Empiric Regulatory News (ESP)

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6 June 2017

Empiric Student Property plc

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

Trading Update

The Board of Empiric Student Property plc (ticker: ESP), the owner and operator of premium student accommodation across the UK, is pleased to issue the following update on trading ahead of the half year end on 30 June 2017.

Highlights

· Unaudited basic eNAV per ordinary share as at 30 April 2017 is 107.75 pence compared to basic NAV per ordinary share of 105.9 pence as at 31 December 2016 (prior to adjusting for the dividends of 1.525 pence and 1.55 pence per share, respectively)

· The Board is targeting a dividend of 6.1 pence per ordinary share for the year to 31 December 2017. It is anticipated the dividend will be substantially covered by adjusted EPRA earnings per share for 2017 and going forward1

· The Company's property portfolio has been independently valued by CBRE Ltd as at 30 April 2017 at £786.7 million (including forward funded commitments) (31 December 2016: £721.3 million), as confirmed in their valuation report dated 5 June 2017 for the purposes of this announcement

· 81 assets (7,579 beds) expected to be operational for the 2017/18 academic year

· The Group is targeting an annual rental uplift for the 2017/18 academic year of approximately 2.8%, with a gross annualised rent roll (including commercial) of approximately £63.6 million (31 December 2016: £52.1 million)

· Excluding the benefit of developer rental guarantees, letting for the operating property portfolio is progressing ahead of this time last year

· Significant progress with the transfer of assets onto the Hello Student® operating platform

· Net operating margin has returned to historical levels of c. 70%

· The Company is in advanced discussions in respect of a substantial new revolving credit facility

· Strong near-term pipeline of attractive investment assets comprising a mix of operating and development properties representing, in aggregate, over 2,900 beds, including a significant London based portfolio of operating assets

Property Portfolio

The Company's property portfolio currently comprises 8,762 beds contracted2, either operating or under development, across 90 assets in 30 top university cities and towns in the UK. By the start of the 2017/18 academic year in September 2017, the Board anticipates that a total of 81 of these assets (7,579 beds) will be operational following the practical completion of seven assets currently under development (and a further one for early 2018), namely:

All of the above with the exception of Bonhay Road, Exeter will be managed by Hello Student® from the outset. In addition, The Frontage in Nottingham (162 beds) reached practical completion in May and is letting well. A full year's rent has been received from The Frontage developer for the current academic year.

Excluding the benefit of developer rental guarantees, letting for the operating property portfolio is progressing ahead of this time last year with in excess of 60 per cent. of the portfolio let for the academic year commencing September 2017. 

The Group is targeting an annual rental uplift for the 2017/18 academic year of approximately 2.8%, with a gross annualised rent roll (including commercial) of approximately £63.6 million, an increase of £11.5 million compared to 31 December 2016.

The Group has recently received planning permission from Manchester City Council for the redevelopment of Victoria Point. Originally developed as a private residential scheme, Victoria Point comprises 561 beds across six buildings which are set out in a mix of two, three and four bedroom apartments. The phased redevelopment will see the conversion of some of the multi-bed apartments into studio apartments, others upgraded as shared apartments and the addition of extensive communal facilities to create a purpose-built student hub. 

The first of these buildings (with 132 beds) is currently being refurbished and will be available for the 2017/18 academic year. It is expected that the rental income on this building post refurbishment will enjoy a significant uplift.

Market

The fundamentals of the UK student accommodation sector remain positive, with excess demand and limited supply persisting. The business continues to see good levels of demand for its accommodation and with the 2025 Plan, the Directors expect to be able to address this demand in a wider context.

Pipeline

The Company has a strong near-term pipeline of attractive investment assets comprising a mix of operating and development properties representing, in aggregate, over 2,900 beds, including a significant London based portfolio of operating assets.

Hello Student®

The Group is making good progress in transferring the management of its buildings onto the Hello Student® platform. Since the end of December 2016, the following have been transferred onto the platform:

· all the assets in Cardiff (519 beds);

· The Exchange, James Street West, Bath (78 beds);

· Centro Court, Aberdeen (56 beds);

· Francis Gardner Apartments, London (70 beds);

· 134 New Walk, Leicester (16 beds); and

· Pavilion Court, Canterbury (79 beds).

The transfer of additional buildings onto the Hello Student® platform in any one town or city improves the economies of scale in that location, thereby improving Net Operating Income, as well as providing opportunities for building student communities and cross-marketing. All but one of the seven developments due to complete for the 2017/18 academic year will be managed by Hello Student®.

Net Operating Margin

After including the cost of acquisition and mobilisation of one further standing asset and one further forward funded development, and migrating 818 beds to the Hello Student® platform (as detailed above), operating costs have returned to historical levels resulting in a net operating margin of c. 70 per cent.

Estimated Net Asset Value ("eNAV")

The Company's property portfolio has been independently valued by CBRE Ltd as at 30 April 2017 at £786.7 million (including forward funded commitments) (31 December 2016: £721.3 million), as confirmed in their valuation report dated 5 June 2017 for the purposes of this announcement. On a like-for-like basis, this represents an uplift of approximately 1.23 per cent. over the standing asset portfolio value as at 31 December 2016 (excluding the acquisitions over the period).

The Company's unaudited basic eNAV per ordinary share as at 30 April 2017 is 107.75 pence (prior to adjusting for the interim dividend of 1.525 pence per share declared in respect of the quarter ended 31 March 2017). This represents an increase of 1.75 per cent. as compared to the audited basic Net Asset Value per share as at 31 December 2016 of 105.9 pence (prior to adjusting for the second interim dividend declared for the period of 1.55 pence per share).

Dividends

The Board is targeting a dividend of 6.1 pence per ordinary share for the year to 31 December 2017. It is anticipated that the dividend for the year ending 31 December 2017 and going forward will be substantially covered by adjusted EPRA earnings per share.1

Financing

The Group has recently agreed term extensions on two of its existing debt facilities: the £32.8 million facility with AIB Group (UK) PLC is now repayable in October 2020; and the £30.63 million facility with The Royal Bank of Scotland now becomes repayable in December 2018.

The Company is in advanced discussions in respect of a substantial new revolving credit facility, details of which will be announced in due course.

The Company has invested, or committed, substantially all of its equity capital, with appropriate levels of debt drawn down in line with its stated investment policy. As set out above, the Directors believe that there is a strong near-term pipeline of suitable new investment opportunities, including a substantial London based portfolio, which are in various stages of progress and due diligence.

The Company is, therefore, considering an equity fundraising to fund identified potential acquisitions. A further announcement providing details of any such equity fundraising, which would be subject to shareholder approval, will be issued in due course.

Paul Hadaway, Chief Executive of Empiric Student Property plc, commented:

"The first half of the current financial year has been one of consolidation, during which time we have focussed on embedding the significant number of acquisitions and developments undertaken during the previous financial period. We have, however, continued to seek out further investment opportunities and we are in advanced negotiations on a number of attractive pipeline assets. Having successfully deployed, or committed, the equity capital raised to date, alongside applicable debt financing, the Directors believe that it would be appropriate to seek further equity capital to capitalise on these identified investment opportunities."

Notes:

1 The figures in relation to prospective dividends set out above are not intended to be, and should not be taken as, a profit forecast or estimate, or a dividend declaration.

2 This includes estimated figures for certain properties under development that are still subject to planning.

For further information on the Company, please contact:

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.

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