Post New

Hello board.

This post relates to this year's REIT thread, but I think merits its own thread. Please note: no AI has been used (or harmed) in researching and writing* this short essay, it is 100% human in origin.

In the last two weeks, one of the largest REITs in the UK, Unite Group, has fallen from 730p (start of October) to 550p (this week)**. This is a drop of around -25%. Personally, I do not believe this relative valuation gap with other UK REITs is justifiable and so I have flipped part of my portfolio into Unite Group. So, please be aware, I'm potentially talking my own book here. Also, please check every claim I make here if you are taking this idea seriously, as this is not advice nor a recommendation to buy or sell. I take no responsibility, DYOR, you are on your own, etc.

Well then, what is Unite Group? They operate student accommodation, mostly at 'top' universities in the UK, e.g. Russell Group. Some rooms they let directly, others they have medium or long-term inflation-linked agreements with various universities. Occupancy is generally quite high (97%) as there is a shortage of accommodation in most UK cities. They have prospered from the growth of UK higher education along with the high number of foreign students coming to the UK.

They're one of the oldest REITs in the UK, founded in 1991. They have a quite good long term record of growth - both asset value & earnings - without diminishing shareholder equity, though 2008 was 'a bit rough'.

For every share currently priced at 560p, you can get around 990p of net assets per share depending on your preferred measure. That's a discount to NAV of 43%. I think that's quite good. Indeed it is rarely heard of for a large, still-growing REIT in the UK, holding useful/highly occupied property in popular cities rather than empty office blocks in Skegness. As well as operating properties, they have also developed new properties in areas of high demand in cooperation with universities.

Interestingly, to rebuild this REIT from scratch, even ignoring all the challenges of setting up arrangements and agreements with universities, establishing a reputation for good quality accommodation with students and community, finding well positioned large properties in university towns - would require around 1069p per share, per the accounts***. Today's closing price was a discount to NRV/share of around 48%.

Unlike e.g. LAND/BLND, they are not being crushed by low occupancy, crap yields, or large levels of debt.

Very much the opposite. Their debt level per the last full results was 24% relative to assets and the cost of that debt was 4.1% (3.6% in 2024). And thankfully, there is no debt maturity tsunami about to crash down upon them, maturities are stretched out fairly equally over the next 8 years or so, averaging about 4 years, hedged to give a predictable fixed rate.

Indeed, this particular company has usually been so well regarded in terms of returns, safety and brand, that they have often traded at a good premium to asset value. In 2021 and 2022, they traded over 1200p per share versus this week's 550p low.

Very intriguing. So, what's the catch? Particularly, A) Why did they get cheaper after 2022? B) Why are they suddenly remarkably cheaper still in the last 2 weeks?

A) After 2022, essentially every UK REIT got cheaper, and rising interest costs on debt seems to be the primary reason. Changes to UK visa policy in 2023 and a reduction in student visas by 14% for 2024 were feared to trigger a decline in student intake from overseas, but occupancy in 2024 ended up around 99% by the end of the term that year. Notably, the Russell group universities saw a decline of only 5% in visa grants; so this is was more of an issue for lower ranked universities, where Unite generally doesn't operate.

B) This year Unite decided to buy out their only listed university accommodation competitor in the UK, Empiric, which was about 1/10th of their size measured by beds and historical market cap. Although this does not give Unite a monopoly on university accommodation, it will make Unite the only listed university property group in the UK. Empiric, judging by their accounts, was not so efficiently run as Unite and there are likely to be quite nice benefits of scale and efficiency. The bid was a mix of cash and stock, leading to a modest increase in debt for Unite going forward, but not outrageously so. You can read about the economic logic of the bid here at the reference**** below. It boils down to: it would cost a lot more money for Unite to build the same buildings as a developer (by about 20%). And the REIT market is fairly trashed. So why not just buy all those buildings at once, while Unite's debt is low and Empiric's price is low? And thus save rather a lot of time, energy and money, essentially bringing forward the next 10 years of growth and expansion early, and at a substantial discount. The bid is expected to be accretive to earnings for Empiric holders in the first year and Unite holders in the second year.

Now, personally, I am not sure it's a superb idea but it's not bad? It makes economic sense, it essentially trades off extra business risk today to lock in a bunch of growth cheaply, when Unite is quite well placed to take on the extra risk. It also reduces risk in other ways, because the attractiveness/occupancy/price of these buildings for students is a known factor, which can't be said of a new development.

Finally, we reach what I consider to be 'the catch'. Not all shareholders agreed this plan is a good idea*****. On Monday October 6th, an AGM/court meeting resulted in only 71% approval. And so for the following two weeks there appears to be (*in my opinion*) an overhang of sellers, which in turn has set up a kind of negative momentum/sour sentiment around the stock, at a time when other REITs are sexy and racing ahead.

(I think also there's a strange sentiment in the air that universities will no longer matter going forward because people have chatbots to do everything for them. I don't think that will be a big issue for the set of universities and cities where Unite/Empiric operate, in fact I think the idea is fairly silly.)

What else might be 'the catch'? At the October 6th meeting, Unite noted that room sales for the year are slightly below previous years at this point******. But this is not 'news'. They projected exactly this throughout the year. 95.2% occupancy when in previous years it would be 97% at this time. This has led to rental growth of 4% (as they projected) when previous year's results recently had been around 7-8%.

The company has affirmed that earnings are exactly on course as expected with full year guidance unchanged at 47.5-48.25p. So I don't think that is 'the catch'.

What else then? The Empiric bid is not fully complete. Although shareholders of both companies have formally approved it, there's an investigation by the UK competition watchdog******* that I think will finish in a few months. I assume that Unite and Empiric have foreseen this and planned accordingly, and that the scheduled property disposals within the bid play some role in reducing concerns.

Overall, to my mind the current price of Unite Group relative to value is simply a mistake, a mispricing, and an opportunity to turn around either a very quick 30-35% gain, or a very long term 100% gain, while being paid a 7% dividend as you wait, less 20% WHT for those without a UK tax wrapper such as ISA or SIPP. (It might be useful to mention here that most of Unite's dividend is PID subject to a REIT 20% withholding tax outside of tax wrappers, but part of the dividend is sometimes just an ordinary dividend with no withholding. This may slightly increase the income value for non-UK investors.)

I believe any good value opportunity should have most/all of the following qualities:

1 - Low debt - as debt does tend to create the most problems. Here, debt is relatively low/manageable, and low cost, compared to the sector. Maturity dates/balance are not an issue. The amount of debt used for the offer seems reasonable.

2 - There should be an OUTRAGEOUS discount to intrinsic value. Which I think we have here, at roughly 50% discount to recently updated valuations on book and >50% discount to peak pricing in recent years.

3 - Something to 'out' the value - here, we are seeing a ongoing rally in many other REIT prices. Hopefully, any overhang of unenthusiastic institutions bailing out will soon come to an end. Together, this could produce positive momentum.

4 - Good assets, to establish a foundation for the intrinsic value of the stock - here, they own heaps of property in high-demand areas of the UK at a time when there's a massive shortage of property in the UK. If every university closed tomorrow, all the assets would still be very high value and in high demand.

5 - Something to change the narrative completely - this is linked to outing the value, but longer term. Perhaps I can explore this with a simple question. Suppose you were a rich parent somewhere in Asia, who was sending off family to a fancy university in either the US (number 1 destination of the past) or the UK (number 2). Perhaps with the hope of them acquiring PR/citizenship later. Which of these two destinations would you encourage them towards in 2025, and why? (Come to think of it, consider the same question, asked to a wealthy US parent...).

6 - There should be some sign the falling knife might have stopped falling. To my eye, it seems the price movement might have flattened in the last few days of trading. Hence I am finally motivated to write this essay, in case it isn't worth writing at all next month.

7 - Ongoing earnings & asset value growth in the background are always nice to see, to help build up the 'value pressure' underneath the price. Very much present, here.

At 730p, 2 weeks ago, Unite seemed good value to me.

At 560p, close of market today? It seems like a bargain.

So I have purchased some at 630p, 600p and 570p in roughly equal amounts. I will probably not buy any more due to my own position size limits.

I hope this has been interesting or useful for someone.

Thank you for reading and for any feedback/thoughts you would like to share.

TRS


NOTES

* 'reiting', perhaps

** a few numbers are slightly rounded for elegance - if you care about everything after the decimal point, it's best to double check.

*** https://www.unitegroup.com/articles/interim-result...

**** https://www.unitegroup.com/wp-content/uploads/2025...

***** https://www.ajbell.co.uk/news/articles/unite-group...

****** https://www.investegate.co.uk/announcement/rns/uni...

******* https://www.insidehousing.co.uk/news/competition-w...

Thank you for this post. I have bought a few today after a little thought. As you say the fall seems overdone and near it's end.

Deucetoace

Hello Deucetoace, you're very welcome.

As a sanity check / finger in the air, last week I googled around to find a similar company in Europe to explore how it was valued currently relative to Unite Group.

https://www.xior.be/en/

Xior is a Belgian student accomodation company that operates at major universities across the EU, which appears to be a comparable peer.

Xior has a comparable market capitalisation of 1.4 billion (vs 2.84 billion for Unite Group). It operates in several countries, which may be a diversification advantage over Unite which only operates in the UK, or may be a disadvantage due to language/internationalisation in IT systems, and the complexity of managing many sets of laws/building regs/uni regs/taxes/accountancy standards etc.

Xior is similarly down 50% from peak valuations a few years ago. Similar occupancy levels at 98%. Similar 'rent existing campus buildings and build where demand is high' business model.

So far, so similar.

Xior has considerably more debt, 50% LTV* rather than 24% LTV for Unite Group around the same point in time in 2025. Where Unite has a debt/EBITDA of 5.3x, Xior has a debt/EBITDA of 11.7x. This is an important difference to me as I personally prefer companies that produce good earnings using as little gearing as possible. Especially so in value plays. Excessive debt is a common factor in value traps.

Both companies have debt maturity averaging around 4 years. Xior has access to debt at 3.0% (EU) vs 4.1% (UK) currently for Unite.

For earnings and dividends, I prefer to use recorded data rather than projections. I've used today's closing prices (580p) and (29.2 euro) & 2024 full year results to calculate ratios.

Unite 2024 P/E: 44p EPRA earnings per share = 13.2x P/E (note; adjusted earnings are suggested by the company, at 46.6p/share, 12.4x P/E)

Xior 2024 P/E: 2.21 euros EPRA earnings per share = 13.2x P/E

Unite 2024 Dividend Yield: 37.3p per share = 6.4% yield.

Xior 2024 Dividend Yield: 1.768 euro/share = 6.0% yield.

Unite discount to 2024 EPRA NAV/share: 580p vs 972p = 40% discount.

Xior discount to 2024 EPRA NAV/share: 29.20 euro vs 39.91 euro = 27% discount.

Unite is projecting 3% growth in earnings/share in interims and very recent updates, and has raised the interim dividend by 3.2%.

Xior appears to be projecting 0% growth in earnings/share for FY 2025 and 0% growth in dividend according to page 36 in the 2025 H1 interim results.

In fact, earnings growth and dividend growth have been precisely 0.000% between 2023, 2024 and 2025.

Well, at least they're consistent.


Summary of important points
---------------------------------------

1) The companies are comparable, with similar scale of operations and business model. Both companies have a 2024FY dividend around 6%, and a 2024FY EPRA P/E 13.2x.

2) Unite is achieving slightly better adjusted earnings & dividend plus better growth *while using half as much gearing as Xior* despite *higher cost of debt*. I think this is very interesting.

3) Unite is at a discount of 40% to the EPRA NAV/share, whereas Xior is at a discount of 27%. *If considering a value play rather than a long term investment, this is very interesting*.

Conclusion
--------------

Both companies are interesting. Unite is about 6% cheaper on 2024FY dividend and adjusted earnings. Unite is about 18% cheaper by NAV discount (0.6/0.73). Unite has half the debt gearing of Xior. Unite is growing at 3% while Xior is not growing. Unite is perhaps likely to grow faster for a few years with the recent acquisition, though with elevated gearing for a while. Unite probably has better pricing power at present as it is nearing monopoly in the UK, and because UK housing demand in cities is exceptionally high.

I think on balance Unite is a much more compelling investment due to far lower debt risk, better growth, cheaper assets, cheaper earnings and dividend.

How much more compelling?

A) Assuming Unite's price recovered so that the discount to NAV was the same as Xior, would result in a 21.6% gain in the Unite share price.

B) Using EPRA earnings, and adding growth to earnings yield, 7.6% earnings yield + 3% growth = 10.6% return for Unite.

Using EPRA earnings, and adding growth to earnings yield, 7.6% earnings yield + 0% growth = 7.6% return for Xior.

Assuming Unite's price moved so that both companies had similar prospective 7.6% returns would require a 65% gain in the Unite share price (e.g. 7.6/4.6).

(Though I am not sure it would be wise to place much weight upon that argument.)

C) Assuming Unite geared up the business to the same level as Xior has, I would guess that earnings, dividend etc at Unite might improve by 10-30%. Total guess though. Haven't done the maths.

D) Overall I suggest Unite might be relatively undervalued by 20-25% versus this EU peer at today's prices. Depends on the importance you place on assets, debt cost, debt amount, near-monopoly, growth etc.

E) Or to put it another way, when Unite was priced at 720-730p 2 weeks ago, I think it was probably priced correctly *relative to this example of a peer company*.

(Xior was around the same price level then as it is today - it didn't move down in parallel with Unite's price crash).

If anyone would like to run similar comparison numbers for other EU/US university accomodation REITs, I would be very interested to see that. No AI slop though, please.

If anyone sees important/substantial flaws in the analysis above, I would be grateful if you could highlight them for me.

Otherwise, thanks for reading**.

TRS



LINKS

Full year 2024 reports and H1 2025 interim reports for each company.

https://uploads.xior.be/website/67a0ef63b53cc/xsh-...

https://uploads.xior.be/website/689325fd31835/xsh-...

https://www.unitegroup.com/annual-report-and-accou...

https://www.unitegroup.com/articles/interim-result...



NOTES

* looking at page 4 of the H1 results, their very first proud result is "LTV <50%". On page 13 the number is revealed to be 49.84%. Hmm....

** I apologise sincerely for my ongoing failure to mention Trump anywhere in this thread. Judging by the 'best of' board it seems to be some kind of requirement? :-)

PS

Regarding the issues I noted about 'waiting for a falling knife to stop falling' and 'movement of other REITs upwards might reverse momentum effects on Unite'.

Unite +3% Wednesday. The entire REIT sector was up today in the UK. Unite is now 5% above the lowest point of the dip so far.

https://www.google.com/finance/quote/UTG:LON?windo...

Hello TheReitStuff,

I bought some Unite and Empiric back in June, when I thought they were reasonably priced but a good inflation hedge over the long term and less risky than many equities around the world. I wrote about it here.

https://www.shrewdm.com/MB?pid=210116721

Nothing out of line with what you are saying, other than now Unite is 30% cheaper! It looks a lot more attractive now with a price to book of 57% and a 6.5% dividend yield and a 7.8% earning yield. (I'm reading these numbers of my June spreadsheet with up to date market prices but they might have had earnings published since, so the numbers might be marginally better than this.)

I was first attracted it to it, when looking for student accommodation for my son. We only looked at one or two cities but there is definitely a shortage of student accommodation in the UK. I agree the UK might benefit from more demand, that might have otherwise gone to the USA.

The only challenge I would make to your article, is the quality of the assets. The are high quality but if there was a major drop in university demand (and I don't think that is on the cards), I would expect them to be hit quite hard. I get the impression the properties are high density student properties that would be expensive to convert to something else. But yes, the properties would still have value. I don't see much evidence that student numbers will drop off, so that's not a problem currently. (However, it is getting very expensive to go to university and there may be less jobs for graduates in future. You could certainly make a case that it would make financial sense for a lot of youths, to learn a trade and avoid student debt and the risk of being unemployed in the new AI world. But its a hard enough sell to an 18 year old to learn a trade and many are not suited to it. Then again, maybe the AI use cases are only beginning to become apparent. Maybe university demand will soften. I don't know.)

I'm not sure why the stock has fallen so hard, over the last few months. Probably because I bought it! Base rates have been falling but maybe the type of borrowing they do has gotten more expensive. I suppose the point is that the loans they secured during the low covid rates will be refinanced at higher rates. I haven't looked at that too closely.

The current discount to book value is very attractive in my opinion. To be able to buy a property asset, in an inflationary environment, at a sale price, when there is a shortage of property and growing population is interesting. This is not some crappy REIT with low quality assets. They are quality operators, with high occupancy rates and as you say, deep links with the UK's leading universities. And they are growing.

Looking at my spreadsheet again, another way to look at valuation, is the market cap you are paying per bed. It's £40,487. That's cheap. If you go out into the UK 'buy to let' market and try to buy a property, not only would you be paying a lot more than that, you would be paying a lot of tax on the rental income, unlike Unite with its REIT status. I agree it's a buy, based on my limited knowledge and lack of expertise. I just wish I had waited a few months for this price...

Thanks for your report. I enjoyed it.

EVBigMacMeal

Hello EVBigMacMeal!

Thanks for the kind words. I went back and read the post you wrote before. I must have missed it earlier in the year even though I was sure that I had read that whole thread.

I appreciate you taking a moment to confirm that I am not simply puffing up the quality of this particular stock, this company really is 'pretty decent', at least by the standards of the UK market. In bubbly global markets it's rare to suddenly have one of those situations that's a hybrid of quality/monopoly-like, GARPy (8% growth in recent years), yieldy (7%+), predictable cashflow-y, low debt, tax bonus-y, all at once, fairly free of scandal, mismanagement or white elephant projects, while also being tariff-proof, and set to benefit greatly from Trump's chaos and malice rather than being harmed by it.

Going back to your posts & comments: Price/bed vs private BTL is a very interesting idea, I hadn't looked at it that way before.

