Subject: Re: Unite Group (UTG), UK, falling knife.
> "lower tariff cities"

I want to note for passers-by that 'tariff' refers not to payments/costs, but to the average number of number of UCAS points (grades) needed to access courses at a particular university.

This varies by university, rather than by city. Though, I suppose you can average across a city, I'm not sure it makes sense.

Some cities such as Edinburgh have multiple universities, but accomodation which is convenient for one university campus might not be convenient or acceptable to use for another.

To take an example, Newcastle University is not too expensive for studying, but it's high-tariff (grade demands), because it's a good university (top 150 in the world).

So aligning with 'high tariff universities' doesn't mean 'going where the big bucks are, paying for premium land', it means 'going where the smartest students go'.

If you think about it, that makes sense. In a world where more students are staying at home, and international students are becoming more picky, you know that the best students will go to the best universities, and their mum and dad probably don't live there. So if you're a private company seeking to have predictable cashflows, it makes sense to operate somewhere predictable. Buying empiric plays into this well because 80% of their properties are aligned with high-tariff universities vs 67% in the Unite portfolio more broadly.

A big issue relates to business visibility/management. The economically weakest universities are becoming more reluctant to pre-book accomodation from Unite for years in advance with inflation-linked contracts. But the wealthy prestigious ones are still doing it. For ease of operations and visibility of future cashflows and management of property debt, it makes sense to move towards the prestigious universities who have a good idea what they'll need for a decade to come.

But that does not mean the accomodation there is necessarily cheaper or more expensive.

It just means that it's easier for Unite to operate as a company if it focuses on certain niches, and fortunately, the crash in REITs provided them with an excellent way to pivot via Empiric.

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> "It seems to me they need two bits of luck for this to work out: low interest rates and good sale prices for low occupancy student property."

I'm sorry but I don't understand why it seems that way to you.

"low interest rates" - they don't need them. Run the maths, year by year, even assuming medium term marginal rates for UTG sit at peak levels of the last 5 years along with inflation sitting at 3-4%. Also, I would say, don't get an AI to do the maths for you, do it yourself so you see the dynamics in play.

"good sale prices for low occupancy student property" - do you believe asset appraisers have not already adjusted asset prices to reflect reduced occupancy in the last year or two? Appraisers aren't looking at it and saying 'well, it was high occupancy in 2024 and lower occupancy in 2025, so I guess it's lower occupancy forever now, and can only ever be used for students'. And Unite might only use it for students, but the same can't be said for the buyer, depending on the property.

Also, Unite aren't daft, and if a property has had a truly terrible year that impacted the asset value of the buildings meaningfully, I'm sure they're smart enough to manage it back to health for a few years before considering the sale.

TRS