Well you've stepped off the escalator for a spell but you can always get back on. Unite have a three year pipeline of 7,500 new beds to develop. That's the base investment case which I reckon will deliver ave. c.17% total shareholder return per annum.
On top of that they will be looking for more University Partnership deals, like Aston - where they bought the whole campus accommodation or Oxford Brookes - where they are building to-order with a pre-let agreement. They have a number of these under review.
With a LTV of less than 32% currently, a new £500m flexible loan facility and their two funds to share the funding with, they have a lot of capacity for more deals.
This 'slide' is because the property valuations haven't risen as strongly this year than last. So, as this is included in that statutory figures - on a comparative basis profits have fallen. It is due to this distortion that EPRA figures are used to standardize the measures of performance. So Josh ain't wrong but that headline is somewhat misleading.
Unite's outlook is positive for the 17/18 academic year with record levels of bookings at 91% reservations - and with the clearing yet to take place. The development pipeline is also looking very strong with 7213 beds through to 2020 (wholly owned) and a further 1407 in USAF (23% owned).
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Ahead of the half-year results, due on the 26th July, today we have the Quarterly Fund Valuation Report that gives a good early indication of performance. As well as Unites wholly owned student digs Unite run a couple of student property funds of which they own a percentage:
The two funds are:
USAF Unite own 23%
LSAV Unite own 50%
These funds are independently valued for their large financial institution investors, and the good news is that USAF is up 0.9% and LSAF up 0.5% during the quarter. Also, quoted
Reservations for Unite's portfolio stand at 89% for the coming 2017/18 academic year, compared to 87% at the same time last year, and is supportive of achieving target occupancy of 98% across the portfolio and rental growth of 3.0% - 3.5% for the full year.
So solid progress is likely to be reported on the 26 July with strong demand and the outlook is positive for the full year. I note Mr Market likes the news and has marked the shares up 11p to 651p as I post.
This must of been first post on this board ( link ) ... but i recall reading the post from PZookes on 10/05/10
( over 7 years ago ) I must off read for years before posting . Re EX Charman setting up rival company ( wonder how he got on ) This added to concerns of a bad pick.
Recall thinking id made another bo bo here .
This indicates to me its not about charts or any over clever stuff but is about time.
Well observed & good facts. I honestly didn't realise the number of international students nationwide is actually pretty low. I do live in the South East, within a popular Student city. My un-researched opinion was skewed
I do agree this is largely a very safe long term hold with good visibility. Another point is I find it that there is alot of Private landlords with Buy-to-let houses in cities for Students. This you could argue is becoming increasingly less popular now with the loss in tax relief & rises in stamp duty. All in Unite's favour.
I am a holder of Unite shares.My general opinion is that the present valuation probably fairly represents the attractions of the company; generally there are very few obviously cheap shares around esp in decent companies and Unite is no exception.
Shorting shares in the present bull market has left many hedge funds with seriously burnt fingers & unless we see a change in general market sentiment to share valuations this could be the case here.
With regard to your observations it is perhaps worth pointing out that the vast majority of Unites rentals are to UK based students with just 6% to Students from rest of EU.Although overseas student application are down by circa 5% this year according to figures published a couple of months ago;it is worth noting that only about two thirds of overseas applicants end up with a place as most courses are over subscribed so it is unlikely there will be many empty places.
Currently about 60% of places are block rented to Universities on long term contracts at agreed rentals.This will increase as Unite are increasingly working with Universities,the new 3000 bed complex at Aston Uni being a case in point.Bookings overall are up this year on already high previous levels so we have very high visibility of earnings.
Unite is presently not investing in London as it is unable to achieve its minimum initial investment return of 7% so I am not too worried about the risk of declining property values.
Obviously there are a number of other quoted & unquoted student accommodation suppliers so we have to watch we do not move from a present shortage to an oversupply situation which could affect rentals but generally I think the prospects of a decent return remain sound.
A disposal of a student property in London for £135m. This time the buyer is another quoted specialist student property REIT GCP Student Living (DIGS). GCP will be getting an initial yield on purchase of 4.5%. What is interesting is that the property was in Unite's books valued at 6% lower which puts it on a yield of 4.7% indicating how conservatively valued UTG's assets might be.
