UK student landlord Unite Students posts £417m half-year loss

Student Housing Giant Hit by Revaluation and Rising Costs

Unite Students has plunged to a loss of more than £400 million after a £500 million revaluation of its properties and "extremely challenging" building costs.

The UK's largest student landlord reported a £417 million pre-tax loss in the six months to June, reversing a £186 million profit from the same period last year. Earnings slipped by 2% to £142 million.

The FTSE 250 firm has been grappling with lower occupancy in recent months and has cut rents in an effort to shift stock.

A revaluation of Unite's property portfolio delivered a £530 million hit to its profit, the company said.

Strategic Review and Property Sales

Following a strategic review, the landlord is taking "ambitious" measures to offload up to £400 million of property, aiming to focus on student tenants at the UK's "strongest" universities.

The group generated £130 million from property disposals in the six months to June and plans to sell as many as 20,000 more beds as it reduces its footprint.

Rent Cuts to Drive Occupancy

Unite said it expects rental growth of 1% to 2% for the current academic year, following "targeted" price-cutting drives on campuses including Leicester, Nottingham, and Sheffield.

The FTSE 250 business stated that these discounting efforts are expected to pay off, with occupancy projected to reach between 94% and 96% this year, after trailing behind previous years' levels in recent updates.

Empiric Acquisition Impact

Unite acquired student accommodation rival Empiric in August last year. The company told shareholders on Tuesday that the acquisition drove an 11% increase in rents to £262 million.

However, analysts at Quilter Cheviot said the deal was responsible for a 7% drop in earnings per share to 27.1p.

Oli Creasy, head of property research at Quilter Cheviot, noted that while most real estate acquisition deals are "immediately accretive to earnings," Unite's purchase of Empiric "came at just the wrong time."

"Unite is a company under pressure. For investors, today's results are a confirmation of earlier fears, with the company share price materially underperforming the wider real estate investment trust market year-to-date," he said.

Criticism of Renters' Rights Act

The landlord warned that it expects the supply of student accommodation to "tighten" in the coming years, as new construction slows and multiple-occupancy (HMO) landlords exit the sector.

"Higher build costs and new regulation have made development of new student accommodation extremely challenging," the firm said.

The group stated it would need to charge £300 per week—far above its average rate of £190—to make new development viable outside of London.

Unite also criticised the Renters' Rights Act, which it said is pushing private landlords to leave the sector, on top of rising mortgage costs.

"Obsolescence of older student accommodation also continues to see beds removed from the market each year due to age, high running costs and the need to deliver a higher-quality experience for students," the firm added.

Shares in Unite fell 3.4% to 538p in early trading.