Reflecting for a moment on BTL: besides the issue of tax on rental income, there's also the issue of tax on capital gains on property, which I expect is quite painful with BTL when you can't ISA/SIPP around it. And nowadays, the need to run a limited company if you want to do BTL with any kind of tax efficiency, as well as the property stamp duty, the purchase/sale costs in time and money, the time/stress of accurate tax reporting each year, and the overall running, monitoring and maintenance of the place and the eternal search for good tenants. You can't gear up a regular BTL at 3-4% rates very easily (I think ordinary BTL fixed rate mortgages are about 50-100 basis points higher than what most REITs have access to), and you certainly can't buy UK BTL properties at a 50% discount (to NRV). You can't scale in or out of them depending on any other opportunities that come up, or any need for spare cash. I genuinely wonder why people bother with BTL at all? It seems like much more suffering, for much less money.

> I suppose the point is that the loans they secured during the low covid rates will be refinanced at higher rates.

Perhaps, but it strikes me as odd that institutional investors would all notice that on a random morning in October. Also, that issue affects every REIT (and UTG.L is one of the least affected - compare with e.g. SUPR.L recently, or many others). If they are all affected, why would a 30% gap emerge between this stock and the rest of the herd, when they usually move together?

I'm very sorry to hear you picked it up before the drop. As it happens I was nearly in the same situation as yourself. I had been planning to buy UGT around 700-730p in September, but I didn't quite get around to it. Mostly because there has been a lot of other choices lately (until the recent rally of 10-20% in most REITs). And of course, there was that fabulous buying opportunity in Greggs, an epicurean's delight for merely 1500p per share not so long ago. How could I resist it? It's been a struggle lately to choose between one extra unit of stock, or a soggy paper cornucopia stuffed with lukewarm sausage rolls.

TRS

thanks TRS

Good points on the BTL challenges and of course those taxes on UK BTL are pushing private landlords out of the market. Which is by government design to free up housing stock for families. But that does mean there is less supply of private rental properties, which in turn is good for Unite. Maybe the phrase – don’t fight the Fed – can become don’t fight the UK Gov, when it comes to property investment.

Why has it gotten so cheap is a great question. I might have thought a company backed up by property would be less volatile and prone to big price moves, at lease during a period of flat, to gently falling interest rates. I speculate that you are correct that it’s related to the Empiric acquisition. As you suggested, it could be some shareholders liking the combined firm less and getting out. It could even be the timeline for the completion is too long and short term investors just see it as dead money while the deal gets investigated and eventually completes way into 2026. Could also be something else is happening that we don’t know about.

As far as I can see, Unite was previously fairly valued and considered a strong operator with a great portfolio. Now it’s for sale at a discount, as happens from time to time in stock markets. In the wider stock market, fundamentals are out of fashion currently and the UK has little appeal to international investors.

FT reporting that Chancellor Rachel Reeves is looking to boost UK share ownership by overhauling ISAs, with potential measures including a minimum holding of British companies and stamp duty tax breaks. Good news for companies like Unite and Greggs…

EVBigMacMeal

Thanks for posting, this one had fallen off my radar. I keep an eye on the house builders and REITs. It's a no brainer at these valuations IMO, I bought in yesterday. Potential double over the 3 years at a push with growing rental income, closing discount & growing NAV.

BTL is dead in the UK tbh, ive been in it. This also plays into Unite hands as many private landlords were heavily invested in University towns.

I consider this a better play than BLND and Land Secs.

Hello Blackswanny,

Thanks for the feedback and comments. Glad it was useful for you.

I consider this a better play than BLND and Land Secs.

I agree. Besides the relative stability/demand in the education sector vs offices/retail, consider this graph below.

A good example of a picture worth a thousand words.

https://stockcharts.com/sc3/ui/?s=LAND.L&id=p86383...

TRS

am curious if the demand (e.g., admission rate of schools served) and relative cost of proximal housing has any useful insights?

> am curious if the demand (e.g., admission rate of schools served) and relative cost of proximal housing has any useful insights?

Hello weatherman. The most recent trading statement is here and seems positive (or not negative) on these issues.

https://www.londonstockexchange.com/news-article/U...

Regarding 'admissions' and 'local rental cost', the following lines seem relevant:

"The outlook for international demand remains encouraging thanks to growing student mobility and the increasing attractiveness of the UK as a study destination as competitor markets introduce more restrictive policies."

"Looking ahead, the outlook remains robust, underpinned by growing demand from school leavers and stabilising international admissions."

"Home Office data shows 7% growth in applications for study visas in the year to August with applications in the peak summer months in line with 2024 levels."

"Sales to date deliver 4.0% rental growth for 2025/26 (2024/25 8.2%)"

"Rental growth driving modest valuation increases in Q3 (USAF: 0.0%, LSAV 0.4%)"

TRS

My understanding is that halls of residence are more expensive than private accommodation.

U.K. origin students tend to go to halls of residence in first year and pay the premium. Gives the student an opportunity to get to meet other students and provides peace of mind for parents. As students move to later years, they often find private accommodation which can be cheaper.

International students (there is a large contingent of wealthy Chinese), often stay in halls of residence for their whole university life.

The onboarding process for halls is designed for students, so that they can make a holding deposit early in the year before starting and are only contracted if they get their place on their course, which is not confirmed until August time, a few weeks before term starts. Private landlords, in many cities where supply is tight, require deposits much earlier and it doesn’t really work well because of the late confirmation of a course place. Another reason for the popularity of halls, as offered by Unite.

The advantage of halls is the certainty of having accommodation, the shared spaces and the selection of rooms set ups to cater for different budgets.

I would say halls are more expensive but not hugely and they are much more suitable for the first years and foreign students.

I actually doubled my position today. I like the idea both from a numbers perspective and the narrative around trends which are generally favourable.

A good discussion.

Interesting thread. Not a company I had looked at but will make a point of doing so now.

"The only challenge I would make to your article, is the quality of the assets. The are high quality but if there was a major drop in university demand (and I don't think that is on the cards), I would expect them to be hit quite hard. I get the impression the properties are high density student properties that would be expensive to convert to something else. But yes, the properties would still have value. I don't see much evidence that student numbers will drop off, so that's not a problem currently. (However, it is getting very expensive to go to university and there may be less jobs for graduates in future. You could certainly make a case that it would make financial sense for a lot of youths, to learn a trade and avoid student debt and the risk of being unemployed in the new AI world. But its a hard enough sell to an 18 year old to learn a trade and many are not suited to it. Then again, maybe the AI use cases are only beginning to become apparent. Maybe university demand will soften. I don't know.)"

My first thought when I saw the fall in price mentioned was that it may have been because of the threat to demand.

There has been a growing trend to bring in international students as they pay higher fees I think than domestic ones. In recent months there has been a lot of talk about the impact of students on the immigration figures - and how the government will look to tighten up rules in this space (granted, this might be aimed more at non degree students but I think there was some discussion around the number of students remaining in the UK once their studies finished). Secondly, there were other comments I think by government figures recently distancing themselves from New Labour's target for people going to university.

I would imagine though with relatively low debt for a REIT, and if the asset values are fairly accurate that even if the demand side did dry up then the sites could be repurposed for a profit, providing some safety here.

Hello Indefensible, thanks for sharing your thoughts.

Five quick responses:

1. Whether prestigious universities continue to exist, and whether assets like halls of residence in town centers can be repurposed if necessary to other forms of accomodation or usage, are valid questions.

But why would these questions trigger such a massive, rapid gap in relative valuation (vs peers) specifically starting on the day of an AGM/court vote about a buyout bid?

I linked to a graph earlier showing UTG and LAND/BLND. The gap in valuation against those REITS that has suddenly opened up in the last 2-3 weeks is about 40%. That's a spectacular relative valuation gap. UK REITs generally trade together and move as a flock. Thus I think it's much more likely that this is a short-term price gap caused by temporary supply/demand imbalance rather than a long-term change in intrinsic value.

I do believe UTG is an interesting long term investment, and I do think long term questions are valid and interesting, but the reason I took time to write my original essay is simply because of the potential as a very short term 'compressed value' play that I think isn't very likely to turn into a value trap.


2. About "if the asset values are fairly accurate". With niche REITs that hold peculiar assets it can be tricky to estimate the value. However, this is not a niche REIT, and there are established accounting approaches to put conservative prices on the assets. Two common methods are a) sum of discounted future rental incomes (for unusual situations) and b) recently achieved market prices (where the assets are openly traded).

EPRA lay out standards for reporting on asset value, and the accounts of UK and EU REITS comply with those standards. However, they are only accurate at a point in time - discounted cashflows depend on the prevailing discount, and market prices depend on what's currently happening in the market. The safest way to approach this is to look at examples of a few years of NAV values, look at reported asset sales/purchases by the company and peer companies and their NAVs, to make sure they are all being suitably conservative, consistent, and not up to shenanigans.


3. Here's an example of a quick sanity check for asset value per share for Unite.

In 2018's report, assets were reported at 790p/share. (I picked 2018 randomly because 2020 was 'covid' which messed up asset valuations for a while; you might prefer to pick another year). Loan to value 29% then, similar to today, very slightly higher. There has been inflation and there has been about 20% of earnings retained each year (let's call that 1% reinvested and 4% divi, as the earnings/dividend yield was much lower in the past). Let's take 790p and inflate using the Bank of England inflation calculator, and then add 1.01^6 for 6 years of reinvested spare earnings, and see what comes out.

790p * inflation 2018-2014 = 998p in 2024. Add reinvested earnings: 998 * 1.01^6 = 1059p predicted NAV/share.

For curiosity's sake, let's also try with 2017's full year report, in case I picked a strange year by accident.

720p * inflation 2017-2024 * 1.01^7 = 999p predicted NAV/share.

Actual NAV/share for 2024 year end was 972p.

These are 5-10% higher estimates than the actual NAV we ended up with. That's understandable because besides general friction in business, we can see interest rates have risen, covid was not kind to university related businesses, and so on. There are also issues relating to 'tax stuff' e.g. stamp duty on newly purchased buildings that affect the efficiency of reinvested earnings. If you're curious about the 'tax stuff', EPRA lay out standards for how that is handled in valuations. The standard is that you get 3 separate NAV figures from the company accountants that represent different tax assumptions e.g. 'rebuild company from scratch today' vs 'sell everything tomorrow in a fire sale and pay all taxes immediately'.

I think the asset values are probably quite accurate, as they are being estimated by both discounted future rents, and from prices actually achieved in market disposals, and because they're very consistent over long periods and economic environments with what we'd expect to see. Allowing for slight variation over the course of a decade and different economic environment, of course.


4. But if you mean e.g. 'will the asset values hold up *at all* if there are simply no universities ever again, starting tomorrow'... well, that would be a somewhat conservative basis for valuation I suppose. It's probably worth looking at how the UK has been using hotels and social housing at great expense to try to house new arrivals where they have a legal obligation to provide housing assistance. Even if every university closes tomorrow, I think asset values will hold up well simply from the insatiable demand for 'rooms' in UK cities.


5. Keep in mind that some universities in the Russell Group were around for hundreds of years before the USA was founded ... they are the honey badgers of human society, persisting against all kinds of economies, wars, technological changes, social changes and politics. I don't think they'll be gone tomorrow.


TRS

UTG had a target of 97% occupancy and missed this by a few % in recent reporting and they are acquiring empiric which only has an 84% occupancy. I think the market is reacting to this too, concerns about reality vs management optimism.

It will definitely be tougher going forward but as an investor buying at such a big discount to NAV with low gearing offer discount to IV.

The dividend may also be cut, this isn't an issue for me as I assess property companies on NAV, debt and interest cover... can they weather a storm. UTG can I believe.

Hello Blackswanny,

I'm sorry but I don't agree with most of what you posted this morning, and I hope that by the end of this reply, you won't agree with yourself either :-)


>"UTG had a target of 97% occupancy and missed this by a few % in recent reporting"

I feel this sentence, as written, is misleading.

UTG has a target for *final* levels of occupancy in the current year around 97%. The previous year *final* occupancy was 97.5%.

In the October trading statement, they said they were *currently* at 95.2%. The trading statement does not say 'these are the final figures for the year', it says, "As we enter the final stages of the sales cycle".

Put differently, it's Thursday afternoon at the end of the month at the car dealership.

I'm an former academic myself who studied in the UK. During my degrees, I spent about 6 years living in halls of residence, and I became involved with helping the running of more than one of the halls. It was very common for halls to continue to fill up rooms weeks and months after the start of term. Even back in those days when housing in town was plentiful, whereas today it's more common to see students desperately camping in tents on lawns for weeks after term starts in hope they can find somewhere to stay.

The trading statement actually indicated the sales situation *improved massively* from the previous trading statement in June. In June they had sold 88% of rooms, whereas in the previous year it was 94% sold by that point. (6% behind 2024). In October, they had sold 95% of rooms (and still ongoing, but running out of time), whereas in the previous year it was 97.5% at the end as the final figure.

You can review the wording in the two statements here:

https://www.londonstockexchange.com/news-article/U...

https://www.londonstockexchange.com/news-article/U...



2. >"they are acquiring empiric which only has an 84% occupancy"

But this is not 'October 6th News'; the track record of Empiric and the price/value of the acquisition was fully known and essentially certain to go ahead in the vote.

The 'October 6th surprise' was how many were unenthusiastic about the bid and voted no. That was a big blow to sentiment and narrative.

About occupancy, as far as the deal goes, Unite point to this bid as 'the buildings' rather than 'the company' by their focus on the NRV and debts they acquire with the deal in their presentation. The logic is that they take on Empiric's buildings (20% less than they could build it for themselves). I can't recall offhand, but I think Empiric's debt they take on is also a bargain - a better rate than they would get today (5 years, 4.4% I think? versus e.g. SUPR REIT taking on debt at 5 years, 5.0% recently).

So, it is probably not a good time to be an Empiric employee.

To give a further example of why Empiric's occupancy figure doesn't matter (even if it had been announced on Oct 6th! Which it certainly wasn't. It's been known for years).

Empiric's brand focussed on 2nd year+ returning students. Unite focusses on 1st year students. It's much harder to get 2nd years to stay in hall, they want to run free in the wild, hence the lower occupancy.

If you own both buildings, and you get a lot of 1st years and not enough 2nd years some year, or vice versa depending on e.g. local housing and housing demand... it's a very easy to solve problem within a single company and single booking system. Take excess students from building A, offer rooms in building B.

You get synergy not just from Unite sacking staff that are duplicating the same business function / 'scale', you also get synergy from being able to balance different types of demand and overflow at halls between year groups, as well as potentially being able to keep students 'within your system' for as long as possible.

At one point, I stayed in a particular hall of residence, four years in a row. Why? Because I had friends there and they stayed too. Being able to enable this kind of thing adds business value.

I think Empiric's past occupancy numbers are not relevant; they won't be selling or operating those rooms any more. It's just some buildings, and we have a good idea of how well Unite fills rooms in buildings compared to Empiric.

Think of it this way. Two companies might operate the same hotel or restaurant building in different time periods, yet achieve totally different levels of occupancy, profitability, and satisfaction. And we have a good idea of how efficiently and successfully Unite Group runs its assets.

Similarly, if a company operates two restaurants nearby, and one restaurant is overflowing while the other is empty, they can offer to seat guests at the second restaurant with some free drinks, and make the best use of their assets.


3. >"The dividend may also be cut"

May I ask, where exactly are you getting this claim from? Because it does not sound plausible at all.

I know for a fact there's nothing in any company announcement that would suggest it, and the finances of the company also don't point that direction.

Unite's dividend is covered 1.24x, which I think is the *highest*, *safest* level of dividend cover for any UK REIT.

SEGRO, the prima donna of the UK REIT sector, achieved 118% dividend cover in 2024. (https://www.segro.com/investors/investment-case/fi...)

But almost all other UK REITs are scraping by on 100% dividend cover. SUPR (the supermarket REIT) is running slightly below 100%. Regional, Target Health, SOHO REITs all fell well below recently.

Whereas Unite? Earnings of 46.6p in 2024, and a dividend of 37.3p. That's dividend cover of 124.3%!

This is possible because they make money 'on the side' from non-rental operations as well as reserving the maximum 10% of the rental income permitted each year. Whereas most other UK REITs run it very, very close to the line.


4. The Empiric purchase is a *small* competitor, around 1/8 to 1/10 the size of Unite. Bought at a bargain price.

Consider, the bid was announced first on May 7th 2025. Unite's share price the day before was 867p, for a market cap of £4.2bn. At the low of 550p this week, the market cap was £2.7bn. That's a drop of £1.5bn.

The Empiric bid had a maximum value at £719m mid year. I just don't see how buying £900m of net assets for a price of £719m, destroys £1500m of company value.


5. When a price dumps, people sometimes talk themselves into imagining things that may be wrong. (Nowadays, they may even be assisted in that effort by hallucinating chatbots, which are beginning to plague finance board discussions, as they will play along with whatever idea you ask them to). I think it's better to focus on discovering if something *is* actually wrong, as a question of facts or fact-informed probabilities. A drop is only a bargain if there's no equally sized justification for it. Some drops are triggered by true loss of value, but some are just triggered by the general mood of investors, narratives they believe. For example look at TSMC or NVIDIA in 2022 and look at them today.

Not my view, I had a quick trawl of recent news and was guessing why the market might be over reacting.

I have no idea personally and obly invested purely on fundamentals. Voting machine vs weighing machine etc..you can often fool yourself with guess work.

https://www.proactiveinvestors.co.uk/companies/new...

Fundamentals ticked the box so I bought.

Personally, I spent 1 year in halls many years ago and hated it, much perferred living in a large shared Victorian house with a room 3x the size of halls and high ceilings it was also 20% cheaper than halls.

Hello again,

I think a lot can depend on the type of hall you experience, as well as personal taste and lifestyle of course.

I had the fortune to spend 4 years in a newly built modern hall. Each person had a double bedroom with private ensuite shower and plenty of space/storage, good sound insulation between rooms, nice views of the countryside or town, facilities inside the hall like shopping, 24/7 vending machines, big restaurant, cafe, huge laundry, IT center, pool tables etc. Even a small (free!) mini cinema, built into the hall.

It was more like living in a large hotel room, and in the summertime, it turned into a hotel when the students were away.

Not the cheapest hall in town, but there were plenty in there similar as myself from a poor & working class background - uni accomodation was more affordable back then. It was nice.

