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Investment trust insider on student accommodation

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Investment trust insider on student accommodation – James Carthew: DIGS drama raises my hopes for Empiric

As a shareholder in Empiric Student Property (ESP), I got slightly over-excited on 2 July when GCP Student Living (DIGS) announced it had received a number of proposals from a consortium of investors including Scape Living and funds advised by Blackstone.

There is no firm bid for the company as yet, but DIGS also announced that it was expecting a material increase in its property valuation at the end of June. DIGS’s shares shot up on the announcement and are now trading at about a 9% premium to their end of March net asset value (NAV).

I last wrote about Empiric back in the depths of the market panic in March 2020. I suggested then that the AIC’s UK residential property sector was a fertile hunting ground for bargains. In the end, I added to my Empiric position in April and again in July 2020 at an average price of about 62.5p.

Things are taking longer than I envisaged to get back to normal, but the shares have rallied. Empiric had recovered to 87p and was trading on about a 17% discount to its end December 2020 NAV ahead of the DIGS news. I was hoping for a similar share price spike, but the Empiric uplift has been much more muted so far – about 5%. To be fair, the other listed student accommodation stock, shares in Unite Group (UTG) didn’t move much either.

The three companies are not identical. Unite is by far the largest, with a market value of £4.5bn compared with DIGS’s £887m and Empiric’s £545m, and accommodation for 74,000 students compared with about 4,100 and 9,400 respectively.

There are plenty of unlisted players in the sector too. Blackstone is…  read more here

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