Unite Students, the UK's largest student landlord, has slumped to a £417m pre-tax loss for the six months to June, reversing a £186m profit recorded in the same period last year. The FTSE 250 firm, headquartered in Bristol with properties nationwide, attributed the loss primarily to a £530m writedown in the value of its property portfolio. Earnings also slipped by 2 per cent to £142m as the company grappled with lower occupancy and targeted rent reductions.
Financial Hit from Revaluation
The sharp decline in pre-tax profit was driven by the revaluation of Unite's property assets, which delivered a £530m hit to the bottom line. This marks a stark reversal from the previous year's profit, reflecting the challenging conditions in the student accommodation market. The company has been cutting rents at campuses in Leicester, Nottingham, and Sheffield to boost occupancy, which has trailed historical levels in recent months.
Strategic Property Sales
Following a strategic review, Unite is undertaking "ambitious" measures to offload up to £400m of property, focusing on student tenants at the UK's strongest universities. In the first half of the year, the company completed £130m in property disposals and aims to sell as many as 20,000 more beds as it streamlines its portfolio. The group expects rental growth of 1 to 2 per cent for the current academic year, driven by targeted price cuts that are anticipated to lift occupancy to between 94 and 96 per cent.
Impact of Empiric Acquisition
Unite's acquisition of rival Empiric Student Property in August last year boosted rental income by 11 per cent to £262m. However, analysts at Quilter Cheviot noted that the deal caused a 7 per cent drop in earnings per share to 27.1p. Oli Creasy, head of property research at Quilter Cheviot, commented: "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 added that while most real estate acquisitions are immediately accretive, Unite's purchase of Empiric "came at just the wrong time."
Market Challenges and Supply Outlook
The landlord warned that student accommodation supply is likely to tighten in the coming years, as new construction slows and private landlords exit the sector. "Higher build costs and new regulation have made development of new student accommodation extremely challenging," the company said. Unite stated it would need to charge £300 per week, far above its current average of £190, to make new developments viable outside London. The company also criticised the Renters' Rights Act, which it claims is accelerating the departure of private landlords from the student market, alongside rising mortgage costs. Additionally, older accommodation is being removed from the market due to age, high running costs, and demand for higher-quality experiences. Shares in Unite fell 3.4 per cent to 538p in early trading.
