Unite Group Reports Increase in Earnings for 2016

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Unite Group has reported a 24% increase in EPRA earnings for the year ending December 2016.

The group reported a 24% rise in adjusted EPRA earnings to £61.3 million versus £49.5m reported a year earlier.

Profit before tax was reported at £201.4 million for the 12-month period, which includes property revaluations of £136.3 million. This represents a decline on the previous year where profit before tax was recorded at £388.4 million, with £324.6 million attributed to property revaluations.

As a result, EPS came in at 101.3p versus 164.2p in 2015 due to the lower level of revaluation surplus as a result of yield compression in 2015.

During the period the group maintained a portfolio of 49,000 beds at a value of £4.3 billion, an increase on the 46,000 beds it held at the end of 2015.

For 2017 Unite is expecting its rental growth to be in the region of 3.0-3.5%, supported by its relationships with universities and student number growth. However, this represents a compression on the 3.8% growth in rental income which it recorded for the 2016-17 academic year.

The group has maintained a positive outlook, with 75% of its bed spaces being reserved for the 2017-18 academic year, up from the 67% reported at the same time a year earlier. For the 2016-17 academic year occupancy rates stand at 98%.

Unite has increased the proportion of beds let to Universities with 58% or rooms now under nomination agreements, up by 5,000 beds over the past three years. It expects this to remain around this level in the future. The company also noted that rents on nominations are around 5% lower than their direct let equivalents but sees opportunities to close this discount in the coming years.

With a development portfolio of 7,000 beds, in addition to its expected rental growth, the group expects it could add 15-20p to earnings over the next few years.

Despite UCAS recently reporting a fall in the number of EU domiciled students applying to study at university for the 2017-18 academic year, as of the January 15 deadline, Unite does not expect Brexit to significantly impact student numbers and will continue to focus on its relationships with high to mid-ranked Universities.

Commenting on the results, Chief Executive of Unite Group, Richard Smith, said: "These are another excellent set of results that reflect the quality of our people, properties and service execution that sets us apart in our sector. Looking forward, we will maintain the quality of our portfolio through development and also strategic acquisitions such as our recent purchase of Aston Student Village, our first on-campus. Students and Universities remain our core focus and we will continue to invest in our operational capabilities, providing excellent service and ensuring consistently high satisfaction levels. This strategy, plus the ongoing strength of UK Higher Education, student numbers and the demand for beds means we are confident in further growth."

Unite Snaps up £227m Aston University Accommodation

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Unite has acquired 3,067 beds through the acquisition of Aston Student Village in Birmingham.

Purchased for £227 million in a 50:50 joint venture with GIC, the Singaporean wealth fund, Aston Student Village (ASV) represents Unite's first major on-campus acquisition.

The asset consists of 3,067 beds across five large, detached properties on Aston University's campus in central Birmingham.

ASV is the only accommodation currently offered to students studying at Aston University, which has a student population of 11,000, with no additional accommodation available either under direct ownership or through nomination agreements. Currently the accommodation is fully occupied.

Due to the purchase Unite now has a portfolio in Birmingham of over 5,000 beds. The company also hopes the acquisition will provide opportunities to establish a long-term strategic partnership, which may include bed nominations.

Unite is looking to invest further money into the site during the summer to help enhance the student experience and product for customers as well as drive rental growth opportunities once the buildings are integrated into their PRISM operating system.

The purchase price represents an acquisition yield of 5%, which is expected to grow to 6% following additional investment into the property. ASV will sit within Unite and GIC's LSAV 50:50 joint venture and Unite expects the acquisition to add approximately 1-2p to the Group's annual EPRA Earnings on a recurring basis.

Commenting on the site, chief executive officer Richard Smith, said: "I am delighted to announce this acquisition, our first on campus. Birmingham is one of the top cities for students and this acquisition demonstrates the value of our strong relationships with Universities and also the benefit of our position as market leader, both by scale and efficiency and the service that we able to offer to students as a result of our PRISM operating system."

UCAS Data Highlights Struggling Universities

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Data released by UCAS has revealed that some universities are losing students at a significant rate.

In an increasingly competitive market, universities including Sunderland, Southampton Solent, London Metropolitan, Cumbria and Wolverhampton have suffered from a substantial decline in the number of acceptances from 18-year-old UK students in the past four years.

University vice-chancellors say that since the removal of the cap on student numbers, competition for students has never been so fierce.

According to UCAS, Sunderland University reported a decline of 26% in the number of 18-year-old UK students who accepted places, and 32% since 2012, when the cap was removed.

