Indicators below.

Our Market

The UK student accommodation market remains positive, with rising participation in higher education and continuing strong global demand.

While the outcome of the Brexit process remains uncertain, its impact on the UK higher education sector is likely to be limited, with students from the European Union (the "EU") making up only 7% of full-time students in the UK. UCAS data as at January 2018 showed a 3% increase in applications from EU students for the 2018/19 academic year. The Government has also confirmed that EU students will be treated as home students in the first intake after Brexit and that this status will last for the duration of their course, making them eligible for the same tuition fees and financial support as at present.

Investment demand for purpose built student accommodation ("PBSA") is strong, with substantial capital looking to participate in the market and targeting both standing assets and new developments. This capital is funding some new entrants, leading to increased competition. Selectivity remains key to successful investment and we are starting to see some sites with planning permission being left undeveloped in cities with substantial supply of PBSA.

Article 4 directions, which prevent houses being converted into houses in multiple occupation ("HMOs"), are in place in the majority of university locations. This continues to restrict the supply of new HMOs, with local authorities seeing PBSA as a way to meet demand for student accommodation while protecting housing stock for local residents.

The number of UK 18-year-olds has declined in recent years but will rebound strongly from 2021, supporting longer-term market growth. Over the same period, the number of international students both from inside and outside the EU choosing to study in the UK has continued to rise.

Post Balance Sheet Events

On 14 August 2018, the Group drew down the first £20 million of its £70 million three-year revolving credit facility. The funds will be used to fund our development commitments.

On 21 August 2018, the Board declared an interim dividend of 1.25 pence per share in respect of the quarter ended 30 June 2018. The dividend will be paid on 14 September 2018 to shareholders on the register on 31 August 2018.

Looking Forward

We expect strong like-for-like income growth of above 6.0% for the 2018/19 academic year. This is the result of average annualised rental increases of 2.0% and the executive team's work to extend the weighted average lease term from 48.5 weeks to 50.5 weeks.

The academic year generates seasonal movements in performance for all student property businesses. This results in lower revenue, and lower profit, in the third quarter due to associated turnaround costs between the tenancy periods. The fourth quarter then represents the first of the next academic year, when we expect to achieve the highest margin for the year. Taking into account this seasonality, we are forecasting the Gross Margin for the year ended 31 December 2018 to be above 61%.

We are focused on improving TR, to achieve this we will continue to drive operational performance alongside the development of new assets, funded by the sales proceeds of some non-core assets together with the use of prudent gearing.

Empiric has the right buildings in the right places with the right amenities, and a service offer which differentiates us in an attractive market. The work we are doing to improve the financial efficiency of our operations and further enhance the customer experience will help us to make the most of these advantages.

Tim Attlee

Acting Chief Executive Officer & Chief Investment Officer

Lynne Fennah

Chief Financial & Operating Officer

21 August 2018

DIRECTORS' RESPONSIBILITIES STATEMENT

The Directors confirm that to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the operating and financial review herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority namely:

· an indication of important events that have occurred during the first six months of the financial period and their impact on the condensed financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial period; and

· material related party transactions in the first six months.

A list of the current Directors is shown below. Shareholder information is as disclosed on the Empiric Student Property plc website, www.empiric.co.uk

For and on behalf of the Board

Stuart Beevor

Acting Non-Executive Chairman

21 August 2018

KEY PERFORMANCE INDICATORS

Key Performance Indicators

Notes

1 For the six-month period ending 30 June 2017.

2 As at 31 December 2017.

EPRA Performance Indicators

Notes

1 For the six-month period ending 30 June 2017.

2 As at 31 December 2017.

PRINCIPAL RISKS AND UNCERTAINTIES

A stable risk environment

The principal risks and uncertainties we face are described in detail on pages 34 to 39 of our Annual Report and Accounts for the year ended 31 December 2017. The Audit Committee, which assists the Board with its responsibilities for managing risk, considers that those principal risks and uncertainties were unchanged during the period, not withstanding the greater uncertainty arising from Brexit.