On the other hand, later on I stayed for 2 years in the cheapest hall in town.

Lovely friends in the corridor, but good heavens... the stinky dirty toilets... the noise... random people stealing things... no space to work, just a bed...

If not for the nice people I met, it would have been awful.

TRS

Mine was newish halls £50 a week early 2000s with private ensuite, communal kitchen / lounge, gym and laundry, bar, games room on site. Countryside view. (Univerity owned and managed)

Victorian shared house, shared bathroom, but sink in room. (also university owned) £40 a week.

I avoided London as the halls were double the price back then.

Out of interest I looked the Halls up and it's £138pw per room now.

Good tip, good thread.

Meh, I worry too much. I went ahead and bought some, in at 560.7 pence.
I haven't really done enough reading yet, but it seems very unlikely to be a disaster from here.

One could think of it as a somewhat aggressive linker: higher risk, higher yield. Barring another pandemic-style blow-up, the yield should track inflation over time, with luck even a bit better. In sterling, of course.

Jim

There's alot in the news atm about Labours overseas student tax (6%) they are proposing to levy on Universities, expected to take c600m pa from a pie of 10bn£, it's expected that they will pass costs on and this will dampen demand.

Unfortunately their policies are often counter productive whether it be employers NI, the housing market and now this.

I dont like how the UK Economy is managed at all but valuations are depressed and everything has a price.

Dear Jim,

Thanks for dropping by with a comment.

I'm delighted that my arguments have merited such a high profile badge of approval :-)

Recent thoughts:

1. UK REITs have generally moved up in price about 5-15% in the last month. While Unite is still hovering near lows. This means that the valuation gap against local peers is bigger than ever.

2. Empiric are still operating as an independent company until the CMA (UK competition and markets authority) phase 1 investigation is complete. They recently reported that they saw rents rise 4.5% (good) but occupancy lower than last year (bad). The reason seems to be a drop in Chinese students coming to the UK. Their accomodation is positioned for older students rather than 1st years, and they apparently hope to lift occupancy with postgraduate students in January.

3. I think I'm going to write to the Unite CEO to point out that if a 20% discount to NRV justified them buying Empiric, then a 47% discount to NRV surely justifies a buyback program for Unite. One of those situations where it's probably worth them selling assets or taking gearing up to LAND/BLND levels in order to buy back the whole portfolio at half price, while it's on offer.

4. Recently, the CMA have very rapidly approved the takeover of Assura REIT by Primary Health Properties REIT without requiring a phase 2 investigation. I think this is probably a good omen for Unite/Empiric?

5. I have not seen anything in the news that would justify the ongoing discount on Unite's stock, it is quite baffling? I am actually quite surprised there hasn't been a move back up to 650-700p sort of level.

6. Saw this article (July 2025) randomly in a news feed: https://www.forbes.com/sites/michaeltnietzel/2025/...

7. Obligatory sausage roll news: A tasty treat was on sale yesterday - GRG dropped from 1720p to 1553p in the last ten days. Has recovered to 1600p today, slightly more lukewarm.

TRS

Latest thoughts, having bought more recently.

The Russell Group rankings, for some of the lower rankings universities have fallen in recent years, due to the growing status of universities in China and Singapore. Chinese students in particular, pay a lot of attention to the global rankings. Given that foreign students tend to stay in halls for their entire study life, this is not a helpful dynamic for demand. Empiric has reported some occupancy softening for this very reason.

The recent high profile case of Chinese intervention to influence U.K. universities, is not a great narrative, along side ever increasing geopolitical tensions.

However, the current discount for Unite makes any negative narrative seem very overblown. when looked at over the long term. China, with its huge population, is currently in a depression and yet it is sending thousands of their young people to the U.K. to study.

The U.K. has a world leading reputation for higher education and attracting students from overseas. Surely we can take some comfort from the fact that people like Lee Quan Yew, studied at Cambridge and LSE. Oxford has been around since 1096 and there is a fair chance Unite will be renting rooms to Oxford students for many years to come. And inflation will mean those rents will keep creeping up.

Remaining philosophical, I regard an investment in Unite at current prices, as a high probability of a satisfactory return and safety of principle. Let’s say, the NAV discount remains for many years and all I get is a 6.7% dividend, which grows due to the 20% capital retention and inflation. Well that might sound unattractive in a world of booming AI stocks, but it is our lifetime, cumulative compounding record that matters. I see Unite as something that might hugely outperform in a falling stock market…and who knows maybe the NAV gap closes for an extra boost.

Good to see more smart money getting on board.

*Safety of principal

It's difficult to get information about the state of the UK's higher education intake, however this article from October 31st 2025 sounds positive.

It seems African, US and Indian student intake is at higher levels which is offsetting the recent drop from China.

Part of the improvement seems to have come from new approaches that make it easier/faster to scrutinise students that are applying.

https://thepienews.com/cas-issuances-up-8-across-u...

" International student recruitment is regaining momentum after a slower 2024 cycle"

"While issuances for the Confirmation of Acceptance for Studies (CAS), a unique reference number issued to international students after accepting an offer, are up 8% year-on-year, acceptances and deposits have risen by over 18%. The gap between applications and final approvals indicates that UK universities are processing more students while applying greater scrutiny to decisions."

"As per data highlighted by Enroly, West Africa recorded the highest year-on-year rise in CAS issuances (70.03%), followed by North America (11.82%), East Africa (7.74%), and South Asia (2.54%).
In contrast, regions such as the Middle East (-30.45%), Southeast Asia (-11.2%), and East Asia (-7.61%) continue to record significant year-on-year declines in CAS issuances."

TRS

Price is hitting new lows. Hit 539.50 last Friday and this morning.

Jim

Labour Government mismanagement and the up coming budget, prople pulling money out of the UK, thought we may have reached a bottom in the market with some quality companies at 5 and 10 year lows, clearly not!

I think the market is just 'wrong' on UTG here.

I'm going to imitate Jim a little and pound on the table a bit (as well as having put actual pounds on the table).

UTG dumping while every other big REIT in the UK goes up is just... wrong.

I don't know why this price is prevailing lately, but it should not be so.

I suppose you could construct a convoluted argument in which other big REITs don't have risks...

- "The AI bubble that's fueling REIT datacenter builds definitely won't go pop!"

- "The UK government definitely won't change the rules on inflation linked contracts for health care/social care rentals!"

- "UK residential property definitely won't dump, even though net migration rapidly flipped from +1m/year to +200k/year!"

- "UK high street retail is essentially risk free, even though younger generations have no money to go shopping!"

And I suppose you could construct an argument whereby the REITs loaded to the eyeballs with debt are 'better' if rates drop (which might even be true).

And I suppose you could argue that higher education has troubles ahead; it certainly does; it always does.

But at the current price, as far as I am aware:

- UTG has the best dividend cover among big UK REITs*.

- UTG has the best underlying earnings yield among big UK REITS*.

- UTG has the best discount vs net asset value, I think among all big UK REITs.

- UTG has relatively low, managable debt, versus other large peers (LAND, BLND, PHP) and currently identical to the best in class of the big UK REITs. (Historically, UTG _are_ the best in class for achieving good earnings/nav growth with low debt among big UK REITs.)

- UTG has made a relatively small acquisition compared to recent acquisitions by the other UK REIT biggies (e.g. BBOX, LMP, PHP).

- In fact, if you net out the effects of £150m asset sales this year, and £300-400m asset sales next year, vs the acquisition price of Empiric (£630m), it begs the question whether they have actually acquired much at all, in aggregate. Did they just devour their biggest competitor and throw the pieces away?

- I mean, June 4th this year, the day before they bid for Empiric, the share price was 850p. It's now 526p. We are talking about a £4000m mcap company, picking up £100-200m of assets in aggregate, consuming their only real competitor, then being punished for it by losing £1600m of market value. While in the background, net assets/share grow, LFL rental grows, etc. Eh?

- No other REIT in the UK is closer to an effective monopoly in its subsector than UTG.

- I don't think there's any large REIT with a better track record on NAV growth in the last 4 years.

Honestly, it's just... bizzare. Totally weird.

I mean, this REIT is such good quality it used to trade on a yield of 1.5% just a couple of years back! Now it's almost 8%.

And what changed to ruin that? Occupancy went from peak at 97% to 95%? (As rents went up, NAV went up, dividend went up, earnings went up... ?)

Well anyway, pound, pound, upon the table. This is a great REIT and a great price. The market is wrong.

And it appears, from the sudden mention of buybacks for the first time recently in the company announcements today, Unite are preparing to exploit the market's mistake themselves, as an opportunity to grow even faster.

How important might that be? You'd be surprised.

A buyback of 10% of a hypothetical company A at a 10% discount to net assets, produces roughly a 1% advantage to the net assets/share.

But with UTG, we have almost a 50% discount to net assets (500p ish vs 1000p ish). If they sell £400m of assets as scheduled, and used much of it to buyback with the mcap at £2.4bn as it is, that's a buyback of up to 16% of the market cap (!)

50% x 16% = 8% improvement in net assets/share! (ish)

Regular earnings might be impacted by all this buying and selling, as they note, but it potentially could double shareholder gains from ~8% / year from rent/non-rent to ~16%/year total if the UTG price stays as low as it is and asset values stay as high as they are.

Sometimes a bargain hides in plain sight right in front of you.

All numbers are approximate, all calculations back of an envelope, in the above text. All IMHO, do your own research, and so on.

If I'm wrong on any claim I made above, please, point it out, I'll be grateful.

TRS

* depending on how you define 'big', there's SOHO REIT, but SOHO has been 'troubled' to say the least in recent years.

Don't worry TRS it ticks the boxes as a decent value play IMO. Markets overshoot on both sides. I take a 3 year view.

Eg I purchased Alibaba and Meta 2022 and they fell futher and futher and a few years later the fall that seemed big at the time looks like a blip.

Ive been in and out them since. Sometimes they move 50% in 3 months. Alibaba moved 40% in a day once (amazing for a 200bn cap company)

Stick your share cert in the sock draw and come back in 3 years.

Buying cheap quality companies on my watch list is always my aim, I also like looking at 52nweek lows and now 5 year lows!

Google another example.

I bought in at 90 Jan 23 sold at 150/ 180 a year later.

Back in April this year (all in) at 150 and sold again 4 months later at 250/ 260.

Valuations looked attractive then they didn't, it's at 325 now. Makes you look stupid for selling early but the price to free cashflow multiples are nosebleed now with no visibility of earnings on capex.

For context, I'm taking smaller positions in more opportunities than I used to now. For context I wouldn't be all in on UTG. It's c3% if portfolio for me.

> Google another example.

> I bought in at 90 Jan 23 sold at 150/ 180 a year later.

Same here. Except, I bought Google in the 80s and sold in the 100s, twice in a row.

My mistake of selling too soon with Google was a result of trying out options (with the equivalent balance in cash).

It added a feeling of time pressure I've not felt before in investing. So I do not use options any more.

Separately, I was surprised by this bubble happening as it did, a strong rally beginning from such high levels.

The 'lows' of the last two 'crashes' of 2020 and 2022 are still higher than the Shiller CAPE of all but a few years in the last century.

Look at the graph and compare 1905, 1937, 1955, 1965, 2004, 2007, 2014 peaks for example against 2020 and 2022 lows.

https://www.multpl.com/shiller-pe

TRS

> Don't worry

Thank you, but I wasn't worried at all.

I'm just quite surprised by how cheap this particular REIT has become considering how expensive and popular it used to be for a very long time, and considering there has been little deterioration to drive that change of sentiment. Consider, here is a table of UK REIT yields as they stood 21st March 2021. It's in reverse order, so here, Unite is near the 'top' of the list alongside Hammerson.

https://www.uk-reit.com/lists/yields/all/

TRS

It's certainly on my shortlist to buy more.

I'm of rhe view that i want to be in the market anyway, buy quality companies on the numbers / moat but beaten down on price, take the view you're going to hold to 3 years and let it play out.

Check every 6 months against your intrinsic value calculation. If it's massively run ahead for some reason then that could be an opportunity to sell.

With Alphabet I listened too much to the noise around the whole market correction and sell off due to happen imminently and AI Bubble

I should have held firm as ive been through the same thing many times.

I was also swayed by the previous price action from the year before and that the price had run well ahead of my IV calculation. Give it another 3 months and selling may look OK but ive still missed out on c30%.

Unite down 3% more to £5.13 this morning, net assets/share just shy of £10.

8% dividend with 1.25x cover falling to 1.15x for a year next year.

Personally, I would be selling Google currently, at this price.

There is no sign yet that AI services can generate revenue to cover their costs, never mind turn a profit.

The hardware depreciates at a quite remarkable rate. It's important to keep in mind 'AI services' are essentially a commodity.

Exactly my target IV is £10.

Britain's Unite Group (UTG.L), warned of lower earnings in 2026 on Thursday, as the student accommodation developer grapples with lower student occupancy and slower rental income growth, sending its shares to a more than a decade low.

Unite Group, in a separate statement ahead of its investor event, said it expects a 7-10% drop in its 2026 adjusted earnings per share, as it grapples with lower student occupancy, a fall in rental income, and delays in development completions, among other factors.

Earlier this month, Empiric reported a 6% decline in occupancy, citing a fall in reservations from Chinese student tenants. Unite said on Thursday that it expects to deliver rental growth of 2%-3% for the 2026/27 academic year, below the 4% reported for the 2025/26 academic year.

The Bristol, England-based company also expects to report muted growth in occupancy for the 2026/27 academic year at 93-96%, compared to the 95.2% in the 2025/26 academic year.

Shares in the company dropped 6% in early trade to their lowest levels since early 2015.

https://www.reuters.com/sustainability/boards-poli...

Hello rnam,

> "Nov 27 (Reuters) - (This Nov. 27 story has been corrected to say Unite is grappling with slower growth, not a fall, in rental income in paragraph 1, and that it reported a drop in the number of late-cycle Chinese postgraduate tenants, not the overall number of students, in paragraph 3)"

Unfortunately the article is all old news, badly mangled up & full of errors.

I'm guessing reuters is using AI to generate 'it must be because' articles now whenever there's a price move - I know several sites are doing that already, and every day.

TRS

I'm guessing reuters is using AI to generate 'it must be because' articles now whenever there's a price move - I know several sites are doing that already, and every day.

One research study concluded that AI generated page content (i.e., slop) outnumbered human written web page content starting in May 2025. So greater than 50/50 chance this post is also slop...?

Jim

DYOR.

https://www.theguardian.com/business/live/2025/dec...

"The average rates on UK two- and five-year fixed mortgages have fallen to their lowest levels since early September 2022."

I suppose this is mildly good news for UK REITs, particularly the ones that operate in e.g. residential buy to let.

TRS

Unite Group (UTG) closed at 549.50 today having been as low as 505.00 on 8th December.

The narrative seems to have changed this week with the announcement the UK is rejoining the Erasmus student exchange scheme in 2027.

This had a lot of coverage in the UK this week, and the news seems to have been warmly received by the public.

https://www.bbc.co.uk/news/live/c4g654qgl83t

The move up has been steady for the last week or two, hopefully it will continue.

TRS

Unite Group (UTG) closed at 549.50 today having been as low as 505.00 on 8th December.

Not too late, I'd say. If it was worth buying during the current dip, it's probably still worth buying.

Jim

> Not too late, I'd say. If it was worth buying during the current dip, it's probably still worth buying.

I certainly hope so, seeing as my average price of purchase is above the current level! :-)

Here's an interesting graph.

The black line is Unite Group and the blue line is IUKP, which is a market-cap weighted index ETF of UK REITs.

https://stockcharts.com/sc3/ui/?s=UTG.L&id=p212655...

(If it doesn't set itself to 5 years automatically, please pick that option.)

From this you can see that in the last 5 years Unite has been less affected than the average REIT by things like interest rates and sentiment. Which makes sense. 'Social housing' property REITs got hammered, 'office' property REITs got hammered, and highly indebted REITs got hammered. Unite doesn't fall into any of those categories and has continued growing NAV/earnings even as interest rates went up.

Currently and across the 5 year period, there is a 'dump' in UK REITs but Unite's October 2025 dump goes far beyond what is normal for the stock.

Unite could instantly jump 20% higher than it is today, and it would still be trailing its typical performance by about 10-20%. On top of that, the whole REIT sector itself may be worth a bet separate to the Unite discount.

What's interesting is that this gap between Unite and the rest of the herd has happened before in the last 5 years. You can see in late 2021 to early 2022, a gap emerged where the average REIT was outperforming Unite quite a bit. IMHO it was due to the start of 'return to office' & 'return to high street retail' (Landsec, British Land) concurrent with a boom in logistics REITs (Segro, Big Box etc) and a brief bubble in short-term storage REITs (Big Yellow, Safestore).

That relative valuation gap (Unite vs IUKP in 2022), which was somewhat similar to this recent gap, persisted for about 6 months then disappeared and instead became a relative premium for several years.

Who knows, maybe history will repeat, or rhyme?

TRS

p.s. Knowing that others may still be invested in Land Securities and British Land, it's interesting to make the same comparison against IUKP. The relative valuation of LAND and BLND over the entire UK REIT sector looks quite high at the moment, compared to the past 5 years. Of course, that may be justified, or perhaps not. Personally, I have my doubts about LAND's pivot from offices (at a time of weakness in office pricing) to retail buy-to-let (at a time of relatively high prices & construction costs). BLND is my favourite of the two (imho).

Unite Students has scrapped a flagship £147m London student housing project after tighter visa rules reduced international student demand, making the development financially unviable and signalling growing pressure on universities and student accommodation providers.

For anyone new to the thread, make sure you look up UTG.L, not UTGL.

The latter is a new-to-the-game bitcoin treasury based in Hong Kong : )
I'm not entirely clear what their pre-existing "...blockchain...trust...blah" business is, but it isn't housing UK students.

Jim

FYI
New price dip to 521, down about 10% this morning, within rounding error back at the lowest price in 11 years. Yield before tax 5.79% based on trailing year payout.

Earnings call in progress, not well received it seems. "Adjusted EPS" up a hair. Operating costs up a lot, occupancy rates down a little.