Both Sunderland and Southampton Solent were hit the hardest last year, however London Metropolitan University was also down, with a 14% reduction in 18-year-old UK acceptances. However, since 2012 when the cap was lifted the number of 18-year-old UK acceptances have fallen by 45%.

Other big losers included Cumbria University, down 13% and Wolverhampton University, which reported a 12% fall.

Sunderland University has indicated its prepared for the reduction in 18-year-old acceptances and has worked hard to increase its intake of mature students to help compensate the fall.

Meanwhile Prof Graham Baldwin, Southampton Solent University's vice chancellor, said of the figures: "This is the most competitive student market I can ever remember. There is much more use of unconditional offers, institutions offering financial incentives and other tactics. Everyone is going to extreme lengths to engage students and pull them in. Things have changed very, very quickly."

Jo Johnson, the minister for universities, has indicated in the past that there must be room for "market exit" in the system, however the question of whether a university would be allowed to go bankrupt is open for debate.

Student Loan Debt Put up for Sale

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The UK government has begun the process of selling more student loan debt to the private financial sector.

Loans made to students in England between 2002 and 2006 will be included in the sale, which will be followed by other pre-2012 loans, with the aim to raise £12bn.

Although Universities Minister Jo Johnson said the sale would have no impact to those with student loans, the National Union of Students said it was an "ugly move on students".

The government has always aimed to sell the student loan book to private investors and over the next four years it will dispose of the loans from before 2012, when tuition fees in England were increased to £9,000 a year.

The new tranche of loans being put up for sale, dating from 2002 to 2006, come with a face value of £4bn and the government has promised that despite the sale there will be no changes to the terms and conditions for borrowers, ensuring the rate of repayment for former students remains the same.

Although Universities Minister Jo Johnson said the sale is part of the drive to bring public finances under control, the National Union of Students have warned it could begin a process in which loans are made more attractive to private buyers, at the expense of students.

Both Labour and the Liberal Democrats also condemned the plans.

Labour's shadow education secretary, Angela Rayner, said: "This government never learn any lessons, this sale will do nothing to ease the burden of debt piled on students by the Tories who have trebled tuition fees and scrapped maintenance grants."

However, Nick Hillman, director of the Higher Education Policy Institute, suggested there was plenty of misinformation about the sale of student loans and the main issue was ensuring good value for the taxpayer.

Bournemouth Student Accommodation Sold to Investors

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Property developer Watkin Jones has agreed the sale of the student accommodation element of its Christchurch Road development in Bournemouth.

The development consists of 454 beds, with 437 en-suite clusters and 17 self-contained studios. The accommodation is due for completion in the summer of 2017 ahead the new academic year.

The student accommodation element of the development has been sold to an institutional investor for an undisclosed fee. Also, situated on the Christchurch Road site will be a 128-bed Premier Inn hotel and 70 sq ft of office space.

Planning permission for the site was originally attained in 2015, along with permission for two other developments. This latest sale means that all of Watkin Jones' student accommodation developments due for delivery before the end of the current financial year have been forward sold.

Commenting on the sale, chief executive Mark Watkin Jones said: "We are delighted to announce that we have successfully completed the sale of the student accommodation development at Christchurch Road in Bournemouth.

"Having now forward sold all of our projects which are due for delivery in the current financial year, the group has demonstrated its strong relationships with institutional investors and its ability to provide good visibility on near term returns for its shareholders."

Unite Secures Planning for an Extra 1,186 Beds

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Unite Students has announced it has obtained planning consent to develop 1,186 new beds in Birmingham and Sheffield, bringing its total development pipeline to 6,500 beds.

The new scheme in Birmingham, dubbed International House, is situated alongside Unite Students' existing development 'The Heights'. Meanwhile in Sheffield St Vincent's Church is located next to the University of Sheffield's main city centre campus.

Both schemes are expected to be open for the 2018/19 academic year and have a combined £75 million development cost, including land.

The schemes will be funded by internally generated sources and are expected to achieve a yield on cost of 8% and to contribute 2p per share to EPRA earnings once complete.

Richard Simpson, Group Property Director for Unite Group, said of the new developments: "We are delighted to have secured planning consent for these important sites in two of the UK's most popular University cities. These cluster led developments will help to meet the strong demand for student accommodation in these cities and provide a safe and secure home for students.

"We will continue to progress our secured pipeline which remains focused on regional locations with strong student markets."

Watkin Jones Receives Approval for Two Aberdeen Sites

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Planning permission has been granted for two student accommodation developments in Aberdeen, which when complete will provide a total of 817 beds.