The principal risks and uncertainties described in the Annual Report and Accounts are summarised below:

Strategic Risks

· Development of the UK higher education market generally, or any change in demand from international students

· Competition in the PBSA sector from UK and international property investors

· Uncertainty from Brexit

Investment Risks

· General property and investment market conditions

· Dependence on both the rental income received from our properties and the appreciation in property values

Development Risk

· General development risks, including construction risks and changes in market conditions

Funding Risks

· Adverse movements in interest rates

· Inability to secure further debt on acceptable terms

People Risk

· Reliance on performance of the Executive Directors and senior staff

Operational Risks

· Inability to adapt to changing planning and regulatory environment, and the need to comply with health and safety laws and regulations

· Changes to the Company's tax status or UK tax legislation

· Inability to maintain occupancy rates

· Information security breach

· Reliance on third-party property managers

Financial Statements

The financial statements on the following pages detail the improvement in the Group's performance during the period and its robust financial position at the period end.

Lynne Fennah

Chief Financial & Operating Officer

21 August 2018

INDEPENDENT REVIEW REPORT TO EMPIRIC STUDENT PROPERTY PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the interim report for the six months ended 30 June 2018 which comprises the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and related notes.

We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim report is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting its responsibilities in respect of interim financial reporting in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (United Kingdom and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

BDO LLP

Chartered Accountants

London

United Kingdom

21 August 2018

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

30 JUNE 2018

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

30 JUNE 2018

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

PERIOD FROM 1 JANUARY TO 30 JUNE 2018 (UNAUDITED)

PERIOD FROM 1 JANUARY TO 30 JUNE 2017 (UNAUDITED)

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR FROM 1 JANUARY TO 31 DECEMBER 2017 (AUDITED)

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

UNAUDITED CONDENSED NOTES TO THE FINANCIAL STATEMENTS

For the period 1 January 2018 to 30 June 2018

1. Accounting Policies

1.1 Trading Period

The condensed interim financial statements of the Group reporting period is from 1 January 2018 to 30 June 2018.

1.2 Going Concern

Since IPO, the Group has raised in excess of £600 million from seven equity placements and £390 million of debt. The Group has deployed these funds across a portfolio of operating assets that have stable income streams and potential for capital appreciation. In addition, the Group has committed to a number of developments which will become operational in time for the 2018/19 academic year and beyond. As at 30 June 2018 the Group held £26 million of cash that had not been invested in property but is expected to be invested in line with these objectives. The Group had undrawn debt facilities amounting to £70 million as at 30 June 2018.

The Directors are therefore satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, for a period of not less than 12 months from the date of this report.

1.3 Basis of Preparation

The condensed interim financial statements for the six months ended 30 June 2018 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and with IAS 34, Interim Financial Reporting, as adopted by the European Union.

The condensed consolidated financial statements for the six months ended 30 June 2018 have been reviewed by the Group's independent auditor, BDO LLP, in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity and were approved for issue on 21 August 2018.

The condensed consolidated financial statements presented herein for the period to 30 June 2018 does not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group's Annual Report and Accounts for the year to 31 December 2017 have been delivered to the Registrar of Companies. The Group's independent auditor's report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

The Group's financial statements have been prepared on a historical cost basis, except for investment property and derivative financial instruments which have been measured at fair value. The consolidated financial statements are presented in Sterling which is also the Group's functional currency.

The accounting policies adopted in this report are consistent with those applied in the Group's statutory accounts for the year ended 31 December 2017 and are expected to be consistently applied during the year ending 31 December 2018, except for the impact of IFRS 9 from 1 January 2018 where the Group provides against trade and other receivables based on the expected credit loss model, rather than the incurred loss model previously adopted.

1.4 Significant Accounting Judgements, Estimates and Assumptions

The preparation of the Group's interim financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Judgements

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated interim financial statements:

(a) Fair valuation of investment property

The market value of investment property is determined, by an independent real estate valuation expert, to be the estimated amount for which a property should exchange on the date of the valuation in an arm's length transaction. Properties have been valued on an individual basis. The valuation experts use recognised valuation techniques and the principles of IFRS 13. The Group has acquired investment properties which are subject to commercial property leases with tenants.

The valuations have been prepared in accordance with the RICS Valuation - Professional Standards January 2014 (revised April 2015) (the "Red Book"). Factors reflected include current market conditions, annual rentals, lease lengths, and location. The significant methods and assumptions used by valuers in estimating the fair value of investment property are set out in Note 6.

For properties under development the fair value is calculated by estimating the fair value of the completed property using the income capitalisation technique less estimated costs to completion and an appropriate developer's margin.

(b) Operating lease contracts - the Group as lessor

The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the duration of the lease terms and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the leases as operating leases.