Jim

(This comment is written entirely by hand without any use of AI in any way! I just like bullet point lists.)

Hello everyone. Here are my thoughts on the results. Please remember to double check anything I claim, in case I've made a mistake.

Results
=======

https://www.londonstockexchange.com/news-article/U...


Short version
=============

The -10% price move is very weird because there is very little new information in these results.

You can read these numbers preannounced in the Oct/Dec/Jan trading updates.

So much for the efficient market hypothesis... :-)


Background
==========

- Most UK REITs have moved up 10-15% since December lows when UTG was previously at the 520p level. The UK market as a whole has also moved up a bit.

- UTG buybacks have been underway for 6 weeks, a steady 150000 shares/day, which is about 7% of average daily trading volume. Total so far about 5m shares. Total shares in issue are 542m. So the buyback is progressing at about 1% of the company being bought back every 6 weeks. The current buyback is £100m (approx 4 months supply). The company has indicated buybacks are going to be the norm going forward as capital is freed up. I would expect the buyback to be extended if the price is still low in a few months time.

- Like Berkshire, REITs are best viewed in terms of 'lookthrough earnings' which strip out the effect of asset price volatility (e.g. if Berkshire's portfolio goes up 10%, the p/e looks amazing, if the portfolio goes down 10%, 'BERKSHIRE REPORTS HUGE LOSS' etc, but underlying earnings tend to be steady and upwards). The exception to this is when REIT assets are on a consistent trend up or down and not just wobbling around with the effect of interest rates, local market rents/prices etc. This year is a 'bad' year for Unite in relation to this effect.

- Emerging February market narrative of "HALO" - what can you buy that won't be affected by AI?

- Warming relations between UK & EU and also between UK & china, which are primary sources of students that use student accomodation.

- Ongoing situation in USA is not encouraging foreign students.



Today's results good/bad
========================


Odd: There is very little 'new' news in the results? Almost everything was pre-announced already last year, see references below.

Odd: -10% price move this morning extremely odd given the lack of 'news'. A chunky dividend, paid soon, is included in today's price.

Good: Sale of a large property at a good price. See below.

Bad/neutral: Adjusted EPS fell within the range forecast by Unite in the previous trading statements (47.5-48.25), but at the low end (47.5). Slightly bad.

Good: LTV debt was forecast to be 29% (October 2025) but is only 27%, despite the drop in NAV by 2%.

Neutral: Cost of debt 4.1%. As forecast October last year. Not news.

Neutral/bad: Empiric 89% occupancy exactly as forecast in November 2025. Not news.

Bad: NAV down 2%, relating to rents/prices changing across the country in some areas, may reflect interest rates having been higher in 2025. e.g. NAV 2024 920p, NAV 2025 980p, NAV 2026 955p.

Good: Rents going up like-for-like at both Empiric and Unite.

Neutral/good: Good progress integrating Empiric into the Unite sales/marketing platform, de-duplicating positions.

Bad: Unite had forecast that 2026 earnings would fall because of the Empiric bid by -10%. EPS guidance range is now 41.5-43. The low end of that range is -13%. The midpoint is -11%. The high end is -9%.

Good: big increase in demand / offers for student places at the universities where Unite operates.

Neutral/good: IT platform upgrade spending is coming to an end in 2026.

Neutral: Expansion projects at 3 land sites being reconsidered, 3 other projects delayed. Good for buybacks, good in that limits on supply are good for rents, bad in the sense there are no cheap/easy routes to expansion.

Bad: £22 million loss on interest rate swaps. Unsure here; I think it may have been they bought protection against rate rises, but rates went down.

Neutral/bad: rents are up, but costs (staffing) and occupancy meant margins dropped from 68% to 66%. In line with previous trading statements. Neutral in that it's not news, bad because margin decline is bad.

Bad. Dividend up 1%. I would rather it kept up with inflation. However, as long as they are using cash for buybacks at these prices, I can live with it.

Neutral: Section 6 indicates there's 'no adjustments' to news from Jan 1st->Feb 24th this year that hasn't already been announced.


Sale of property
================

https://www.investegate.co.uk/announcement/rns/uni...

Basically, they retain partial ownership, get £100m cash and continue to get paid for managing the property on behalf of institutions.

Good: sold at 1% below Dec 2025 book value.

Good: hinting at buybacks: "releasing capital for reinvestment into higher-returning opportunities in accordance with our capital allocation priorities". Buybacks please!


Previous trading statement
==========================

In the previous trading update they mentioned they had cancelled a struggling/delayed project where there had been lots of local opposition to building. This resulted in a one-off charge of £10m for the wasted effort. This has freed up a lot of capital for buybacks, which are likely a better option than if the project had continued. It's mentioned again in the results today.


References
==========


Empiric bid presentation last year, August.

https://www.unitegroup.com/wp-content/uploads/2025...

Trading update, October 2025.

https://www.investegate.co.uk/announcement/rns/uni...

Trading update, Jan 2026.

https://www.investegate.co.uk/announcement/rns/uni...

Empiric update, Jan 2026.

https://www.investegate.co.uk/announcement/rns/uni...

Empiric update, Oct 2026.

https://www.investegate.co.uk/announcement/rns/uni...

TRS

Thanks for the rundown
Much faster to check things than to come up with them all.

This page has the presentation, webcast, and statement.
https://www.unitegroup.com/investors/reports-and-p...

Jim

Closed at 503p. What a strange day.

505p was the intraday low when it bounced in December 8th and began the steady climb back to 595p.

Since December there's been a bit of buybacks and a bit of incremental dividend built up. Interest rates have dropped. UK policy towards EU & China has improved. 2/5/10Y interest rates have fallen.

Adding it all up , UTG is far better value now than it was at the December low (which is why all the other REITs are up 15%!)

What absolutely baffles me is that there's almost nothing in these results that wasn't known last week, Feb 17th, when it was trading at 595p, or even last year. What were people 'reacting' to today? I've read the results back to front and all the trading statements and I don't see it. There's a spooky story in the Investor's Chronicle website today, but it doesn't have anything in it that couldn't have been said last week, last month, or last year.

There's a some Yahoo News narratives 'students are not going to university any more, students are staying at home with parents', but the majority of accomodation offered by Unite was sold out, 99% occupancy in most of the places they operate. This is their 'worst year since covid', yet even then, their occupancy is better than most REITs on the market in the UK and globally.

Consider CREI, another UK REIT. They've hovered around 90% occupancy for years. Their debt profile is similar to UTG. They have a much smaller discount to net assets. They have no cover on the dividend. They've flown up 15%. It makes no sense.

=====

The last few % of today's drop seems to be mirroring a drop in various UK REITs, particularly London-based ones.

LAND -2%
BLND -1.1%
LMP -1% (-2% from day high)
HMSO -3.3%
GBPE -2.2%
DLN -1.4%

=====

Various round number effect / Schelling points may now be in play.

"500p", "PTBV 0.5", "previous bounce at this level", ...

=====

Further thoughts:

-> big drops are more often than not followed by big rallies, this is a -13% day, very rare in the UK market on big companies outside of serious bear markets.

-> P/E is wildly out of line with the entire UK REIT sector, global REIT sector and the stockmarket in general

-> discount to net assets is now wildly out of line with the entire UK REIT sector and the stockmarket in general

-> debt profile is out of line (in a good way) with most large UK REITs. Consider, PHP, usually a peer to UTG, is running 55% LTV right now and almost no discount to NAV.

-> "P/E in 5 years < 10" rule appears to be met

-> management aren't being insane, they seem to be behaving sensibly/pragmatically

-> Empiric bid wasn't humungous, it was rather small?

-> the 'trigger' for the crash (the bid for Empiric) appears to be getting unwound by asset sales / buybacks rather quickly.

I had to remind myself today that 90% of the time, the price of a company will be lower at some point after you buy it.

Anyway it's very strange. I hope to see the price back between 550-600 in a few weeks time, as we saw after December.

TRS

AI musings; discussing today.

Here’s why Unite Group’s share price has dropped sharply recently (especially around 24 Feb 2026):

📉 1. Weaker earnings outlook
Unite Group cut its 2026 earnings guidance, expecting adjusted earnings per share to fall to around 41.5–43 pence, down roughly 9.5–12.6 % from 2025 and below market expectations. This indicated slower profit growth than investors hoped for, pushing the stock lower. �
Reuters +1

👩‍🎓 2. Softer student housing demand

Demand is weaker, particularly from international postgraduate students, which are a key customer group for Unite’s purpose-built student accommodation. Rising education costs in the UK, visa policy tightening, and more domestic students choosing to live at home have reduced occupancy and slowed bookings. �
Reuters +1
🏘️ 3. Lower occupancy and rental growth

Occupancy rates fell to around 95.2 % from about 97.5 %, and rental growth has slowed in several cities. Weaker booking momentum for the 2026/27 academic year also disappointed investors. �
Reuters
📊 4. Valuation pressures and portfolio performance

The company’s portfolio valuation showed declines and the newly acquired Empiric Student Property business is currently contributing less than expected to earnings. This combination has dampened the outlook for future profit growth. �
Investing.com UK +1

💼 5. Significant share price movement
On 24 Feb 2026, the stock fell sharply — at one point down over 14 % — making it one of its worst trading sessions in months, with high trading volumes. This followed the earnings downgrade and weaker demand signals that spooked investors. �

MarketWatch
In summary: The share price drop isn’t just one event — it’s a reaction to a weaker earnings outlook, slower student housing demand (especially international postgraduates), softer occupancy and rental growth, and earnings contributions from recent acquisitions falling short of expectations. Together, these factors reduced investor confidence in near-term profitability, leading to the heavy sell-off. �
Reuters +1

If you want, I can explain how longer-term industry trends might affect Unite Group’s outlook too.

Here’s a deeper look at the long-term industry trends that could affect Unite Group over the next 3–5 years:
1️⃣ International Student Demand (Biggest Driver)
Unite’s growth over the past decade has heavily depended on international students coming to the United Kingdom.
🔹 Risks
Stricter UK visa rules
Limits on student dependants
Higher tuition fees
Competition from Canada, Australia, and the US
If international postgraduate numbers remain weak, demand for premium purpose-built student accommodation (PBSA) could stay softer than pre-2023 levels.
🔹 Long-term support
The UK remains a top global education destination.
Russell Group universities continue attracting overseas demand.
Structural global demand for English-language degrees remains strong.
📌 Bottom line: Short-term volatility, but structurally positive unless UK policy tightens further.
2️⃣ Supply vs Demand Balance
Purpose-built student housing is still undersupplied in many major university cities.
Supportive factors:
Planning restrictions limit new developments.
Construction costs remain high, slowing new supply.
Smaller landlords struggle with regulation and rising mortgage costs.
That benefits large, well-capitalised operators like Unite.
However:
If too much PBSA was delivered in certain cities (e.g., Manchester, Birmingham), rents could soften locally.
📌 Over time, supply discipline is generally positive for large operators.
3️⃣ Rental Growth Outlook
From 2021–2024, Unite saw unusually strong rental growth (sometimes high single digits).
Going forward:
Expect more “normalised” rental growth (3–5% rather than 7–9%).
Affordability constraints may cap how much rents can rise.
The business model remains inflation-linked, but not at pandemic-recovery levels.
4️⃣ Interest Rates & Property Valuations
As a REIT-style property company, Unite is sensitive to interest rates.
Higher rates → lower property valuations → NAV pressure.
Lower rates → valuation recovery and stronger share prices.
If UK rates gradually decline over the next 1–2 years, that could support asset values and the share price.
5️⃣ Demographics & University Participation
Long-term UK demographics are supportive:
The number of 18-year-olds in the UK is rising through the late 2020s.
University participation rates remain structurally high.
Urbanisation trends support city-centre living.
This is a structural tailwind for PBSA providers.
6️⃣ Acquisition & Integration Risk
Unite recently expanded through acquisitions, including Empiric Student Property.
Long-term success depends on:
Smooth integration
Realising cost synergies
Maintaining occupancy in acquired portfolios
If integration goes well, earnings growth could re-accelerate from 2027 onward.
📊 Overall Long-Term Outlook
Bull case (3–5 years):
Interest rates ease
International student flows stabilise
Supply remains constrained
Earnings growth resumes mid-single digits
Dividend growth continues
Bear case:
Further visa tightening
Sustained international demand weakness
Rental growth stalls
Property valuations fall further
🎯 Big Picture
Unite’s recent share price drop reflects cyclical pressure, not necessarily structural decline.
The long-term fundamentals of UK student housing remain relatively solid — but earnings growth is likely to be steadier and less explosive than in the post-pandemic rebound years.
If you'd like, I can also break down whether the current valuation looks cheap relative to history.

The discount to book value seems incredible now.

I am new to REITs and am beginning to see my mistake. I understood they had this really high occupancy rate of 97.5% from previous years (when the discount to NAV was 5%).

Then a couple of things begin to effect occupancy (government makes it less attractive for foreign students; cost of living forces more students to live at home, management buy Empiric, who have greater postgraduate exposure and are hit harder by the decline in foreign student demand.)

Management now guiding towards lower end of 93% to 96%, as they absorb Empiric’s 89% and three troubled markets in lower tier university cities (67%, 70% and 84%).

To a non experienced REIT investors like me, that doesn’t seem to justify such a brutal discount to book value. Then I begin to look at it closer and I realise that the difference between 97.5% and 93% goes directly to the bottom line, massively eating into profits.

The second factor is interest rates. Not only is Unite’s income coming under pressure, the ultra low interest rate loans they secured during Covid are maturing and are being refinanced at significantly higher rates. Management reports that the effective interest rate will continue to climb, even as U.K. base rates are falling.

Buying Empiric in this environment was a mistake. They could probably have bought it cheaper at a later date in hindsight. Regardless of how it works out long term, the stock market is calling this out as poor management judgment. Management judgement is important in this game presumably.

The question now - are the factors that are weighing on occupancy rates, structural or cyclical? If they are structural, management and the student housing market will adapt by limiting supply. This is already happening with fewer units being built. Unite have strategically shifted: selling properties, cancelling developments, concentrating on the higher tariff cities that have high occupancy. They are buying back stock. That all sounds like a good idea if they can get reasonable prices for the properties they want to sell.

The rising interest rate challenge is likely more of a cyclical issue as base rates are falling.

The remaining question in my mind and I don’t know how to answer it is - what is an appropriate price to book ratio for a REIT experiencing these challenges? Surely not 0.53x?

Having demonstrated to myself that I know nothing about REITs and how they behave under different conditions, including changes in interest rates, I am not confident in my intuition that an investment in Unite is an incredible bargain but I shall continue to hold and hope operating conditions improve and the current situation is the eye of the storm.

Closed at 503p. What a strange day...

My screen says close was 495.40 : )
Lowest close since 2015-02-02, just over 11 years ago.


I guess you have to step way back to get a sense of scale of the situation.

One could possibly sum it up: maybe the UK education market was a little overbuilt and bubbly, and maybe it became a little too dependent on the slightly fickle pipeline of foreign students. Some retrenchment seems in the cards. It might be a bit harder to fill all those seats, and beds, than it was. The entire broad UK "education industry" might have a dip or a long flat spot.

But it's not going away, and retrenchment will be concentrated in the 3rd-tier and 2nd-tier institutions. And any service providers that are over-leveraged. It doesn't seem as if Unite falls much in either of those two categories, and a long flat spot, maybe a dividend cut for a while, is not the same as a wipeout. Especially if that counts as the near-worst-case.

For the greed case, which is always much more fun though less important, if they ever eventually returned to prior highs (just pre pandemic), what's the CAGR from today based on the number of years that takes? Even if it takes 13 years, it's still 8.0%/year compounded price return, PLUS the dividends : )

Jim

Hello Jim,

Could I make a couple of points relating to your post, including a correction to the dividend yield figure?

Plus I'd like to share a variety of general interest REIT comments that you might already know, just while I have an excuse to talk about it. (This isn't directed at you personally, it's mostly just a ramble.)

None of what I am about to write below should be considered authoritative. It is NOT advice in any way. As always, I encourage everyone to double check anything that seems important or interesting for decision making.

> "within rounding error back at the lowest price in 11 years. Yield before tax 5.79% based on trailing year payout."

Regarding 'lowest price in 11 years'. Some REITs change form considerably over time, even becoming totally different kinds of business in a different sector within the space of a decade. Some REITs pay out 100% of income as dividends, others retain a little earnings to grow the company (or shrink it, I suppose, in the case of buybacks). Some REITs do lots of rights issues (yuck), others not so much.

Some REITs build the properties they rent, some REITs acquire properties, some REITs acquire other REITs, fractionally or in whole. I hear you can get spicy MBS-filled CDO-nightmare-fuel REITs in the USA, but I'm only interested in the normal/sane 'owns property, rents it out' kind of REITs.

Some REITs totally change their character even within a couple of years. For example NewRiver REIT owned 200 pubs I think in 2013, then 700 pubs in 2020, then 0 pubs in 2021. One of the picks you've highlighted before, LandSec, is another interesting example. It's been selling off its offices (perhaps near a secular low, hmmm) to move into residential letting (perhaps near a secular high, hmmm). British Land, used to be offices and high street and business campuses, now they run a lot of retail parks. And so on.

Unite Group for example operated lots of cheap beds in the past at many universities, and now it operates less beds at fewer universities but with higher prices and hopefully better long term occupancy levels. That has a big impact on the business outlook, especially today. (In fact this particular business pivot is looking increasingly wise, with hindsight.)

REITs such as Safestore or Big Yellow (short term storage) could make extra money from value add such as charging to access the storage at strange times of day, selling you padlocks, etc. Even in the logistics 'big box warehouse' sector you have some companies that are purely 'rent a warehouse' and others like Segro/Tritax Big Box that (I have heard?) are trying to move into the datacenter construction/operation business themselves to try to capture some of the sexy datacenter value-add (a terrible idea, imho, I think they'll get a couple of good years from it then a decade of horror, but that's another story).

Unite can do non-REITy stuff too, e.g. they could directly provide services inside the properties (cleaning, maintainance, canteens, shops, vending machines), which generate income, they can build out new property developments (in cooperation with universities), they can operate lettings for properties owned and co-owned by other groups, and so on.

