Unite Group has announced that it has acquired an 800-bed development site in Paddington, central London on a subject to planning basis. It has also provided an update on check-in performance for the 2020/21 academic year.
Paddington development site acquired from Travis Perkins
Unite has exchanged contracts to acquire a new 800-bed development site in Paddington, central London from Travis Perkins Plc on a subject to planning basis. The total development costs are estimated to be in the region of £150 million, and these are to be funded from the proceeds of Unite’s recent equity issue. Unite has only committed to limited development costs at this stage and has optionality over a development start date, subject to market conditions.
The scheme is targeted for delivery for the 2023/24 academic year, subject to planning approval, and Unites says that it will deliver a development yield in line with its enhanced targets for University partnerships in central London. Unite says that discussions are already underway with its University partners, to support the scheme through planning, with a view to agreeing a long-term nomination agreement.
The development will target a BREEAM Excellent rating and incorporate a range of design features to reduce its embodied and operational carbon, supporting the Company’s transition to net zero development and operations. The acquisition is Unite’s second partnership with Travis Perkins following the delivery of St Pancras Way in 2014. Like St Pancras Way, the development will incorporate a new ground floor retail unit for Travis Perkins.
Update on 2020/21 check-ins
Unite says that, as it has previously disclosed, it has let 88% of bed spaces across the whole of its portfolio for the 2020/21 academic year (2019/20: 98%). Checked-in occupancy has increased to 80% (8 October: 70%), reflecting those students who have now checked-in to their accommodation and nomination agreements where Unite receives rent directly from Universities. Unite says that customers making up the remaining 8% of occupancy are expected to check-in during January, and that rental arrears for the first term are broadly in line with previous years.
Guidance on earnings and dividend
Unite says that its check-in performance and rent collection to date for 2020/21 is expected to result in a reduction in rental income of up to 20% compared to 2019/20 (previously 10%-20%), excluding the impact of cancellations in 2019/20 due to Covid-19. However, it says that it is retaining its guidance for EPRA EPS of 22-25 pence for FY2020, reflecting progress on rent collection in the first term and delivery of targeted cost savings in the year. However, given current uncertainty, Unite says that it is too early to commit to the reinstatement of dividends, although its Board will review this decision early in the New Year.
Comments from Richard Smith, Chief Executive of Unite Students
“Our latest land acquisition means we have now secured c.£175 million of new development opportunities since our recent placing. This is a rare opportunity to acquire a zone 1 central London site in an excellent location, which will help to meet the growing accommodation needs of our London-based University partners. We remain confident in the growth outlook for London over the next decade, reflecting the global reputation of its Universities and a positive outlook for growth in UK and international student numbers.
“We have continued to welcome students to our properties over the past month, reflecting the value they place on the learning, socialising and independence that University provides. We know from our recent student survey that the majority of students are committed to continuing their studies and returning to their current student accommodation in the New Year and we look forward to welcoming them back in January. For those students that want to stay over the Christmas period, we will be fully operational. We will continue doing all we can to help keep students and our staff safe throughout this challenging period.”
Note on Unite’s recent student survey: 93% of students intend to remain at university and continue with their courses for the rest of this academic year and 85% said it was likely they would stay in their accommodation to do this (survey of 1,000 UK students for Unite Students by Opinium from 30th October to 6th November).