Student accommodation specialist Unite Group reported record earnings in results for the year to 31 December 2023, as the supply and demand dynamics in the real estate sub-sector continues to benefit the company.
The company posted an 8% uplift in adjusted earnings per share to 44.3p (2022: 40.9p). This was influenced by practically full occupancy of 99.8% across its vast portfolio of assets and 7.4% rental growth for the 2023/24 academic year (2022/23: 99.3% and 3.5%).
The company said that it was confident in delivering rental growth of at least 6% for 2024/25 (previously guided at least 5%), with reservations for the 2024/25 academic year already at 80%.
It has provided guidance for 3%-5% growth in adjusted earnings in 2024 to 45.5p-46.5p, while it expects that earnings growth to accelerate from 2026 as development completions increase.
The group has a record £1.3bn development pipeline, with £569m committed for developments in Russell Group university cities at a 6.5% yield on cost, a £250m joint venture agreed with Newcastle University, and a future development pipeline of £452m at a 6.7% yield on cost.
On top of this, it is targeting £50m-£75m per year of refurbishment projects, where it expects to achieve an 8%-plus yield on cost.
Resilient valuations
The group’s portfolio was valued at £5,510m, up 1.2% over the year on a like-for-like basis (2022: £5,397m). The 7.4% rental growth offset a 31 basis points (bps – equivalent to 0.31%) yield expansion.
Total accounting return was 2.9% (2022: 8.1%), reflecting 1% reduction in EPRA net tangible assets (NTA) to 920p (2022: 927p). The company paid a dividend of 35.4p during the year (up 8% from 32.7p in 2022).
Net debt to EBITDA reduced to 6.1x (2022: 7.3x), with the group’s LTV of 28% (2022: 31%).
Comments
Joe Lister, chief executive, commented: “This is a strong set of results, driven by full occupancy, rental growth and substantial investment into our platform and portfolio. Our pipeline of developments, asset management projects and our new university partnership present a substantial growth opportunity for the business.
“The supply-demand imbalance of student accommodation is acute and continues to intensify. We play a leading role in tackling this shortage, easing pressure on the wider housing market and freeing up homes for families. Our development and asset management pipeline stands at a record £1.3bn and we are taking an innovative approach to delivering more homes for students. University partnerships provide a compelling opportunity to deliver new, high-quality accommodation and our first joint venture with Newcastle University is only possible for a business of our reputation, scale and development expertise.
“We are trusted by students, parents and universities to deliver high-quality, safe and affordable accommodation where it is needed the most. Our strong leasing performance supports continued earnings growth in 2024 and we are confident that our all-inclusive offer, student support programmes and balanced approach to rental increases will continue to provide real value for money.”