Real Estate

Unite Group profits buoyed by overseas students

The profits of the UK’s biggest listed student landlord have almost trebled thanks to an influx of students from China and India and strong investor demand for university accommodation, which has remained a prime target even as the wider property market has suffered. 

Unite Group, which recently entered the FTSE 100, reported pre-tax profits of £334mn for the first six months of the year, up from £130mn in the same period last year.

Earnings were up a third to £96mn, but the company cautioned that rising interest rates could hit earnings for the full year, sending shares down 3 per cent to £11.41 pence on Wednesday morning.

The increase in Unite’s profits this year was largely explained by a leap in the value of student housing, driven by a spate of major deals struck in recent months.

In May, Singaporean sovereign wealth fund GIC and US property company Greystar agreed to buy Student Roost, a portfolio of thousands of student beds, for more than £3bn. A month later, GIC swooped again, striking a €2.1bn deal for The Student Hotel alongside Dutch fund APG.

Those deals helped push up the value of Unite’s portfolio by about 5 per cent, further buoying a sector that has been a consistent bright spot in real estate during the pandemic. Unite has been the top performing UK property stock in the year to date.

Investors have turned to student housing, as well as other forms of rental accommodation and warehousing, as a relatively safe bet and recently as a hedge against inflation. 

Unite was not completely insulated from rising prices, with energy costs up 15 per cent in the period, according to chief executive Richard Smith. But the company could largely pass on increases to students, with an aim to raise rents by 4-5 per cent next year, he said. 

The company’s strategy of “delivering sustainable rental growth for investors but offering affordable accommodation for students” was not under threat from runaway inflation, he added.

Even with rising rents, the number of applications from international students, particularly from China, India, Nigeria and the Middle East, were increasing. Applications from non-EU students were up 9 per cent this year, according to UCAS, helping to offset an 18 per cent decline in EU applications caused in part by Brexit.

But higher interest rates caused Unite to revise its earning per share guidance from 41-43 pence to 40-41 pence. Max Nimmo, an analyst at Numis, described the revised guidance as “prudent” on the basis of rapid moves in interest rates, but remained “confident in [Unite’s] outlook given its ability to recover higher operational costs through higher pricing, as well as the continued structural tailwinds”.


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