» » Unite Group Confirms 2010-11 Like-for-like Rental Growth View – Update

Unite Group Confirms 2010-11 Like-for-like Rental Growth View – Update

(RTTNews) – Unite Group plc (UTG.L), a developer and manager of student accommodation, Friday issued its first interim management statement covering activities during the period to May 13 and stated that it continues to expect like-for-like rental growth of 3% to 5% for 2010/11.

The company stated that the group achieved a profit for the financial year ended December 2009 and continued to trade profitably during 2010, as measured by Net Portfolio Contribution, a key measure of profitability.

As at May 13, reservations across the company’s managed portfolio comprising 39,500 beds stood at 71%, compared with 74% at the same time last year and 59% at the end of February.

Unite Group also said that the current weekly rate of reservations is well ahead of last year and in line with management expectations for the current year. The group’s London portfolio comprises 6,600 beds for 2010/11, representing 17% of the portfolio’s bed spaces. Direct let sales in London are likely to begin later than elsewhere due to the high proportion of international customers. The company also said that bookings typically commence from early June each year.

The company said that market conditions have improved over the past couple of months, supporting its objective to acquire development sites in London. The group has secured approximately 2,300 beds across six projects under contracts, options and lock-out agreements in the capital for expected delivery between 2012 and 2014, representing an increase of 1,400 beds since the end of February.

The company also stated that about GBP 175 million of development debt will be required to build out these beds, of which around GBP 100 million will be funded from existing facilities. The company requires new facilities to finance the remaining GBP 75 million and will seek to secure this funding during the first half of 2011.

The company also stated that the three 2010 schemes being developed in its joint venture with Oasis Capital Bank, representing 1,119 beds, remain on budget. These schemes are on track to be delivered this summer ready for occupation at the start of the 2010/11 academic year.

Further, Unite Group said that, as outlined in its Preliminary Results announcement in March, the group has been considering the potential to deliver projects for 2011 occupation. The company has now committed to two schemes following a review. The two committed schemes require a total capital expenditure of GBP 64 million. The capital spending will rise to GBP 79 million if the third scheme is progressed. These schemes are expected to deliver an average development yield of between 8.25% and 8.5%, the company noted.

Additionally, Unite Group said that Unite UK Student Accommodation Fund or USAF now has the capacity to acquire assets up to a total value of between GBP 200 million and GBP 250 million, depending on gearing levels maintained in the fund. USAF is likely to acquire further operational assets from Unite in the second half of 2010 under the Development Pipeline Agreement that exists between the two parties. The company expects to sell assets between GBP 100 million and GBP 125 million to USAF later in the year.

The company also indicated in the interim statement that demand for University places remains extremely strong for the forthcoming academic year, with a 23% rise in applications made by January 22. The company foresees a year-on-year increase of approximately 70,000 in student numbers, following the Government’s March 24th announcement that 20,000 additional spaces will be made available. Meanwhile, a degree of uncertainty remains with Higher Education funding following the General Election earlier this month, Unite Group noted.

The company also stated that it expects the student accommodation sector to remain resilient overall due to the growth in student numbers over recent years, continuing strong underlying demand for places and growing demand from international students for places at UK academic institutions.

UTG.L is trading at 203.10 pence on the LSE, down 4.90 pence, on a volume of 228,527 shares.

For comments and feedback: contact editorial@rttnews.com

Copyright(c) 2010 RTTNews.com, Inc. All Rights Reserved

Recent Articles By Economic News:

*/ ?>