Some REITs have to do quite a bit of work and marketing regularly to get trade (think, short term storage like Big Yellow or Safestore), others, not so much. Unite is sort of in the middle of the sector here, they have some direct lets they have to work to fill every year, and they have some properties where they sell spaces to universities up to 20 years in advance, with inflation built into the contract.

The REITs that have to do more work to operate in their sector, often have higher comparative running costs, compared to the sectors where REITs can run on a shoestring budget (but perhaps those businesses can only access lower rental yields). Unite is on the high end of the spectrum when it comes to running costs. Generally running costs improve with scale, which is kind of part of the argument about acquiring Empiric. It was a small student accom REIT, and paying a relatively higher % of income to duplicate a lot of the operational stuff Unite has in place. Synergy / de-duplication, etc.

Some REITs have fierce competition all the time (Big Yellow/Safestore are always competing with your mate's empty shed or attic). Others, not so much. Unite is kind of middle of the road, arguably low competition. It's in a unique kind of position in many areas where it operates, I mean, you literally can't just put up new buildings anywhere you like right next to a university campus overnight. This kind of thing isn't always well reflected in the NAV of these companies. (In the case of Unite, I'd argue that it makes the 'real' NAV/share a bit higher than it seems on paper).

There are also UK based multi-country or foreign REITs, which can be exotic (SRE for example, or the quite remarkably-named "Phoenix Spree Deutchland"). The tax situation for these sometimes boils down to, 'the UK bit is a REIT and the foreign bit is a regular company'. There are many opportunities for excitement and fun with foreign-property REITs. For example, you may find it interesting to browse through the last few annual reports of SEREIT while paying close attention to any gradual change of tone and outlook.

https://www.propertyweek.com/finance/schroder-euro...

On top of that there is the issue of reinvested income over the years (for the REITs that don't pay everything out), reinvestment of profit from refurbishing or trading properties (significant for some REITs, such as AEW), and last but not least, inflation.

Inflation is a big issue. RPI inflation for the UK from January 2015 to December 2025 (11 years per your post) amounts to 160%. Generally, that's pushed up rents in many parts of the economy that REITs are exposed to. If nothing else had changed at Unite Group (or any other REIT) in all that time, you'd still be 160% better off paying price X today, than price X in 2015.

There are exceptions where significant secular change has occured to diminish rents despite inflation (cough, cough, British Land, cough, cough, Land Securities, HUGE COUGH Regional REIT). Indeed the issue that seems to be driving sentiment on Unite Group is 'is a secular change occuring that will make blocks of flats in popular university towns not very valuable any more'. Historically, Unite benefits from inflation 'for free' as it is written into many of their long term contracts.

About retained income and value adding services that generate non-rental income: UK REITs are obliged to pay out 90% of property income, minimum. Many pay out 100%. Some REITS even pay out more than 100%... ;-)

However any money that UK REITs make from non-property value-add services, is not obliged to be paid out, and is often reinvested back into the business. It has to be accounted for independently of the rentals bit of the REIT. Unite for example does things this way. It leads to an interesting complication with things like dividends and calculation of business efficiency.

UK dividends from REITs are sometimes split into two parts. There's the PID, (property income distribution), which does not experience corporation tax, and *often* experiences a withholding tax depending on the tax status of the person or company recieving it. Then you may also get a regular type of dividend from the non-REITy bits of the company, the value-add services etc. Corporation tax will be paid on this, and I believe for most tax payers there is no withholding tax, though obviously further taxes will apply as normal per your dividend situation. (THIS IS NOT TAX ADVICE! look up anything tax related for yourself or consult a tax advisor.)

Unite usually pay out the property rental bit, and either retain or pay out the value-add bit. This means there has been quite a few years of earnings added into the business with Unite Group, that you may not see with other large REITs.

For example, this year the earnings were 47.5p but the dividend was 37.7p, that's quite a big gap and this year some of it seems to be coming back to investors in the form of a meaningful % buyback. Whereas, you look at other REITs like CREI, PHP, THRL, SUPR etc, I believe they're just paying everything out as it comes in, so over a decade-long view there's not really the same effect of steadily reinvested surplus.

Regarding the details of the dividend yield. Jim, you wrote,

"Yield before tax 5.79%"

I don't think that's exactly true, because it depends what you mean by 'before tax'.

The dividend for the current year looks like this:

"The Company announced its half year results for the six months to 30 June 2025 on 29 July 2025 and declared an interim dividend of 12.8 pence per share (the “2025 Interim Dividend“), 9.7 pence of which will be paid as a Property Income Distribution (“PID“) and the remaining 3.1 pence as Non Property Income Distribution (“Non-PID”)." [1]

"We are proposing a final dividend payment of 24.9p per share (2024: 24.9p), totalling 37.7p for the full year (2024: 37.3p) and representing a 1% increase compared to 2024. This represents a payout ratio of 79% of adjusted EPS. The final dividend will be fully paid as a Property Income Distribution (PID) of 24.9p, which will fully satisfy our PID requirement for the 2025 financial year." [2]

So there is 3.1p (no withholding taxes), and 9.7+24.9 = 34.6p PID (which may or may not have withholding taxes depending on the situation).

If you're a UK investor using an ISA or SIPP for example, and if your broker has registered their nominee stuff correctly, it arrives gross. Some other UK brokers will reclaim the withheld tax so that it arrives net at first, then the extra gets paid up later to become gross.

In some countries, perhaps someone might be able to offset the UK PID withholding tax payment made against their personal local dividend taxes or property rental taxes. It would presumably depend on their personal situation and the laws of the country in relation to dividends, rental income, REITs etc. I am ignorant on this topic. It is very far outside my own experience and knowledge.

But the gross payment 'before tax' is 37.7p. It is also expected to be 37.7p in 2026, and it was 36.0p in 2024. [3]

I'll take the Unite share price as 520p for this calculation.

2025 => 37.7/520 => 7.3% yield, 'before tax'.

2025 => 36.0/520 => 6.9% yield, 'before tax'.

This might lead you to some interesting thoughts about the relative merits of REIT investing vs regular stock investing for an investor who focuses within their local economy using tax efficient investment wrappers.

Complicating things, many REITs pay dividends in four regular annual payments, but Unite pays a big dividend in the first half of the year and a smaller payment in the second half. If you buy in the next couple of months, the soon-arriving dividend might nudge the value characteristics around by a few %. I feel that if I get a dividend within a month or so of buying a stock, I can count it as a kind of 'discount' on the apparent price of the stock, at least when I'm making historical comparisons against how the stock was priced before on long term graphs.

Anyway I hope this post was useful to you or to someone in some way, I hope that it has not come across as condescending or rude at all (its intended as a quick tour of the pecularities of the UK REIT sector), and I hope also that I have not made any important mistakes above.

Best wishes, and welcoming any feedback / criticism,

TRS.

[1] https://www.unitegroup.com/investors/dividends

[2] https://www.investegate.co.uk/announcement/rns/uni...

[3] https://www.dividendmax.com/united-kingdom/london-...

> "Buying Empiric in this environment was a mistake. They could probably have bought it cheaper at a later date in hindsight."

Maybe, maybe not. You'd need to know in advance what would happen to the costs of REIT-accessible debt in future, you'd need to be making a bold bet on the direction of the market/REITs and property development costs in general.

There's a reason why the UK REIT sector has been emptying out in the last 12-24 months. Unite was one of the *last* companies to make a bid and it appears they timed it right at the exact low of the 'cheap REIT' period.

It's also an *extremely* small takeover, compared to what e.g. LMP and PHP and US PE money have all been doing. Add up the scale of the acquisition, deduct properties sold off in the last 12-18 months, see what number you get and compare it to the size of the Unite portfolio or even the much-reduced market cap.

There are also non-linear effects.

For example, if you want to focus your portfolio on certain cities, you can't just plop down buildings anywhere you like. Empiric have properties in particular places where it's hard to put things, e.g. near univerities in university towns. Those buildings come with long term contracts for rental which are hard to negotiate into place. Their NAV for the bricks and mortar really doesn't quite reflect the 'difficulty of duplication' or net benefits of the bid.

Consider too, if you're the biggest operator, and there's a smaller competitor operating in the same places you do, and you can yum them up fairly cheaply in a moment of market weakness, why not do it?

There are also subtle things like, when you acquire a REIT, you can acquire its debt with it. That can be quite handy if it has borrowed money cheaply in the past, more cheaply and more long term than you can borrow money now.

Another non-linearity, suppose company A has 110 students wanting accom and 100 places, and company B has 90 students and 100 places. It's much easier to ensure you don't lose them to e.g. private housing, by putting everthing on a single integrated platform. You can even convert accomodation more conveniently as needs change, e.g. oddly high demand for first year students this year? let's convert some 2nd year accom to first year accom this year. Let's mix in some first years with second years, if we have to.

If you read the presentation last year, it's quite clear that the main argument was: 'we couldn't ever hope to build a comparable portfolio this cheaply ourselves, or have it up and running so quickly compared vs our traditional mode of property development', when it comes to Empiric's portfolio. They basically brought forward 5-10 years of property development, far cheaper than they could do it themselves.

People are retro-fitting the acquisition as the explanation for the price of UTG being low 'it must have been a terrible acquisition to have damaged the price so much!'. But the acquisition was very small, and it was offset by asset sales in non-core areas.

Let me put it bluntly. Assume for the moment that Unite bought Empiric and it turned out, it was a grift. Empiric wasn't even real. They had no buildings at all. The entire bid money bought just a piece of paper and a dream. So the entire bid had to be written off against equity 100%. Total disaster! In this fantasy scenario, what would be the total damage caused to the Unite market capitalisation? (e.g. market cap teh day before the bid, minus, price paid for Empiric). Do the calculation, (I did), it might surprise you.

TRS

> My screen says close was 495.40 : )

okie dokie let's take a look...

https://uk.advfn.com/stock-market/london/unite-UTG...

This handy site is free if you register.

Last two trades before market close were:

16:29:59 7853 bid: 502.50, offer 504.00, price paid 504.00, 1000 shares.
16:30:00 7854 bid: 502.50, offer 504.00, price paid 502.47, 97 shares.

(this is what I saw, I don't normally check the trade list by hand)

(Particularly since there's been a lot of buggy prices from LSE lately after 16:30, even bid/spread being reversed.)

Then 5 minutes after market close there is an absolutely massive uncrossing trade marked at 495.40 of 2,559,803 shares.

then other trades at 580-ish (late reported)

So it seems you are correct, the final closing official price is 495.40. Wow!

p.s. re: max greed, yes indeed, I've done the same calculation :-)

but also, add on the growth on the dividends, via inflation & retained earnings, because if you assume it takes 13 years to get there, you'd like to hope that over 13 years the divis will go up a bit as well over that time. So 8%/year price return, plus 7%/year dividends, plus ?% inflation/reinvested earnings growth causing dividends to rise. Not a huge impact, but not nothing either, depending on how inflation plays out in years to come.

If we get super low interest rates again, there's a real chance we might revisit that kind of pricing sooner rather than later. Likewise if the government relaxes visa policy to allow more students, which is quite possible given the massive change in net migration this year versus last few years.

I have more confidence that students will be renting hall accom in Cambridge and London in 13 years time, than I do that e.g. Oracle, Paypal, Tesla etc will still be around and profitable at that time. Or for that matter, that if I invested in the US and shut my eyes for 13 years, that I would certainly be able to get my money back.

There are plenty of REITs in the UK where the price was nuked in the last couple of years then rapidly recovered. Segro, Safestore, Big Yellow, Tritax Big Box, Land Securities, British Land, Supermarket REIT, Social Housing REIT (super nuked), PHP, ... Unite was the last one to get super nuked, and will likely be the last to recover it seems.

It's one of these situations where the media narrative requires a sector to be out of favour for 6-12 months, then something else takes its place. My guess would be datacenter-related REITs getting a bad narrative in about 12-24 months time. Possibly Primary Health Properties, if the government changes its policy on inflation-uplifting in healthcare property contracts, or if their really big acquisition goes wrong e.g. if interest rates suddenly rise enough to make 55% LTV very unappealling. A big international war for example, might be enough to cause that. Or Reform getting elected - yikes.

I picked up ANOTHER little bit of Unite, just a few % extra, at 506p right before market close, because I have kicked myself for the last 6 weeks for not being brave enough to buy at 505p in December. However my regret minimisation attempt failed 5 minutes after market close today though it now seems. I am a fool! lol.

Still, who knows where we might be in 6 weeks never mind 13 years? I can't find much else that's safer and steadier to invest in. Fingers crossed.

TRS

I'm currently closing a bunch of open tabs in my web browsers from about a month ago.

This is how fast the news cycle moves nowadays:

https://x.com/StefanFSchubert/status/2022229718456...

"Despite the housing crisis, London housebuilding has collapsed to a historic low not seen anywhere else in the developed world." - from FT, 12 days ago

Hopefully in 2 weeks the newspapers will have moved on to the next exciting finance story and the yield seekers will be out in force.

TRS

Great post on REITS, particularly UK ones, for those who don't know any of that stuff.

> "within rounding error back at the lowest price in 11 years. Yield before tax 5.79% based on trailing year payout."
Could I make a couple of points relating to your post, including a correction to the dividend yield figure?

Sorry, yes, I just took it from the wrong line in my spreadsheet, fingers getting ahead of my brain. It was 7.24% before tax at the time of my post (trailing year dividends gross 37.7, price at the time 521). Or I suppose 7.20% if you're a buyer at 521, for the stamp duty increase to your cost basis.

I generally discuss the before-tax number because various investors have very different tax situations. Mine is quite unusual.

Nothing I wrote was to suggest that the forward dividend would be the same, of course. The future is as yet unwritten. The general hope, as with infrastructure plays, is that it at least keeps up with inflation.

Jim

I see the Unite Chairman bought some shares.

“Richard Huntingford bought 37,985 shares of Unite Group on Feb 24 at an average price of GBX 529 per share, a transaction valued at about £200,940.65.”

I personally bought more today at £489.18. The sell off just seems way too extreme. I can’t say it felt good, as I’m down a lot but hopefully it will prove to be a good move over the next few years…

I noticed that the daily buyback rate increased from 150k shares per day average to 350k yesterday.

https://www.investegate.co.uk/announcement/rns/uni...

One nice thing about the low price is that it amplifies the value of these buybacks.

Selling assets at book value to buy back stock, is a wonderful thing when NAV is (credibly) over 950p and the share price is 500p.

Buybacks have a meaningful impact on intrinsic value when the following three things are true together:

a) the stock is *very* mispriced, in either direction.

b) a *very* large amount of stock is bought; i.e. several % of the entire business, ideally >10%.

c) the money is not urgently needed for some purpose to keep the business running.

If Unite commit hard to buybacks and the price stays low, they can add a surprising amount of business value.

At yesterday's 350k shares/day for example, they would be buying back 7M shares each month of the 540M shares that exist.

They would buy back the entire business in just 5 years at that rate!

Which is good for you if you're the last person left holding the final share. ;-)

And while it is happening, the NAV/share of the remaining shares starts zooming upwards, making it even more financially attractive to do buybacks.

If you run the maths, there is almost no better business model for them right now than selling off every non-core asset that can be sold quickly for a good price, and doing absolutely huge buybacks.

There are very few UK REITs that have this kind of opportunity available to any degree.

I hope they will increase the buyback rate even further while the shares are so low, to lock in the win.

TRS

A couple of random questions out of curiosity rather than diligence.

Would any of the properties they are selling be changed from student to residential? Obviously not the London property they sold to the related party.

Could management be kitchen sinking the set up? Making 2026 the year they lower occupancy expectations massively, then beat and absorb the pain of the Empiric portfolio?

How will Unite aim to transform the Empiric occupancy rates? Selling off the most difficult properties but can they run the remaining properties better under the Unite processes and systems? How does that work?

If the U.K. experienced a recession and base rates continued to fall to say 2%, presumably Unite would be a large beneficiary from lower rates eventually? Or in other words, do they fix their loan interest for only a few years?

> Would any of the properties they are selling be changed from student to residential?

I have thought of writing to them about this sort of issue.

It's actually offensive to me that they have some rooms sitting empty in towns where young professionals can't find homes. In some cases, those professionals were tenants in the halls before graduation!

I would think that it is trivial to convert some types of student accomodation to residential and other types of accomodation to touristic. I mean, I've often stayed in students halls running in tourist mode while on holiday in Europe.

Some halls are structured in a kind of '6-8 person flat' style (Empiric did this, I think). Those suit residential conversion.

Some halls are 20 rooms along a corridor and a kitchen with a larger staffed canteen somewhere else. Those are more suited to hotels.

> Could management be kitchen sinking the set up?

It certainly sounded that way even in October when they said earnings will get a shock in 2026. One of the big problems for REITs is when a building is empty or money is sitting in the bank unused. The bid situation is probably causing both of those things over a 6 month period.

As for 'lowering expectations', I don't have the feeling they are doing that intentionally. I think there's some legitimitate slowness that will change over time based on pricing and government policy re: students, visas etc.

> How will Unite aim to transform the Empiric occupancy rates?

To give a quick example, Unite has a Chinese platform for marketing accomodation to students while they're still in China. Empiric didn't have that, I believe.

Another example. In many cities, Unite has a 99% occupancy but Empiric has a 90% occupancy. They can direct the people they couldn't accomodate into the Empiric buildings.

Another example. Unite is big enough to have their systems integrated with the university's own platforms for applications, acceptances etc. Empiric isn't.

The Empiric bid makes a lot more sense if you view it as 'sell off properties for residential use in cities where it's harder to fill them with students, and buy ready-made student accomodation in cities where we have more demand than we can accomodate'.

> If the U.K. experienced a recession and base rates continued to fall to say 2%, presumably Unite would be a large beneficiary from lower rates eventually?

Sort of correct.

- They borrow effectiely at 3-8Y lengths I believe. If rates at that timescale fall, Unite's profit margins grow quite a bit (as do the NAV valuations on the properties they own).

- People often go to university when unemployment is high, to get new qualifications/skills.