Unite's share price is already well below the last reported NAV of 647p - if this 6% under valuation of asset values is consistent across the portfolio the NAV would be 710p.
Investors Chronicle have tipped Unite this week, following the results:
>> Record reservation levels
>> Strong earnings visibility
>> Solid rental growth
>> Reit status boosting the dividend
>> Uncertainty over foreign student numbers
>> Strong competition for land
IC View: 'Earnings growth in the next few years is likely to be significant. And while there may be doubts about the number of overseas students arriving, there is still a huge shortage of purpose-built space.' 'And yet the shares are trading at a noteworthy discount to forecast net asset value. Buy.'
Unite have made a substantial £227m acquisition of Aston Student Village comprising 3067 beds over five properties on the campus of Aston University in central Birmingham. Although it doesn't say so I presume bought from Aston University.
Reflecting this hot sector of the property market and quality of the asset the yield on purchase is 5% - but Unite intend to grow this to over 6%. I'd pick out a couple of points of significance:
>> The yield of 5% is pretty good as it's as good as guaranteed as these properties are the only accommodation offered to Aston's c. 11,000 students;
>> The deal reflects UTG's access to substantial funding;
>> UTG's existing scale of operation and infrastructure puts it in a strategically strong position in the likely consolidation of the sector; and
>> This deal will put Unite as prime candidate for similar deals by other universities looking to realize the value in their student accommodation assets.
Whilst, we're foregoing the 3% development yield gain on this new approach we'll be seeing the benefit far earlier in NAV and EPRA earnings. It's also worth noting that Unite is still very conservatively financed with loan-to-value (LTV) rising to 38% from 35% previously; and with the ability to sell its developed properties into either of its two managed funds (USAF or LSAF). Unite has unique advantages to compete effectively in this attractive sector of the property market.
As well as its fully owned property Unite run a couple of student property funds of which they own a percentage. As well as earning management fees from these funds, there is also the possibility for a performance based bonus.
So great news, as announced today, rental growth is continuing to drive the property fund portfolio values up and Unite will receive a £6m bonus!
The two funds are:
USAF Unite own 23% up 4% on an annual basis
LSAV Unite own 50% -up 5% on an annual basis
These funds are independently valued - and so provide an excellent indication of Unites' results.
Interesting RNS from Norges Bank Holdings - it appears that whilst they hold 3.09% of Unite Group - they have leant 0.9% to the shorters. Now Norges Bank is in fact the Central Bank of Norway - and they are managing what I believe is the largest sovereign wealth fund on the planet. All that North Sea Oil and only 5.2m Norwegians.
So you wouldn't think that Norges Bank (the state bank of that moral superpower Norway) would need to nickle and dime it with those nasty hedge funds?!? The fees from stock lending must be insignificant against the decline in the capital value of their 3.09% holding. OK, so they are long-term investors and so the shorting driven share price dip may not matter on a longer term view.
However, I just wonder whether Norges Bank has a different cunning plan - to increase their holding taking advantage of the now lower price and increased liquidity? As the amount of short positions declared above 0.5% totals 4.52% Norges Bank represents 20% of that on loan and this stock can be recalled. So they appear to be in an influential market position.
According to the fundamentals on iii they have increased shares issued year on year since 2009.
But I am surprised that in general property shares are treading water. Maybe the big money now is in mining stock.
The last share issue was in March 2014 - and Unite are effectively self-financing now. So apart from employee bonuses and share option scheme I don't envisage dilutive share issues. I'm not sure I understand your concern?
Another positive trading update from Unite this morning covering the current 2016/17 academic year.
>> Occupancy 98%
>> Rental growth + 3.8%
>> On track for EPS yield growth of 4.5% for 2016.
>> Market - 2016/17 sees record student numbers up c.40k
The growth in student numbers is further exacerbating the existing under-supply of student accommodation. Another positive point is that the growth has been strongest in Unite's target locations. With a positive outlook and development pipeline of a further 5,500 beds transparency of future growth in NAV and income is excellent and with Reit conversion will be seeing a likely 10% increase in the payout ratio.
The future is of course uncertain but it's difficult to find any points of concern that would explain the recent fall in the share price. As I post the sp is 566p against last reported NAV of 620p as at 30 June.
