Proactive Investors - Run By Investors For Investors

UNITE Group acquires interest in property in Durham

Durham is a world-class university with a growing student population.
Durham University
"The acquisition grows our presence in this highly attractive university city," UNITE said

Student accommodation developer UNITE Group PLC (LON:UTG) said its Unite Students Accommodation Fund (USAF) joint venture has acquired a property under development in Durham.

The 'forward funded' asset will be opened in September 2018 and will provide a home for 363 students attending Durham University.

USAF, in which UNITE has a 24.6% stake, is paying £34mln for the asset and expects it to yield on cost of 6.4% in its first year of operation.

Based on current valuations, the asset will be valued at a yield of 5.5%, UNITE said, resulting in a profit on cost of around £5mln, of which UNITE's share will be £1.1mln.

"This latest acquisition further extends our high-quality development programme in a strong regional location where there is strong demand for purpose built student accommodation,” said Richard Simpson, the group's property director.

“Our strategy remains focused on high quality universities like Durham, where we see sustainable growth," he added.

Broker Liberum gave the deal the thumbs-up.

"We believe Unite offers one of the best combinations of capital and income growth in the sector, with forecast total returns of 12% p.a., and trading at a 10% discount to NAV. Forecast growth is anticipated to come from RPI linked rents and a secure development pipeline. While the cycle of yield compression may be over for student accommodation, we believe Unite's prospects for income growth remains attractive, and that the capitalisation of that gain to NAV will continue to support total returns," it said, 

Shares in UNITE dipped 3p to 633.50p. Liberum has a price target of 720p.


--- adds broker comment and share price ---


Register here to be notified of future UTG Company articles
View full UTG profile View Profile

Related Articles

Krakow, Poland
April 10 2017
In Romania, the group has said the outlook is “strong” and that it would be looking to growing its presence there, although in March it sold off one of its Romanian properties

© Proactive Investors 2017

Proactive Investor UK Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use