- When the base rate falls, yield seekers buy the hell out of yieldy shares.

Basically REITs win a lot when rates go up (asset values improve, earnings improve, business risk diminishes), and as investments they become more attractive too.

All IMHO etc.

TRS

Some random positive news gossip:

https://www.thetimes.com/uk/politics/article/labou...

"Ministers could announce U-turn on student loans next week
Options include increasing the repayment threshold and cutting interest rates amid warnings over crippling debt burden for recent graduates"

This is a big deal. Making university education more affordable for British students is extremely important for the future of the higher ed sector.

The unaffordability has been in the local news a lot recently and is likely putting people off.

TRS

I looked into Unite yesterday again. I don’t think it is as clear cut as I might originally have thought and certainly not without risk. This might be a bit repetitive but writing it out helped me understand it by think.

The lower tariff university cities have been hit by a double whammy of U.K. students who can’t afford to travel and are living at home and Chinese students desire to only attend high tariff universities.

Unite are urgently trying to pivot away from lower tariff cities. They need to sell properties. The property sale they recently announced, was a trophy London asset at book value. It does not follow that they will be able to sell properties in the weaker areas at book value. There are very serious regulatory hurdles that make this challenging. It seems more likely they would sell at discounted prices.

The pre Empiric acquisition Unite portfolio was concentrated in high tier cities and they enjoyed high occupancy. The acquisition of Unite has exposed the group to the Chinese students avoiding lower tier universities. These students stay in halls for multiple years. While the Hello student Empiric brand does have a high concentration in high tier cities, the collapsing demand from Chinese students in their lower tier markets has had a major impact on occupancy. That makes those properties a lot less valuable.

These down trends in lower tier cities are structural rather than cyclical. And there is further pain to come. Consider that there is a new levy of £925 per international student coming in 2028/29.

The integration of the Hello Student Empiric brand is a very clear opportunity for the group and I see no reason it will not be successful in driving occupancy.

Selling properties and integrating Empiric is going to take a couple of years. There may be issues with asset disposal prices.

Turning to valuation and risk. Here are some numbers.

At the time of writing, Unite is at 508p per share and market capitalisation £2.730 Billion.

Earning yield 8.5%.

Earnings/EPRA net tangible assets 5%.

Forward PE ratio based on management EPS guidance 11.8x to 12.2x.

Price to EPRA NTA 53.2%.

Dividend yield 7.42% with a 79% payout.

LTV 26%

Average cost of debt 3.9% (2025) and gradually rising to 4.7% (2028).

Average debt maturity 4 years and 100% fixed rate. Shame they didn’t lock in some long term fixed rates during covid.

UK base rate is 3.75%.

Cap Rate - defined as Net Operating Income (earnings excluding interest) as a percentage of the EPRA book value of the properties is 4.2%.

The stock market implied Cap Rate is 8.5%.

What does this mean? I originally thought I am picking up these properties at 53% of what they are worth. I earn 7.4% dividend while I await the market cap recovery to closer to book value. Low risk LTV. Sounds great and that is the bull case.

The stock market is challenging that outcome. First of all, it takes no account of the tail risk, however small, of an equity wipe out, caused by higher interest rates. Yes LTV is low, rates are fixed for 4 years but higher interest rates for a sustained period would be a major problem. That doesn’t appear to be likely as things stand. But it’s still a risk. It partly explains the stock market implied cap rate of 8.5% versus the risk free rate of 3.75%.

Settings aside interest rate risk, the more likely issue is selling off the low occupancy properties at book value.

Then you consider the average cost of debt rising to 4.7% in 2028, compared to 5% yield (earnings on ERPA NTA) does not look like a particularly good money maker. Unite are in a race to get rid of property at book (unlikely) and drive occupancy at Hello Students (likely).

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.

It feels like a company to hold for two or three years and watch the management pivot and recovery and keep a close eye on the U.K. economy, inflation and interest rates. Manage risk with allocation size.

A list of the properties and their occupancy would be helpful to understand the scale of the exposure to low occupancy. Perhaps not as bad as the stock market is pricing in. I can see why investors are not rushing in to buy as the catalysts are not on the immediate horizon.

There are plenty of positive market dynamics as well. Not least supply has stalled. The 18 year old demographic is growing out to 2030. Attending top tier U.K. universities is not going to decline and students have to move to those locations and will need accommodation.

Here are more detailed notes which are a mixture of written notes and extracts from various sources. That’s enough from me on Unite.

I also noticed at least one typo in my previous post referring to the Unite acquisition which should have said Empiric acquisition.


More detail:
Lower-tariff Universities
A two tier market exists in UK student accommodation (PBSA). Occupancy in Leicester (84%), Nottingham (70%) and Sheffield (67%) has been impacted from: high supply of new PBSA; lower-tariff university exposure; and international decline. The combination of these factors has had a significant effect on occupancy. Students at lower-tariff universities are significantly more likely to live at home (50% compared to 15% at higher tariff universities). Lower-tariff universities often have a specific mission of widening participation to students from disadvantaged areas. Commuting and living at home usually makes financial sense. The student cost of living crisis has accelerated the trend. International students are significantly less likely to choose lower-tariff universities. The January 2026 UCAS cycle shows that international undergraduate applications rose by 6% to 7%, compared to lower tariff at which experienced a 4% to 7% decline (following a 14% decline in the previous year).

International students are laser focused on global rankings and future earnings. The UK visa changes have impacted lower-tariff universities (preventing students from India and Nigeria from bringing dependants). Higher-tariff universities rely more on students from China and the US, who are less affected by by these specific visa rules. Lower-tariff universities are under more financial strain as they lose share to higher-tariff universities. It’s the inverse to the Harvard dynamic that Charlie Munger previously commented on. The reinforcing credential: the smartest students apply, the top employers recruit and the prestige increases.

Unite’s pristine occupancy rates of the past have been impacted by these lower-tariff dynamics. Unite is now aggressively de-risking the portfolio, by doubling its disposal rate (£300-400m p.a.) to increase its higher-tariff exposure to 80%. They are shifting their focus towards nominations agreements with Universities and favouring partnerships with universities over direct developments. That reduces occupancy risk, reduces marketing costs and reduces capex. They are using that capital and buying back £100m of their own shares at a deeply discounted price.

The disposals raise the question: can they get good prices for the properties they sell. It’s not just as simple of selling the properties and converting them to residential, of which there is a chronic shortage in the UK (think redevelopment costs; full planning applications; Sept 2026 double staircase regulations; nationality described space standard regulations; amenity requirements; affordable housing levies; The new Building Safety Levy).

What Unite is actually doing is selling to smaller players; conversion to Co-Living (aimed at young professionals which may suit the Empiric higher end properties in low tariff university areas); local authorities for use as temporary social housing. Clearly, monetising the carrying value for these assets is a risk and Unite investors will be monitoring disposal activity closely for how the proceeds compare to the value on the books.

The China factor
A degree from a mid-tier UK university is no longer seen as a sufficient return on investment for Chinese students. The Chinese government uses the QS Top 100 as a filter for significant life benefits. To live and work in cities like Shanghai or Beijing, returning students often must have a degree from a top ranked university. These elite graduates qualify for tax breaks, housing subsidies and startup grants.

Many large Chinese corporations use systems that filter out applicants whose university is not top 50 or 100. There is a growing stigma in China that a one year UK masters is too easy and only a UK degree from Oxford, Cambridge or LSE, or a top Russell Group will do.

There is also a trend towards Malaysia, Singapore and Hong Kong. Lower tariff UK universities are not attracting Chinese students. These students tend to stay in Purpose Build Student Accommodation (PBSA) for their whole student life and have been lucrative customers for Empiric, who focused on this demographic. The CCP has also tightened its grip on where students study, favouring STEM and universities with links to Chinese universities. These tend to be high tariff universities with large research budgets and high level diplomatic and academic links.

Occupancy by type and domicile by academic year

Direct let to Chinese students decreased from 14% (202/23) to 12% (2025/26).

General Market Dynamics
The higher-tariff university tier is less affected by the challenges facing the lower-tariff and there are many favourable market dynamics. While some cities have recently faced oversupply (as noted above) in certain sub-markets and a few universities have seen falling student numbers, the broader supply of new accommodation is being constrained by higher costs and a muted development pipeline, with net new supply forecast to decline in 2027. This runs counter to supportive underlying demand trends, including projected growth in the domestic 18-year-old population until 2030.

Although recent policy changes create uncertainty, the UK retains its global appeal,
and student demand continues to polarize towards the high-tariff universities that
are central to Unite’s strategy.

While some markets have been oversupplied in recent years, as seen by Unite's
lowest average occupancy over the last two years in areas that saw the largest share
of PBSA beds delivered since 2020, a sustained lack of new development should
lead to a rebalancing of supply-demand dynamics, particularly in regions where
new development has been less concentrated.

With private landlords of HMOs facing increased financial pressure from rising mortgage rates and new regulations - including potential impacts from the Renters
Reform Bill (PBSA exempt) - Unite has an opportunity to capitalise on demand should
more HMO supply leave the market; especially as over 50% of students needing
term-time accommodation live in HMOs.

Undergraduate acceptances (28 days after results day) from non-EU students rose
6.7% y/y in the 2025/26 after 2 years of declines, marking this group the fastest growing
segment in the current cycle. While the overall increase is positive, it's
important to note the nuanced regional trends: acceptances from Chinese students
rose significantly by 20% (after 2 years of declines), now accounting for 33% of the
non-EU undergraduate intake (29% in 2024/25), while Indian student acceptances
were down by 8%. US student figures increased 10.8%. Overall growth in
international students has disproportionately benefited higher tariff universities
with non-EU acceptances to these institutions increasing by c.83% between 2016
and 2025, compared to around 7% for medium and low-tariff universities. Early 2026 data from the October deadline (representing c.10% of applicants)
shows similar trends with UK numbers growing 5.6% yoy outpaced significantly by
non EU applications up 12.9%. The more comprehensive January deadline data
builds on this momentum, with total international applications up 5.1% y/y ( UK
2.6%). Non-EU students continue to be the fastest growth segment, up 5.4% with
roughly half of the growth coming from China, helped by small increases from India,
US and Ireland.

Whilst undergraduate numbers have been robust, recent OfS data shows declines
in full time postgraduates, where international students make up a much larger
proportion of the population. This trend has continued following the January 2024
visa reforms, which prevent international students from bringing dependants,
disproportionately affecting postgraduates. Although these students are less likely
to live in PBSA, stronger undergraduate intake has mitigated the impact of this
decline, maintaining stable international demand at 28% of UTG's occupancy since
2022/23.

However, the outlook for international student numbers in the UK is expected to come under
pressure. A UK government white paper has proposed reducing the Graduate
Route to 18 months and implementing stricter English language and sponsor
requirements. Further complicating the landscape, a £925 International Student
Levy per student p.a is set to be introduced from August 2028. While the impact of
these measures will vary across different student cohorts and institution types, the
Department of Education estimates that the levy's implementation could lead to a
loss of 14,000-16,500 students per annum (c.12% of international applications).

Despite these headwinds, the UK still retains substantial global market appeal for
international students even if competition from other nations is certainly
increasing. The UK is disproportionately represented in the world rankings with 17
universities in the QS Global Top 100 compared to US (28), Australia (8) and Canada
(5). The UK can also benefit from geopolitical tensions and stricter student visa
policies in other major study destinations. For instance, the US experienced a
significant year-on-year drop in international student arrivals in August, the largest
decline outside of the pandemic, with Asian student enrollments falling by 24%
mainly due to heightened US-China tensions.

With near term concerns over postgraduate international numbers and the natural
shift to more domestic students, there has been an increase in demand for shorter
tenancies (40-44 weeks vs 51 weeks) to better match the academic year and habits
of UK students. While this doesn't impact the occupancy numbers, this has the
potential to create a drag on overall LFL rental income and growth. Shorter tenancy
lengths reduced UTG's LFL income growth by c. 1% in AY25/26 and could well
continue to drag on rental growth if we see a growing portion of lets to UK students
but is likely to be a smaller part of the overall equation.

Higher construction costs and new building regulations, including the Building
Safety Act, have dampened new development starts, particularly for affordable
PBSA stock. Viable developments now typically require minimum rents of £230 per
week, leading to a concentration of construction in more price inelastic regions like
London, Glasgow, and Manchester, and in accommodation types such as studios,
which can command higher rents. PBSA deliveries in 2025 increased from lows
seen in the prior 2 years but remain well below historic averages. Overall net new
supply is expected to contract in 2027 given 2025 saw the lowest number of PBSA
planning submissions in the past 5 years.

The 18 year-old population in the UK is projected to grow by 11% by 2030,
presenting a significant tailwind for higher education demand and, consequently,
for PBSA. This demographic boost, alongside a 3.7% year-on-year increase in 18-
year-old British acceptances in 2025, suggests a robust stream of domestic
undergraduates. This relationship between population numbers and higher
education demand, however, is not linear and depends on the participation rate,
which has stayed stable around 36% in recent years. Assuming the participation
rate is unchanged, demand from population growth alone should lead to c.100k
additional undergraduate student places. While this demographic tailwind is strong until 2030, medium-term projections from HEPI reveal a shift: the 18-year-old population is then expected to decline by 7% between 2030 and 2035, and a further 12% between 2035 and 2040, resulting in a total 17% reduction from the 2030 peak to 2040. Despite this potential
headwind, past trends have shown that higher education participation increased
even during periods of declining 18-year-old populations (2010-2020), partly driven
by initiatives from universities and governments but ultimately reflecting the appeal
of university to young people.

Rent prices for student accommodation have grown consistently, often
outpacing the increases in maintenance loans (which undergraduates typically rely
on to cover accommodation costs), a trend significantly exacerbated by the
ongoing cost of living crisis. Although the average maintenance loan has increased,
now representing 77% of the maximum available for 2025/26 (up from 59% in
2016/17), affordability has worsened in every major UK city since 2016. London remains one of the least affordable cities with fewer than 50% of beds priced below
the maximum loan in 2025, and seeing average annual rent in its halls grow 21%
between 2022 and 2024, significantly outstripping the 8% increase in average
maintenance loan over the same period.

University still remains an attractive option for many, especially those at higher-tariff institutions studying high-value degrees, where the graduate premium is more robust. (Graduates earned £1.36 for every £1 earned by non-graduates in 2024, a drop from c.£1.50 seen on average between 2007-2019. Lifetime earnings are significantly higher for those who pursued STEM subjects, including medicine, law, and economics, particularly if studied at Russell Group universities).

The Empiric acquisition
The acquisition added 7,700 high quality beds that are 81% aligned with high-tariff universities (a strategic aim for the reasons covered above) and give Unite access to major Russell Group cities like Exeter and York. However, the Hello Student brand targets 2nd year, 3rd year and postgraduate students attractive to international students. The postgraduate international challenge is seen in the low 89% occupancy, which has deteriorated further since the deal closed and is the main reason behind the recent profit warning.

Empiric have noted a reduction in Chinese students due to geopolitical events and a trend of Chinese students shifting towards universities in Asia or elite high-tariff universities in the UK. Nottingham, Sheffield and Glasgow alone accounted for 5% of Empiric’s lost occupancy. Those cities also saw a wave of PBSA completions in 2024/25.

With everything that is happening, students are booking later. Empiric is said to have lacked the digital marketing reach and university nomination infrastructure that Unite possesses. Consequently, when the booking cycle slowed down, Empiric didn’t have the sales engine to chase late cycle applicants. The acquisition distraction would not have helped either. Hence the increase in asset sales. It’s not hard to imagine 2026/27 being a clean up year and momentum investors may not see immediate catalysts.

Unite management believe they got the company for a price that reflects the challenges. The Hello Student strategy brings an extended student lifecycle. There are cost synergies of £17m (up from £13.7m). Unite will leverage its best in class digital booking and maintenance platform and drive occupancy. TheReitStuff mentioned Unite has a Chinese platform for marketing to students while they’re still in China that Empiric didn’t have as an example of potential.

Unite will be able to squeeze more out of the Empiric assets as they migrate to the Unite high traffic booking system; leverage Unite’s university nomination relationships and sell off the properties with excess supply.

The most recent numbers
“68% reserved for 2026/27 (2025/26: 71%), reflecting more cautious booking trends…
Demand from strong university partners, with 55% of beds nominated for 2026/27 (2025/26: 59%)...
Targeting disposals of £300-400m p.a., £214 million completed in 2025 (Unite share: £142 million)...
Agreed disposal of St Pancras Way, London to USAF for £186 million (Unite share: £126 million)...
Initial £100 million share buyback programme underway and delivering attractive returns…
2026/27 income expected at lower end of range for 2-3% rental growth and 93-96% occupancy…
Empiric’s 2025/26 income below expectations ahead of integration to our platform…
Cost of debt expected to increase to 4.3% in 2026 (2025: 3.9%)...”

2026/27 income guidance
“Across the Empiric portfolio, 22% of rooms are now sold for the 2026/27 academic year. The slower sales performance reflects a delayed start to the sales cycle following a technology upgrade and the more cautious leasing behaviour seen in the Unite portfolio. Based on our initial assessment, we anticipate Empiric’s letting performance to be in line with our direct-let portfolio for the 2026/27 academic year. The full benefit of our sales platform to Empiric will be realised for the 2027/28 sales cycle.”

Hello, thank you for the interesting posts.

I do not agree with everything you've written, and unfortunately I don't have time this week to go through line by line and explain why. There are many good points in there though. However, in the media and elsewhere, there are things that are future risks, possibilities and proposals (for example the international student levy) that are presented as done deals, despite being still at the proposal stage and having already changed considerably from their first proposal.

To respond briefly,

- Sometimes, adding more information beyond the most essential factors makes decision-making outcomes worse. Signal/noise.

- UK REITs have well established and realistic means to evaluate the achievable NAV on properties, using generally agreed upon e.g. EPRA standards for reporting. External valuers are often used to keep numbers realistic. (Office REITs in the UK got 'shocked' by covid and remote, so that this system broke down for certain REITS with heavy exposure to offices. Generally though, prime properties are assumed to get prime prices and weak properties to get weak prices in calculation of NAV. It's important to ask 'are they selling off the very best stuff to stay afloat' - because that does happen sometimes with REITs - but usually that's a problem for much smaller REITs, or REITs operating in places where demand for a certain kind of property has simply evaporated and there are limited market transactions/rents to draw clear conclusions from.