....and as I've said previously - for anyone tracking UTG - the shorters are presenting a great opportunity to get into UTG at a good price. But you'll probably need to be quick.
The trading pattern of Unite, and the lack of RNSs suggest that the shares are tightly held by FIs. When the shorters look to buy-back the shares to close their positions the sp might shoot back up pretty rapidly.
The hedgies have to borrow stock in order to sell short. Typically, the Nominees holding investors' shares will lend the stock to shorters for a fee. If you object to your shares being used to drive down the share price of your holding - you can prevent it. Just place a Limit Order to sell your holding at a much higher price - say for UTG the 770p JPM target. This prevents the Nominee from lending your stock or makes them have to recall it from the shorter.
I've been having a look at this dip in the share price and it appears that we have a couple of hedge funds shorting the stock just prior to the Morgan Stanley down grade report - Basso Capital Management & CQS (UK)LLP. Far be it for me to suggest that this is a coordinated bear raid.
What is interesting is that the report is based on the student market contracting and this affecting Unite. However, it might also be expected to also affect ESP and DIGS - whereas their share prices have remained very resilient - DIGS is up as I post.
Also, I'm far from persuaded by the report. There is a huge under supply of student accommodation. Last year 25,000 beds were added but student numbers increased by 60,000. There would have to be some cataclysmic event to bring this market into balance - so I'm satisfied that Unite is still an attractive investment in the short, medium and long-term. Unite's NAV was 620p at 30th June and Morgan Stanley sp target is 590p, other analysts targets are up to 770p so UTG are looking good value at the 550p sp as I post.
What we are being presented with is a great opportunity to buy on the dip. However, as we have seen on previous Unite dips - it tends to be a spike - so you may need to be quick before the hedgies cover their positions and it charges back up again.
Another RNS today - this time a well located development site acquired for 570 student beds this time in Sheffield. Again, this will be financed (£35) from internal cash flow. Unite's maturing business model will throw off increasing amounts of cash - and with conversion to a REIT that will flow to shareholders.
With a development pipeline of now 5,500 student beds Unite also offers excellent transparency of future growth as well. So asset backed, very conservatively financed (loan to value ~35%)delivering a potent combination of organically generated growth and prospective increasing dividend stream Unite offers a highly attractive risk/reward profile.
More good news; UTG get planning approval for a £70m development in the center of Liverpool adjacent to an existing property currently 99% let. So a perfect fit.
Also, they are going to fund the development from internal resources. As they have just sold two properties for £88.4m realising a nice £34.7m profit(65% on development cost) they have the cash ready to recycle.
So all looking positive based on the news - so why has the sp fallen to as low as 590p?
Well the other players in the market, ESP, DIGS, haven't fallen so it appears isolated to UTG. And, as the news is all positive, I suspect a large FI is re-weighting its holding, possibly taking some gains to invest elsewhere. Once that clears I wouldn't be surprised another rapid climb up to 660p.
Yes I share your concerns but I'd make a couple of points that are reassuring:
> EU Students comprise only 9% of Unite's customers;
> The immigration focus is on bogus language schools and faux colleges not the UK's top Universities that is Unite's territory;
> Jo Johnson, Minister of State for Universities and Science was re-appointed by Theresa May - and the Higher Education Sector see him as supportive;
> Evidence: 'EU students who are eligible under current rules to receive loans and grants from the Student Loans Company will continue to do so for courses they are currently enrolled on or about to start this coming year. The Masters Loans launched today are also still available to eligible EU students. EU students will continue to receive funding for the duration of their courses.' hTTps://www.gov.uk/government/news/statement-on-higher-education-and-research-following-the-eu-referendum
> Evidence: Government removed the cap on UK/EU student numbers from 2015/16 with a 92,000 increase in total student population in 2015.
I totally agree with your point; it would make sense to remove all foreign university students from the NET migration numbers (and targets). Afterall, they would need to apply to stay-on after a given period post their course and that would be the logical point to include them as Net Immigrants - not if they are here temporarily to study.
Unfortunately, the net immigration figure includes foreign students, for no sensible reason I can think of.
Theresa May looks set to stamp down hard on many of the 55,000 new applications per year that come from foreign students, as a way to get the headline figure down.