(c) Fair value for derivatives

In accordance with IAS 39, the Group values its derivative interest rate swaps at fair value. The fair values are conducted by an independent financial valuation expert with revaluation occurring on a six-monthly basis. The independent financial valuation expert will use a number of assumptions in determining fair values. The fair value is derived by using the mid-point of the yield curve prevailing on the reporting date and the valuation is performed on a clean basis. The fair value represents the net present value of the difference between the cash flows produced by the contracted rate and the valuation rate.

1.5 Impact of New Accounting Standards and Changes in Accounting Policies

IFRS 9 - Financial Instruments and IFRS 15 - Revenue from Contracts with Customers became effective on 1 January 2018 and as a result this is the first period under these new standards.

As expected and detailed in the Group's Annual Report and Accounts for the year to 31 December 2017, the Group's application of IFRS 9 did not cause a material impact on the classification, measurement and recognition of financial assets and financial liabilities within the consolidated financial statements.

In addition, the application of IFRS 15 did not result in a significant impact on revenue recognition within the consolidated financial statements. The Group earns revenue from simply structured rental leases which is recognised over the period to which it relates.

The Group's assessment on the impact of IFRS 16: Leases (effective 1 January 2019) remains unchanged since being detailed in the Group's Annual Report and Accounts for the year to 31 December 2017.

1.6 Seasonality of Operations

The results of the Group's operating business is closely aligned to the levels of occupancy achieved by the property portfolio in each academic year. Empiric targets 51-week tenancies, with a one-week void period falling in September. This results in slightly lower revenue on the existing portfolio in the second half year combined with slightly higher costs from turning around the rooms for the new academic year.

The Group counteracts this through the development cycle as construction is timed to complete ready for the start of the academic year in September each year. These new properties becoming available increases revenue in the second half year.

1.7 Segmental Information

The Directors are of the opinion that the Group is engaged in a single segment business, being the investment in student and commercial lettings, within the United Kingdom.

2. Net Finance Cost

3. Corporation Tax

Taxation on the profit or loss for the period not exempt under UK REIT regulations comprises current and deferred tax. Taxation is recognised in the profit and loss within the Group Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised as direct movement in equity, in which case it is also recognised as a direct movement in equity.

Current tax is expected tax payable on any non-REIT taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

4. Earnings per Share

The ordinary number of shares is based on the time-weighted average number of shares throughout the period.

EPRA EPS, reported on the basis recommended for real estate companies by the European Public Real Estate Association, is a key measure of the Group's operating results.

Adjusted earnings is a performance measure used by the Board to assess the Group's dividend payments. Licence fees, development rebates, rental guarantees and cumulative gains made on disposals of assets are added to EPRA earnings on the basis noted below as the Board sees these cash flows as supportive of dividend payments.

The adjustment for licence fee receivable is calculated by reference to the fraction of the total construction completed during the period, multiplied by the total licence fee receivable given on a forward funded asset.

The development rebate is due from developers in relation to late completion on forward funded developments as stipulated in development agreements.

The discounts on acquisition are in respect of the vendor guaranteeing a rental shortfall for the first year of operation as stipulated in the sale and purchase agreement.

Gains on disposal are the cumulative gains made at the point of disposal.

Reconciliations are set out below:

The ordinary number of shares is based on the time-weighted average number of shares throughout the period.

5. Dividends Paid

On the 21 August 2018, the Board declared a dividend of 1.25 pence per ordinary share in respect of the quarter ended 30 June 2018, which is to be paid on 14 September 2018 to ordinary shareholders on the register on 31 August 2018.

6. Investment Property

At 30 June 2018 the Group held construction accruals and retentions of £15,269,000 (31 December 2017: £10,162,000).

In accordance with IAS 40, the carrying value of investment property is their fair value as determined by independent external valuers. This valuation has been conducted by CBRE Limited, as independent external valuers, and has been prepared as at 30 June 2018, in accordance with the Appraisal & Valuation Standards of the Royal Institution of Chartered Surveyors ("RICS"), on the basis of market value. This value has been incorporated into the financial statements.

The valuation of all property assets uses market evidence and also includes assumptions regarding income expectations and yields that investors would expect to achieve on those assets over time. Many external economic and market factors, such as interest rate expectations, bond yields, the availability and cost of finance and the relative attraction of property against other asset classes, could lead to a reappraisal of the assumptions used to arrive at current valuations. In adverse conditions, this reappraisal can lead to a reduction in property values and a loss in NAV.