- Where PBSA housing is excess to need, I agree that not all student buildings can be turned into 'ordinary homes' very easily, but for example the overlap between hotel and student accomodation is so great that many student accomodations are listed in booking.com outside of term time. Likewise, emergency social housing and unused student accomodation can be an easy and immediate fit too. I mean, we're using private hotels and military accomodation for that purpose at the moment in the UK because there's such desperate need for rooms. And some student housing really can be directly turned into blocks of residential flats given appropriate permission, design/redesign etc.

- I think the NAV 955p, price 500p, issue along with the questions 'will the dividend be maintained and covered' and 'is the debt manageable or a danger', are the three key issues in determining if the company is good value, more than social trends or politics. If I wanted to invest at a price of 800p-900p, I would absolutely be thinking about some of the topics you mention, but at 500p, I'm not.

- the buyback dynamic upon NAV at low PTBV with REITs is unusual and important vs other types of companies.

- Student property arguably has many tiers, depending on how you view it. For example, https://www.unitegroup.com/wp-content/uploads/2025..., slide 17.

- 95% occupancy is an extremely robust, successful number for most REITs. If Unite can hold occupancy there while managing costs, it will be a big success.

- It's worth looking at https://www.unitegroup.com/wp-content/uploads/2025..., slide 13, to get an idea where the 'problem' is with occupancy, to determine how addressable it is.

- You cannot buy a good share at a great price unless there is a temporary whiff of fearful speculation about the future around it, along with some genuine concerns. It is too much to expect a great price and a great outlook. Almost never happens.

- The trend of the cost of debt upwards is not good for any REIT anywhere in the world! (or any company, except banks). Unfortunately, with REITs you essentially have to take some view on the likely path of future debt costs. You can see in 2022 what happens when beliefs and numbers change fast around debt costs. At 10% rates, REITs are awful. If we see 0% rates again, they will be amazing. The 10x demand for Google's 100-year bond @ 6% might suggest down is more likely than up. But the talk of war might suggest the opposite. I don't know.

- UK 5 year govt gilt yields were 4.4% last April, 4.2% in October and now they are 3.8%. Which suggests to me that medium term borrowing is going to get cheaper for REITs. The 10Y has went from 4.8% in September to 4.3%.

- Demographic trends are surprisingly good imho, and things like Erasmus and warming Chinese relations and an exodus of students from the US need to be taken seriously as matters affecting demand. Erasmus students don't stay with mum and dad.

- If you take a look at the link below, page 14, some arguments for 'Empiric properties will do better under Unite' are made there.

https://www.unitegroup.com/wp-content/uploads/2026...

TRS.

> "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.

====

> "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

Who are the main buyers of blocks theubare selling, Private equity investors?

Another random point that might be worth mentioning.

Unite have said that buying Empiric means that earnings/share would be down in 2026.

How could they know? Why don't they expect the Unite platform to bring occupancy up to Unite average levels quickly?

Do they have little faith in themselves to set things right at Empiric quickly?

The answer is: Students tend to book accomodation 6-12 months in advance, we're now in March 2026, so basically Empiric had already 'locked in' a bad year for 2026.

The best that can be hoped for in the current year for those properties is that Unite are able to achieve a partial improvement for the semester starting after the summer holidays.

Equally, that's why the bid was successful without paying a premium and at a discount to the ESP.L price in recent years.

And that's why Unite's projections say 'bid will be accretive to earnings in 2027' in the bid presentations etc.

(Additionally, reducing duplicated positions has an up front cost and takes a little time).

TRS

> "It seems more likely they would sell at discounted prices."

> "That makes those properties a lot less valuable."

> "There may be issues with asset disposal prices."

Hello EVBigMacMeal,

So these phrases I picked out from your posts, came up repeatedly and I'm not really sure why.

---

1. About 8 months ago, Unite sold 9 assets in Aberdeen, Leicester, Leeds, Sheffield, Nottingham.

https://www.unitegroup.com/articles/disposal-of-ni...

"The disposals are priced at a c.1% discount to December 2024 book value"

---

2. Recently, Unite has sold 1 asset in London.

https://www.londonstockexchange.com/news-article/U...

"The £186 million disposal, which is subject to technical due diligence, represents a c.1% discount to December 2025 book value"

---

So basically every single sale across these 10 sites, was sold at around 1% discount to the most recent book value before the sale.

The assets they are looking to sell now include undeveloped land bank sites, and surely there's no reason to assume those would sell far from ordinary appraisals.

All the evidence to date in the last year, across 10 site sales, including both London & non-London sites, suggests Unite's book value estimates are accurate and that they can achieve those prices.

They are not under pressure to sell, it's a choice to optimise returns, rather than being necessary to survive, which has a big impact on realised prices.

If you have any hard evidence they are having problems with selling around book value, if you can bring that evidence to the discussion, I would be delighted to read it.

Otherwise it may be worth considering dropping that 'talking point' from your writing for now, as it contradicts all the known facts that are available to date, and may mislead people.

Best wishes,

TRS.

Interesting CEO interview (podcast+text).

https://www.heidrick.com/en/insights/podcasts/e186...

He was the CFO before, which is encouraging from a 'buybacks/debt management vs expansion and hubris' angle. He seems quite grounded and sane. He's been there for over 20 years at different levels of the company. Again, that's also good, someone who has literally committed their whole life to working in a team building up a company, is less likely to wreck the whole thing with hubris/ego. He actually seems sad that becoming CEO has meant becoming more distanced from people he works with.

It was a delight to discover this interview this evening.

---- some extracts ----

"Joe Lister: I think the way we work is much more—it has to be—much more integrated than you'd have in a traditional real estate firm. So, you're not just managing an asset which one person can do and they have full or, you know, a big group of assets. You have to work with our university engagement team, with our sales team, with our operations team, with the estates team, and you don't have line control over those people. So it's a way of influencing, working with, collaborating in a softer way, rather than just the telling, you know, ‘I'm in full control and I can make this happen by enforcing.’ So, that sort of softer element of influencing is critical to being successful at Unite."

"But yes, it's so early in the journey that it's kind of—I struggle to sort of see what it may be and sort of head towards it, but I can see how we can make some small steps year on year, and hopefully we'll learn from each other. So I've just actually been on a study tour to the U.S. So I went over and spoke to three or four student operators over there to see what they're doing, because they are ahead of us, it's a bigger sector and they've got some great ideas of what they're doing. And sharing best practices from some of those guys has been, we've come back really, really excited about stealing with pride from what others are doing, particularly in that space of AI."

"Joe Lister: Yes, I guess this starts from a place that I know that I can't do everything, and I don't want to do everything, and I can't control everything. So, for me to have and to be able to operate effectively, I need the right people around me, and that means that I need people that I can trust. I need people who will talk openly, who will challenge me. I do like challenge. I need people who don't have an ego, who aren't there sort of promoting themselves over the team. "

"So that sort of, being able to be flexible and adaptable and move from one thing to another. And the bit that probably saddens me a little bit is people look at me differently within the organization, you know, that badge is very much there. And even within the senior team, people I've known for a long time, you know, and it's the downside of authority, to me, in the hierarchy of organizations, that there's just a little bit more of a barrier than there was before. So, I've just got used to that, I guess."

TRS

Hello TRS,

That is encouraging to hear they have historically achieved good prices on property sales. I have zero evidence that they are struggling to sell properties. I was highlighting the risk to myself that low occupancy could lead to discounts on sales. That’s just a hunch rather than a prediction. You are correct to call me out for making statements in a public forum on subjects I am not well informed about. Welcome to the internet. On a positive note it helped surface some new information which I will verify.

I would also add that the vast majority of Unite’s properties are performing extremely well. So even if they did have any issues getting book value for disposals, it wouldn’t have a dramatic effect to an extent that would effect the big picture.

I like the investment at these prices a lot but personally need to do a lot more work. For example, I plan to attempt to develop a list of properties along side book value, university, university rankings on the different league tables and track changes in those measures. There is certainly a well of important information available publicly.

Best wishes

EVBigMacMeal

So basically every single sale across these 10 sites, was sold at around 1% discount to the most recent book value before the sale...
All the evidence to date in the last year, across 10 site sales, including both London & non-London sites, suggests Unite's book value estimates are accurate and that they can achieve those prices.

I personally would not take too much comfort from this *specific* point. There have been cases of extremely large and reputable funds, that later turned out to be in a spot of bother, selling some properties at or above book value apparently for the purpose of demonstrating publicly that their book value was fair across the portfolio. Which it wasn't.

The thing is, the properties sold are never a random sample...they're some unknowable mix of the ones that they wanted to sell for valid business reasons, the ones that they COULD sell, and the ones that could be sold for a price that looked good relative to their current book value. Property managers know full well that investors look at the recent sale history and habitually draw the wrong conclusion from it.

I am absolutely not saying that is the case here, and my comment is nothing to do with Unite. But I am willing to say that, across the entire property sector, a firm selling some properties at booked value is not ANY kind of evidence that the portfolio in aggregate is worth its booked value. (Perhaps even slightly negatively correlated: if they were good managers, they'd probably be selling their worst dogs, and those are the ones most likely to have impairments when it comes to real world hard money sale prices).

To push an analogy past the point of usefulness, it's like someone without a source of stock quotes (there are no quotes for individual properties) reasoning that since I could sell one of my stocks for twice what I paid for it, they must all be worth about twice what I paid. Without knowing precisely why I sold that particular one, there isn't much you can infer.

Jim

Hi Jim

Thank you for your post. I absolutely agree with this particular point as a general concern, and I'm familiar with both the logic and also the reality of it playing out.

I think anyone who survived the 2007-2009 crisis, while holding banks or property, will know there can be a big gap between assessed values and reality, which might not be noticed till it's too late.

And even the most well-intentioned, honest CEOs can convince themselves everything is alright, that *their* company's assets are *valuable* and *marketable*, till one day... disaster.

The point of my post was simply that this issue should be mentioned, discussed, but perhaps not hammered *again and again* when there's absolutely no evidence of it occuring, and some reasonable evidence it is not occuring and does not apply here, for fairly obvious reasons (they are a profitable company with no need to sell).

I mean, what if Buffett has been defrauding Berkshire all this time? It's useful to entertain the notion once, but if it gets mentioned three times in a post, without any evidence or reasoning that points clearly to it, that feels odd? To me anyway.

--- aside ---

You might think the comparison with Buffett/Berkshire isn't reasonable or valid, because Berkshire is special and has an almost unique track record of honesty, candor and accuracy.

But Unite is Britain's Berkshire, in that regard. Throughout the last 15 years or so, UK analysts were said to have joked about Unite because there wasn't anything to analyse: 'it's a bond, not a share'. Unite was famous for hitting forecast numbers to the penny again and again. It was famous for getting its forecasts accurate, and telegraphing them clearly and repeatedly well in advance. I've tried to come up with specific direct quotes from ancient analyst notes to back this up (I even resorted to AI/Gemini - ugh!). I'll post what I have in a second post.

That's perhaps why the share is being punished so hard lately. The forecast for a DROP in earnings on Unite is super strange, even if in this case, it's because they bought a broken company to fix and took on those numbers for the coming year.

--- /aside ---

The most important question is whether sales are *necessary* to meet cashflow commitments & survival, or whether sales are being done to generate surplus for opportunism / convenience.

Here, to the best of my ability to tell, sales are not *needed*. This is raw opportunism mixed with pragmatism about ongoing expansion in the current environment.

Unite spelled out the game plan in the November presentation last year:

- Planning? -> forget it, building new is no longer worth it at these interest rates, land costs, building costs, regulatory constraints etc. Triply so when buybacks are so compelling and easy.

- Land acquired? -> sell it or redesign to make it profitable in the current environment. Again, since cheap buybacks are an option, raise the hurdle really, really high.

- Building underway? -> complete it.

However, they also haven't totally backed away from new projects, i.e. where they can get a yield of 7% on build, debt at 5.5%, plus the university *guarantees* renting the rooms on long-term inflation-linked contracts signed pre-build, AND they pick up management income on the university owned % share of the build - then they're willing to go ahead with it. Fair enough.

--- purpose of raised cash ---

Another important question is: when cash is raised, what is it used for? 'Buybacks at almost 50% of NAV' is a great reason. 'debt is getting a bit expensive to renew, so let's not do that' is a good reason. Whereas 'it looks super cool to report a huge profit by selling an ancient building at a modern price', or 'we need cash to try to survive' or 'uhh, I guess we just like trading stuff? lol' are all bad reasons.

Here, most of their properties are running at 98-100% occupancy and there's a small number of trouble spots that take a lot of time/energy/money to manage back to health. This is not a survival or 'looking cool' exercise. It's about reluctance to commit to long term debt at current long term debt prices, reluctance to expand where demand isn't guaranteed, and exploiting the hell out of a market misprice on their stock. And they straight up tell you that in the recent trading updates, presentations and annual report.

--- rambling follows ---

Ahout trouble spots.

There are actually entire PhD theses looking at the dynamics of student property markets and PBSA in an individual city (e.g. Sheffield).

It seems that in certain cities in the UK recently, the local council threw new PBSA licenses around like confetti, perhaps to try and relieve stress on the regular housing sector which was converting to student BTL just a bit too much.

Money was still quite easy to access cheaply in 2022-2023 ish, PBSA was 'hot' becaues of high demand nationally, so many companies picked up PBSA development licenses and started to build.

2-3 years later, crisis, in those places.

However, nothing happens in a vacuum. HMO (buy to let, houses with multiple occasion) in these areas are now finding there's too much regulation, too much tax, and fierce competition from the PBSA supply, so some traditional student digs are leaving the market, converting back to owned homes. In the transition period, it sucks for both the landlords and the PBSA operators. In my experience, landlords are fairly reluctant to sell up their rented properties till they feel they have to. There's an emotional attachment thing going on.

Nationally, it's also quite interesting. 19% of students stay in university owned halls, 25% in PBSA, and about 56% in HMO / private buy to let. So the ongoing big swing away from HMO / BTL in the UK *ought* to present an amazing opportunity for PBSA builds. But getting the licenses, building it cheaply, accessing debt at the right price... in practice, it's not happening.

There's actually a huge national shortage of student beds, ancient university halls that are falling apart and need replaced - but some places are swamped with PBSA and some are totalling lacking. Feast and famine across the country. Hence, for Unite, the opportunity to lock in years of 'feast'-oriented accomodation at a low price is a quite good deal.

https://www.unitegroup.com/wp-content/uploads/2025... (slide 4)

https://www.charlesrussellspeechlys.com/en/insight...

'shortfall of 620000 beds in 2026'

That is a HUGE shortfall of beds that ought to be met by PBSA. But won't be, now, or in years to come. Because building is expensive now, and more slow and complex than ever (which adds a lot to costs), interest rates have gone up (which means only certain levels of rent are viable), and the places that easily give out licenses to build are already oversupplied.

That's why a) Unite are sitting at 100% occupancy in so many places b) Unite 'fixing' Empiric in those locations where accom/demand exist but are not matched well, makes a lot of sense.

Whereas, building it themselves - where they can get licenses - using debt at 5.6%+ for projects returning perhaps 6% - doesn't make sense at all.

As far as exiting markets go, a lot of PBSA recently has been designed for easy conversion / mixed use deliberately as a plan B. And it might not be Unite that rushes to exit - newer PBSA companies may throw in the towel in the trouble spots first, convert to residential, and problem solved.

Indeed there are signs that Unite is going to encourage that, by dropping rents to the lowest they can to achieve better occupancy (which will have the effect of driving HMO and other PBSA out of the market). IIRC this is referred to in the presentation above or the November presentation, can't remember the slide number.

--- /end rambling ---

Back to the *hypothetical* 'selling the crown jewels at NAV or selling at a loss in desperation'.

This is an interesting topic to math out as a plan B, in case I'm an idiot, or in case we're all idiots.

Let's run the math on Unite assuming that 'the externally assessed book values are totally fake and the average Unite property *including all the ones running at 100% occupancy and all the land sites* could only be sold off at 90% of book value, even if sold off in an unhurried manner'.

Naturally, the corresponding debt would have to be repaid in full despite that.

So what would be the consequence if everything was just... sold off? You still get a number comfortably far ahead of the share price.

Crudely, 1310p assets per share, 355p debt per share, 955p net assets per share.

Take 10% off 1310p => 1180, subtract 355p debt (it doesn't get reduced by 10%!), and you get 825p net assets per share.

OK, let's take 20% off the entire portfolio 1310 => 1180 subtract 355p debt you get 700p net assets per share. Plus the residual business.

Heck, let's take *30%* off the entire portfolio 1310 => 917 - 355 => 562p net assets per share. Plus the residual business.

They could literally dump their entire portfolio overnight at 20% discount average (including land sites, 100% occupancy), pay out a special dividend of 650p a share, and the residual business would be a net cash and very profitable buildings management & property development company, with their contracts pre-secured for a decade to come.

And that is why I hold rather a lot of Unite Group at 500-600p.

I planned out this post over the weekend... and in doing so, convinced myself to buy some more Unite Group this morning at 486p (or 465p, ish, less imminent dividend cashback).

---

If you have questions or doubts about the above, please ask, I will try to point you towards information if I can. After all, I owe you, for all your wonderful posts over the years here & on old TMF!

TRS

Horrifying AI output post follows since I can't find answers/evidence any other way. Beware hallucinations. I will need to follow this up by hand later.

Prompt: "I have heard that Unite Group used to be famous for how accurate their forecasts were, and that company analysts used to joke Unite was more like a bond than a share. Do you know of any source for this story/anecdote?"

---- GEMINI OUTPUT ----

That anecdote is a well-known bit of City lore among real estate analysts. While it may not be captured in a single "story" link, it is rooted in the long-standing reputation of Unite Group (UTG) for providing extremely reliable, consistent guidance—a rarity in the often-volatile world of property development.