Unless someone with some sense can point out to her that these people bring a lot of money into the economy via fees and accommodation rents and general VAT on spending plus air passenger taxes etc etc then she's in danger of ruining one of Britain's few remaining, truly world class, growth industries ... not to mention a big part of my pension plan.
If she allows zero new foreign students (for arguments sake) except those already on a course. By the time those courses are finished, say 2020 (the time of the next general election), the net immigration figures will be reduced by around 200,000 per year, some say 300,000 with all foreign students including from the EU (currently 7%) and medical - the latter who pay up to £35,000 per year in fees.
So net immigration would be just 30,000 per year, or perhaps 130,000 max. In theory. Before any new points system is introduced to cut other immigration. That would appease a lot of voters that might look favourably on compromises elsewhere.
I shudder to think what a politician might do to be able to hold up such figures entering the next general election. Let's hope common sense and the good of the country prevails..... I'm not optimistic, frankly.
EPRA earnings up 22% to £36.1m, EPRA eps up 15% to 16.3p, EPRA NAV up 7% to 620p. Interim div up 9% to 6p/share. Loan to Value 35% - very conservative leverage. IFRS profit including revaluation gains down at £106.7m (2015 £208.3m) due to big uplift last year. Conversion to REIT in 2017.
Ironically, UTG was the share I was most confident was Brexit-proof but took the largest hit!! Whatever, nothing of concern in these figures and outlook statements very positive:
'Despite the uncertainty caused by the result of the EU referendum, the fundamentals of our business and the student accommodation sector remain strong.
The demandupply outlook for student accommodation remains favourable and our earnings growth trajectory is underpinned by our efficiencies of scale and a high quality development pipeline, focused on cluster flat accommodation with a lower price point, where the rental growth outlook is strongest.'
Positive update and valuation uplifts on their student property funds - albeit independently valued prior to 23rd June - driven by rental growth and a positive outlook statement 'we expect to see continued high demand for purpose-built student accommodation'
aa) Student accommodation is a very different species to commercial property (office and retail primarily);
bb) The cost of developing student property will be dropping along with the fall in commercial property development activity; and
cc) More land will be available at more reasonable prices for student accommodation development.
The financial viability of student property development in Central London was becoming marginal in competition with commercial property development. IMHO the linking of the post-Brexit travails of commercial property with student accommodation is miss-placed. Every cloud as they say.....
Unite has been tipped in the Investors Chronicle BUY at 600p. Key points: currently trading at a discount to f/cast NAV of 657p 31/12/2016 and 709p 31/12/2017 (Liberum figs. Prospective yield 4% from conversion to REIT. A strong and growing student market - BREXIT proof.
Unite have secured another site for development in Liverpool with planning permission for 713 student beds - but Unite think that this can be upped to over 1000 beds. This is scheduled to open for the 19/20 academic year - so a nice bit of forward visibility of NAV growth. Their target return on cost is >8% for regional developments.
Another point is that the £70m cost will be funded from internal resources - that I'm interpreting to mean that they will be staying within their conservative <40% loan-to-value financing. This despite the anticipated increase in dividend yield as they convert to a REIT.
NAV growth and increasing yield - what's not to like.
RNS today indicates that UTG's development pipeline is progressing as planned. Another well located site acquired right in the center of Coventry for 2017/18. The scheme is expected to hit UTG's development targets: that is yield on cost for regional developments of >8%. This is significant as it means that UTG is able to find and acquire attractive sites at the right price.
Also, another nice nugget in the RNS is that demand for places at Coventry Uni were up 14% (~3000 more students) this year - so there is unlikely to be a problem filling the rooms.
I was wrong about the broker updates. Unite has been quite stable though which is great in this volatile market but I was expecting c10% increase in asset valuation to result in a 10% increase in share price which hasn't materialised yet. I will continue to hold.
Yep I'm following UTG pretty closely. However, one of the many attractions is that I don't really have to - UTG doesn't keep me awake at night! And I certainly come to my own view rather than be influenced by other analysts' opinions.
Nevertheless, looking at Digital Look they have 6 Brokers' views:
Strong Buy 2
Strong Sell 1
So assuming that their summary is correct the Brokers are currently very positive. Liberum Capital did reiterate a Hold rating on the 1st Dec but with a price target of 675p - back then the price was 672p but now 641p. Apart from these guys I'm not sure to whom you are taking note of?
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