All investment property is categorised as Level 3. There have been no transfers between Level 1 and Level 2 during any of the periods, nor have there been any transfers between Level 2 and Level 3 during any of the periods.

The valuations have been prepared on the basis of Market Value ("MV") which is defined in the RICS Valuation Standards, as:

"The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion."

The table below reconciles the fair value of the investment property per the Consolidated Group Statement of Financial Position and the market value of the investment property as per the independent valuation performed in respect of each period end.

The descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining fair values of student properties are as follows:

(a) Unobservable input: Rental values

The rent at which space could be let in the market conditions prevailing at the date of valuation. The rent range per week are as follows:

(b) Unobservable input: Rental growth

The estimated average increase in rent based on both market estimations and contractual arrangements. The assumed growth in rents are as follows:

(c) Unobservable input: Net initial yield

The net initial yield is defined as the initial gross income as a percentage of the market value (or purchase price as appropriate) plus standard costs of purchase. The range in net initial yields are as follows:

(d) Unobservable input: Physical condition of the property

(e) Unobservable input: Planning consent

No planning enquiries undertaken for any of the development properties.

(f) Sensitivities of measurement of significant unobservable inputs

As set out in the significant accounting estimates and judgements, the Group's portfolio valuation is open to judgements and is inherently subjective by nature.

As a result, the following sensitivity analysis for the student properties has been prepared by the valuer:

7. Borrowings

The existing facilities are secured by charges over individual investment properties held by certain asset-holding subsidiaries. These assets have a fair value of £885 million at 30 June 2018. In some cases, the lenders also hold charges over the shares of the subsidiaries and the intermediary holding companies of those subsidiaries.

A summary of the drawn and undrawn bank borrowings in the period is shown below:

On 14 August 2018 the Group drew down the first £20 million of its £70 million three-year revolving credit facility.

Any associated fees in arranging the bank borrowings unamortised as at the period end are offset against amounts drawn on the facilities as shown in the table below:

The fair value of the fixed rate debt has been valued by independent financial valuation expert, JCRA. The floating rate debt has been excluded as it is assumed the carrying value will be similar to the fair value.

The fair value of these contracts is determined by discounting the future cash flows estimated to be paid or received under these contracts using a valuation technique based on forward rates derived from short-term rates, futures, swap rates and implied option volatility.

8. Net Asset Value per Share ("NAV")

Basic NAV per share is calculated by dividing net assets in the Statement of Financial Position attributable to ordinary equity holders of the parent by the number of ordinary shares outstanding at the end of the period.

EPRA NAV is calculated as net assets per the Consolidated Statement of Financial Position excluding fair value adjustments for debt related derivatives.

EPRA NNNAV is the EPRA NAV adjusted to include the fair values of financial instruments and debt.

Net asset values have been calculated as follows:

9. Capital Commitments

As at 30 June 2018, the Group had total capital commitments of £55 million (31 December 2017: £23 million) relating to forward funded or direct developments.

10. Related Party Disclosures

Key Management Personnel

Key management personnel are considered to comprise the Board of Directors.

Share Capital

There were no share transactions by related parties during the period.

Share-Based Payments

On 1 May 2018, the Company granted nil-cost options over a total of 26,115 ordinary shares to Lynne Fennah pursuant to the deferred shares element of the annual bonus award for the financial period to 31 December 2017.

On the same date, the Company granted nil-cost options over a total of 343,861 ordinary shares to Lynne Fennah pursuant to the Empiric Long Term Incentive Plan (the "LTIP") for the 2018 financial year.

Board Change

On 5 July 2018, the Board announced that Lynne Fennah had been appointed to the dual roles of Chief Operating Officer and Chief Financial Officer with effect from 1 July 2018.

On 26 July 2018, the Board announced that Mark Pain had been appointed as Non-Executive Chairman with effect from 1 September 2018.

11. Subsequent Events

On 21 August 2018, the Board declared a dividend of 1.25 pence per ordinary share in respect of the quarter ended 30 June 2018, which is to be paid on 14 September 2018 to ordinary shareholders on the register on 31 August 2018.

On 14 August 2018, the Group drew down the first £20 million of its £70 million three-year revolving credit facility.