Unite Students expects to do well as the cost of living crisis hammers HMO landlords.
Announcing its 2022 results this morning, the student accommodation specialist said it had increased adjusted earnings by 48% over the year to £163.4m, although IFRS profit before tax of £358m was only 4% higher than the previous year. Its total accounting return fell from 10.2% to 8.1%.
The total value of Unite’s portfolio rose by 4% to just under £5.7bn. Net debt rose to £1.7bn, resulting in a hike in loan to value from 29% to 31%.
However, Unite said it expected 2023 to be stronger, as performance and occupancy exceeded pre-pandemic levels. It expects to deliver 5-8% growth in adjusted EPS in 2023 and a total accounting return of 8-10% before the impact of property yield movements.
Chief executive Richard Smith said Unite expected to benefit from factors that were putting pressure on traditional landlords. “PBSA supply cannot keep pace with growing student demand at the same time as HMO landlords are leaving the sector,” he said.
Unite said the HMO sector, which provides homes to more than 1m students in the UK, “is increasingly expensive”. Traditionally, PBSA has been seen as the more expensive, premium option. But Unite said rising mortgage costs for landlords and utility costs for tenants had reversed that position.
It added: “We expect these cost pressures to only grow for private landlords given increasing regulation around the quality of homes and environmental performance standards through EPC certification. We expect this to further reduce the availability of private rented homes over time, increasing demand for the purpose-built, sustainable accommodation we provide.”
Smith added that opportunities to grow the portfolio would emerge. “We are confident that new development opportunities will emerge over the next 12 months, which we remain uniquely positioned to deliver through our university relationships and development capability.”
Unite said there was an “exciting opportunity” to expand into the wider living sector. In September, it bought a pilot BTR property in Stratford, East London for £71m, which will be used to test Unite’s operational capability in the sector and potential synergies with its core student business. “Early signs are positive,” it said.
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