Watkin Jones has received approval for its redevelopment of Pittodrie Street, located close to Aberdeen University and Caledon House situated opposite Robert Gordon University.

Designs for the Pittodrie Street development were provided by Manson Architects and call for development of a 618-bed student housing scheme, which is due for completion in the summer of 2019.

Meanwhile Caledon House by ICA will provide an additional 199 student beds once complete. Consisting of 147 en-suite clusters and 52 self-contained studios the building is due for completion in time for the 2018-19 academic year.

Watkin Jones also recently reported its maiden annual results as a listed company, with both turnover and profit up year-on-year.

Turnover for the 12 months ending September 2016 rose 9% to £267m, whilst operating profit before the cost of floating on AIM was recorded at £37.9, an increase of 16% on the previous year.

The group listed on the Alternative Investment Market (AIM) in March last year and currently have a further 2,500 student bed spaces either at pre-application or application stage.

Empiric Adds Another York Asset to Its Portfolio

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Empiric Student Property has purchased the land and entered into a forward-funded development agreement for a 106-bed student accommodation scheme in York.

The Percy's Lane development will cost a total of £9.2 million and will involve the demolition of existing buildings on the site and the construction of a new premium purpose-built student accommodation block.

The scheme will consist of a mix of studios and one, three and five bedroom apartments, as well as six bedroom townhouses and communal facilities.

Construction is expected to begin in May, with completion of the site scheduled in time for the 2018/19 academic year.

The property is situated close to Empiric's Lawrence Road development and the recently purchased Foss Studios.

Foss Studios was bought by Empiric earlier in the week for £23.3 million and consists of 220 studio rooms split across three buildings. The development is currently managed by Fresh Student Living but will be integrated onto the Group's Hello Student operating platform at the end of March 2017.

Empiric Chief Executive Paul Hadaway said of the latest scheme: "As a result of these transactions, the group will own a total of 441 beds in York, some 2% of the local full-time student population. The design of the self-contained apartments is in line with our "townhouse" concept, providing students with a group living environment with all the benefits of purpose-built student accommodation."

Tighter Visa Rules Could Cost the UK £2bn a Year

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According to forecasts produced by the Higher Education Policy Institute, a tougher stance by the Home Office towards overseas students studying at UK universities could cost the country up to £2bn a year.

The report also found that UK higher education could increase revenue from higher fees for foreign students after Britain leaves the EU, but the potential gains would be wiped out if the government insists on tightening student visa numbers.

Commenting on the report, director of Hepi, Nick Hillman said: "Were the Home Office to conduct yet another crackdown on international students, then the UK could lose out on £2bn a year just when we need to show we are open for business like never before."

Mr Hillman suggested an easy and costless solution would be to remove international students from the net migration target, which would also signal a change in direction.

The study examined what the impact could be if further efforts were made to restrict student visas as part of the government's larger strategy to force down immigration. It found that approximately 20,000 students could be deterred, and although universities would lose around £500m a year in fees, the wider UK economy could lose a further £600m a year in reduced spending.

However, the largest loss would be over £900m a year foregone in what the report described as "the detrimental impact on universities' supply chains" through lost spending and the "indirect and induced effects" on the UK economy related to this source of export income.

Deputy chief executive of Universities UK, Alistair Jarvis, said the report provides a "stark" warning of the possible economic loss associated with policies that restrict European or international student numbers. He argued that if universities are to continue to boost the economy and benefit communities, they will need the right support from government.

Starwood Enters the Uk Student Market with £120m Portfolio

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The US private equity firm Starwood Capital Group has entered the UK student accommodation market with the £120 million purchase of a six-asset portfolio.

The portfolio is understood to consist of 1,595 beds and comprises of Haymarket in Edinburgh, Chestnut House in Cambridge, The Walls in Southampton, St James House in Glasgow and Union Square and Stepney Yard, both in Newcastle.

In a new joint venture with Round Hill Capital, the six-asset portfolio will be managed through Round Hill's operational brand, Nido Collection.

The deal is the first for Starwood in the UK student housing sector, who already own nearly 7,000 student beds in the US.

Commenting on the deal, the company's head of European acquisitions Zsolt Kohalmi said: "We believe that the UK is and will continue to be one of the top educational destinations for international students.

"We are excited to work with Round Hill Capital and Nido as our partners on this investment, which boasts assets in superb locations and strong student markets."

In addition to the existing six schemes the joint venture has also entered into a forward funded deal for the acquisition of a development scheme in Newcastle, which is expected to be delivered in time for the 2018-19 academic year.