News

08 October 2012 | Education | Unite Group plc

Unite UK Accommodation Fund up 1.5% in 3rd Quarter but occupancy rates declining

Unite has announced the Estimated Net Asset Value ("NAV") of its Unite UK Student Accommodation Fund as at 30 September 2012 was £669.6m, an increase of 1.5% during the third quarter.

The fund, which comprises 21,349 beds in 59 properties across 20 UK towns and cities, was independently valued at £1,285m (before loans and other liabilities are factored in.

​The Company reported the value of its assets held throughout the quarter had increased by 0.7% due to continued rental growth since 30 June 2012. Further growth in values of 0.4% was achieved through the refurbishment of one property during the quarter and the creation of an additional 69 beds at another.

Management said rental growth for the 2012/13 academic year, combined with asset management activities, had resulted in an increase in property values of 3.3% over the past 12 months, with valuation yields remaining stable at 6.67%.

The Company also disclosed that it was still taking bookings across the portfolio because of the disruption caused by the introduction of changes to Higher Education funding.  It now expects final occupancy across the Fund's portfolio to be in the range of 95-96%.

Comment:

With NAV up 1.5% in the quarter and the valuation yield remaining constant at 6.67% all might seems rosy in the world of student accommodation.  However, the drop in occupancy levels to less than 96% for 2012/13 from the 99% reported this time last year will give investors in this sector some cause for concern. This is a high fixed cost business which does not do well when there is excess capacity.

The sector is clearly undergoing a period of change brought on by new student financing arrangements and the University quota system which may eventually result in downward pressure on rentals as providers fight for students

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