The "bond-like" comparison is specifically associated with the company’s business model and its relationship with the markets during the 2010s.

1. The "Bond, Not a Share" Quote

The joke that Unite was "more like a bond than a share" was a common refrain in analyst notes from firms like Barclays, JPMorgan, and Jefferies.

The reasoning was two-fold:

Predictability: Unlike traditional housebuilders whose earnings fluctuate with the economy, Unite’s income was underpinned by "nomination agreements" (long-term contracts where universities guarantee to fill the beds). This made their cash flows as predictable as a coupon payment on a corporate bond.

Yield & Valuation: Analysts often valued the stock based on its "yield spread" over UK Gilts (government bonds). When bond yields were low, Unite was viewed as a "bond proxy"—a safe place to get a steady 3-5% return with almost zero risk of a "miss" on earnings.

2. The Accuracy of Forecasts

The "accuracy" part of the story stems from Unite’s habit of hitting its rental growth and occupancy targets with "boring" precision. For years, Unite would guide for 97-99% occupancy and 3-4% rental growth, and they would deliver exactly that, year after year.

In the London analyst community, this earned them the nickname of a "well-oiled machine." Analysts at Barclays (specifically those covering the Real Estate / REIT sector like Paul May) frequently highlighted this reliability as the primary reason for the stock’s premium valuation compared to other property companies.

3. Sources and References

If you are looking for the "paper trail" of this anecdote, you will find it in:

Barclays Equity Research Reports (circa 2015–2019): Look for titles mentioning "Operational Excellence" or "Visibility of Income." They often used the phrase "Bond-proxy" or "Infrastructure-like returns" to describe the company.

Financial Times (Lex Column / Lombard): The FT has frequently referred to the student housing sector’s "bond-like" characteristics, often using Unite as the gold standard example.

Investor Presentations: In their own annual results, Unite often used charts showing their "track record of delivery," which showed a nearly straight line of growth—the visual equivalent of a bond's performance.

Interesting Twist: The anecdote has actually been tested recently. In February 2026 (and late 2025), Unite faced a rare "miss" in occupancy due to shifts in international student demand. This caused a stir precisely because it broke the "bond-like" reputation that the company had spent two decades building.


---

TRS

PS. That is the most amazing & thoughtful response I've ever had from any AI to date, assuming it's not just fiction. Actual 'wow'.

Another example of a recent sale, variety of cities, all at book value.

https://www.unitegroup.com/articles/disposal-of-si...

"13 May 2024

Unite Students, the UK’s leading owner, manager and developer of student accommodation, today announces the sale of six properties to PGIM Real Estate for £184 million (Unite Students share: £76 million).

The properties, comprising 2,948 beds, are located in Birmingham, Cardiff, Leicester, Liverpool, Nottingham and Sheffield. The disposals are priced in line with book value"

TRS

Note: Leicester, Nottingham and Sheffield are the three worst offenders for Unite's occupancy levels.

https://www.unitegroup.com/wp-content/uploads/2025... (slide 13)

> I plan to attempt to develop a list of properties along side book value, university, university rankings on the different league tables and track changes in those measures

It's been my own experience that the more effort is needed to understand if an investment at a given price is basically amazing or dreadful, the better it is to avoid it completely.

Personally, I don't think any of this information is needed to judge Unite Group at 500p, LTV 27%, NAV 955p, ongoing buyback, though I accept you feel that way.

If the price was 800-900p, then this sort of thing you are interested in could be a good idea to judge if the next stop would be 600p or 1100p.

But I wouldn't buy this stock at 900p, either way. And if it took *that* much work to understand, I'd just move on to something else.

I think it's better to look for things that are likely worth 700-1100p, on sale for 500p, and let the market figure out for itself what it wants to pay.

Ideally, something where just weeks ago the market actually was paying 700p+ for it, quite cheerfully, and where there isn't really much new information to change things since then.


> You are correct to call me out for making statements in a public forum on subjects I am not well informed about.

I didn't call you out for that and I feel you've accidentally mischaracterised what I wrote.

It's OK to comment on hunches or fears that don't have evidence.

It's OK to make statements on subjects you're not well informed about.

I suggested it might not be helpful to keep doing it again and again and again, within a single post many times, *and* without any evidence at all supporting it.

Repetition is extremely dangerous to the human mind; if you see something repeated to you many times, you may pick up the belief subconsciously without even realising how it got on board.

I feel it's not conducive to a good healthy discussion, that's all.

TRS


PS. Repetition is extremely dangerous to the human mind; if you see something repeated to you many times, you may pick up the belief subconsciously without even realising how it got on board.

It's been my own experience that the more effort is needed to understand if an investment at a given price is basically amazing or dreadful, the better it is to avoid it completely.

Seems like a sane approach.

If there are risks here, they aren't to be found in a couple of dodgy property investments.

Offhand the biggest risk I see is that the entire UK education system got a little overbuilt by people mistaking it for an industry, and an export industry at that. Globally, on average the number of university students equals the number of filled university places. What law of nature grants the UK a perpetual surplus? I'll grant that the UK has some advantages in quality and some places in the world have a shortage of decent places, but I do think it got turned into a bit of a bubble in the UK, and the brand got milked a bit. More than a bit. It was easy money, the schools' budgets were getting squeezed on every other front, and they piled in too hard and got addicted to the foreign fools who pay too much.

It would be entirely plausible to me if the number of foreign students in the next 25 years averaged half the recent peak, say. And not because of any potential Reform policy, simply because Chinese and other students will see better value elsewhere, and see that degrees from outside Oxbridge aren't guarantees of riches.

That isn't a forecast, but it wouldn't shock me, and I'd want to game out how that affects the various players. Some bankrupt second/third tier schools, to begin with. And not very good for the student accommodation players in those places.

Jim

Today, I sold some Unite stock for quite a bit less than I paid for it recently.

Am I mad? I hope not.

---

I had flipped Primary Health Properties REIT (PHP) to Unite (UTG) about 3 weeks ago.

The price of PHP was around 108p and UTG was around 500p.

Since then, UTG dropped 6% and PHP dropped 15%.

A 9% gain in 3 weeks isn't much, but it was enough to win me back. For now.

However, it's important to note that PHP is not free of problems. NAV has fallen in the most recent results.

NAV has fallen several years in a row because of gilt repricing effects on property yield.

This time it fell because of a mega-merger. NAV got a little bit diluted, but, there will be economy of scale etc.

If you like dull dividend stocks, PHP is a good choice I think and probably worth a look.

---

Similarly, three weeks back, I flipped some Social Housing REIT (SOHO) at 67p to buy Unite at 525p.

But the world has changed quite a bit since the 24th of February.

Seeing rate & inflation expectations rising so much in the last three weeks, made me wonder about my choice.

Social Housing REIT benefits from having cheap long-term debt locked in, and long-term, inflation-linked contracts.

Both SOHO and UTG are down a similar amount since the 24th Feb.

The market offered me the chance to flip back, as though I had never sold SOHO. I took it.

---

Unite is still by far my favourite holding.

But if you look at IUKP versus Unite, after the day of the results, you can see it subsequently held its price better than most REITs.

If that continues, other opportunities to rebalance may come along.

TRS

I previously speculated:

It would be entirely plausible to me if the number of foreign students in the next 25 years averaged half the recent peak, say. And not because of any potential Reform policy, simply because Chinese and other students will see better value elsewhere, and see that degrees from outside Oxbridge aren't guarantees of riches.
That isn't a forecast, but it wouldn't shock me..

Just for fun, and for a sense of scale, I wondered what the numbers would be on that plucked-from-thin-air scenario.

This academic year, non-UK students are already down about 15% from their peak in 2022/23 of 758870, so 50% drop from peak would be a drop of 41% from current numbers. (as an aside, EU students now make a pretty negligible percent of the total UK university student population, under 3%).
I believe non-UK students are still about 28% of Unite clients, so a 40% drop in that would be a drop of 11% in the total client set, other things being equal. Which they wouldn't be, of course. Presumably some of those vacated beds would be taken up by UK students instead, at least in the places with the highest demand, though perhaps at a lower average clearing price.

So, again unreasonably assuming no secondary effects or replacements, vacancy rates would rise by 11% on average if non-UK student population fell by half from its peak and Unite's impact was proportional.

It's hard to say what the impact of that would be on Unite. I suspect it would leave them lossmaking until a major retrenchment/restructuring was undertaken, with very unpleasant consequences for shareholders, but would not wipe out the company itself.

Jim

> "It would be entirely plausible to me if the number of foreign students in the next 25 years averaged half the recent peak, say."

Is it within the realms of possibility? Sure. I mean, a major global war lasting 5-10 years, WW2 style, would have that impact all by itself.

However, the countries with highest population growth today have quite strong connections with the English language and the UK, and are geographically closer to the UK than they are to the US or Canada.

The global population is 8 billion and isn't expected to stop growing till the 2080s at 10+ billion people. That's a natural 25% boost for any rational starting point. And many of those countries don't have existing higher ed infrastructure/teachers for all the young people who are growing up.

A more reasonable assumption would be that the number of foreign students in the UK increases by 15% from the recent peak in 25 years time, from population growth, and probably more like 25% given where the growth is occuring, given modern geopolitics, and given increasing positive vibes between the EU and UK with Brexit.

Still, let's play with the idea. Half as many foreign students arrive, 25 years from now. Zero problem for Unite! Why?

----

1. Where are they all studying? High tariff unis. You're not travelling across the world and paying UK tuition fees to study in the shittiest university you can find, unless you really, really have to. If you operate a fine dining restaurant in New York, it does not matter that some people lose their taste for McDonalds.

The UK has 150 universities, ish. 260 if you include colleges and art schools etc. Unite only operates in 60 of them, and it's mostly the best ones, and within 5-10 years, it will be even more so.

2. Unite are moving more and more towards the model where the university takes on all the economic risk for filling rooms with room rates on long-term RPI/CPI linked contracts rather than selling at market rates. Less profit but allows bigger projects and less volatile income. These are called nomination agreements.

They had about 50% nomination agreements a couple of years back and it's already up to 60% now, and as of late 2025 they have indicated almost all new projects will be tied to long term nomination agreements. So given the progress and direction to date - 25 years in the future, it should hopefully be 100% nomination agreements, and all financial risks from voids fall to the university, not Unite.

So, to sum up the scenario being proposed for fun, it is a strange kind of fun, because:

a) isn't very likely, since it doesn't correspond with any reasonable assumption about the world today or in the future, it would be an extreme outlier.

b) it wouldn't affect the universities where Unite operates.

c) it will be the university's problem, not Unite's.

Bluntly, you could model that international students coming to the UK drop to 0 by 2050 because a plague from outer space wipes out all life outside these hallowed isles, and it won't make very much difference to 'Unite 2050', because of (b) and (c) and structural undersupply across the country that isn't being met.

----

> "This academic year, non-UK students are already down about 15% from their peak in 2022/23 of 758870, so 50% drop from peak would be a drop of 41% from current numbers."

The UK has long been the second most popular destination for international students, after the USA. People like to study abroad, for prestige (poor countries) and fun (rich countries). The US has long had the big draw of high wages post-university (+ 'The American Dream') and also, proper democracy - "Truth, Justice and the American way". However...

I don't know if you have university-age children or grandchildren, but if you do -

a) if they told you they wanted to study in the US instead of Canada/Europe, would you have supported/encouraged that in 2010?

b) if they told you they wanted to study in the US instead of Canada/Europe in 2026...

I know many hundreds of people in countries all around the world, but I don't know even a single person who is interested in moving to the US for work, life, study etc right now. That's kind of a big deal. Yet we are only 1 year into a 4 year Trump term. It remains to be seen what else he might do during his term.

In terms of 'Trump so far', I think we are yet to see the full impact of US study demand shifting elsewhere, since students entering accom are e.g. 18 months behind political events when they first start to apply to the uni, get a visa, etc, and we're only just past 12 months since Trump took office.

That demand has to go somewhere. The US is the biggest supplier of education to international students, and the UK is the second biggest.

----

Take a look here, at the colourful graph, which is for last year and before (2024-2025):

https://gslglobal.com/2026/02/21/a-tale-of-three-d...

The main impact of visa changes etc in 2024 is that applications from Nigeria and India dropped sharply.

If you scroll down the page a little, to the newest data on UCAS applications 2026...

International UCAS applications hit a record high for 2026. Countries like China that previously had a falling number of applications, saw a jump of 10%.

(Particularly good news for Unite, since they specifically offer a Chinese platform for students moving to the UK seeking uni accomodation.)

----

> "(as an aside, EU students now make a pretty negligible percent of the total UK university student population, under 3%)"

This is partly Brexit, and partly because of the closure of the Erasmus scheme during Brexit.

The Erasmus scheme was formally approved to restart Dec 2025 and is restarting in practice as of Jan 2027.

The number of EU students halved from 150000 to 75000 after Brexit/Erasmus ending.

Suddenly, instead of fee waivers etc or UK domestic fees, they had to pay full international rates. Not cool.

With Erasmus re-opening, it will move back up again. The UK government is spending about £570 million *per year* starting Jan 2027 to waive university tuition fees for EU students and operate the program.

It is expected to cover about 100000 EU student positions per year, whereas the old Erasmus only saw 30000 (of 150000) (since there were other fee partial waivers under EU membership). TBH it looks like bridge funding to EU membership application in a few years.

I would suppose a realistic scenario is within a year or two, EU students will be heading up towards 150000 again and potentially even higher. Of course, some of this will be people currently paying fees who will move to Erasmus instead to save money. So I wouldn't just add 100k onto 75k.

The effect could be quite positive for Unite, because these students generally come from countries that can afford higher-end accomodation, and generally I would expect them to be chasing positions at the high-end universities where Unite operate.

----

> "Presumably some of those vacated beds would be taken up by UK students instead"

I feel this is missing the point about the business model, especially if you're looking 25 years ahead and extrapolating the direction of the past few years and current direction.

Here is how nomination agreements work: Unite lets out the whole building to the university and maintains it. The university pays for all the beds. Unite & the university work together to fill them. Empty rooms? That's a problem for the university, not for Unite. Unite still gets paid in full.

There is a secondary type of nomination agreement called 'soft nomination' where the university agrees to promote/cheerlead for a provider and tries to help them fill rooms as much as possible, or only takes on a 1 year commitment to cover the cost of voids at a time, rather than long term. I think it's fair to say, Unite doesn't like that model very much.

Most of Unite's nomination agreements are 'hard' nomination, i.e. the uni takes the economic risk of empty rooms, and Unite have moved (and are moving faster and faster) towards more hard nomination, especially at prestige universities, as the business model.

----

> It's hard to say what the impact of that would be on Unite. I suspect it would leave them lossmaking until a major retrenchment/restructuring was undertaken, with very unpleasant consequences for shareholders, but would not wipe out the company itself.

The assumptions being made in the 'just for fun' scenario about Unite's business model, 'family geopolitics', global population trends, etc don't seem to correspond well with the reality of how it is, past, present and also Unite's current & future money being spent on projects (location & nomination).

I mean... suppose I write a post about... what if Buffett's replacement decides to sell everything legacy and go big on AI hype stocks and options trading. It's certainly fun to math out the tax impact etc and the new Berkshire '2 grove model' of insurance and options trading, but it's not really a great way to evaluate where Berkshire might be in 25 years.

(I know that scenario sounds impossible, but strange things sometimes happen... see link below about one of the UK's oldest investment trusts and how much they changed in the last 10 years)

https://uk.finance.yahoo.com/news/making-fortune-t...

----

Finally, the impact of very old university halls becoming unsuitable for use after many years should be considered, which is removing vast numbers of rooms from the equation. Remember, construction generally and PBSA in particular has totally collapsed in the UK. That is why Unite is warning about the *urgent need* for *far more* PBSA in the UK, despite oversupply in certain cities. There is strong undersupply in other cities, and old accomodation falling away over time, but 2026 construction costs are so high (plus the effect of e.g. regulations, e.g. BSA G2, local NIMBY-style blocking attempts) that it's impossible to justify building more PBSA at the moment. So what happens? Rent goes up fast at the places that do exist.

Think, two-speed market. Same as with offices in London. Some places, have awful occupancy around 60%, yet others have 100% and a queue out of the door if anything becomes available.

To give an idea how much the PBSA market is in undersupply, there is a *shortfall* of 620k beds across the UK. Some cities have too much, but others, well, that's why you see most of Unite's properties are sitting at 99-100% occupancy.

So how much supply is being produced to meet that shortfall? Just 20k beds per year in 2025 and continuing to fall into 2026! It will take 30-50 years of building at current rates *just to meet the level of need for accomodation that already exists in 2025*. Think about that for a moment. And that is before you add in the effects of ancient student accomodation becoming unsuitable for use.

Imagine if I made up a narrative like, UK businesses need 30,000 warehouses of space, but there are only 20,000 available nationwide, and worse, warehouse-building companies have used up all their capital putting giant warehouses in the wrong parts of the country based on where the industry/need has moved.

Sure, you might wonder about 'just for fun' scenarios in the year 2050 where UK industry collapses a bit and they only need 29000 warehouses, or 28000. That's not the issue though, in that example, or with PBSA today. The issue is that there's a structural massive undersupply, and it will lead to very high occupancy and astronomical LFL rent increases in some places, yet quite bad results in a few random markets where too much was built *and* demand is falling in that location -> leading to repurposing and transformation of use in those places, but also, impairment of investment - which has been written into the book value/NAV already.

There will be an issue of some demand destruction too! High high prices will cause choice of university to shift around as people look for places they can actually afford to live. Some people will give up university altogether. The UK government is already working to address this by looking into changing how student debt works to make university more affordable to more people.

----

On top of that, in the UK, property is affected by something called EPC requirements*, and these are being continually upgraded every couple of years e.g. to drive insulation / energy efficiency at national level. Drafty ancient halls of residence are OUT. Crappy walls, windows and doors are OUT. And do universities have heaps of capex money lying around to totally redo all that stuff? Not really.

This EPC issue is likely to accelerate because of Trump - I mean, just today, the UK announced they're rushing through special approval for home wall-connected microinverter 0.8kW solar panel systems at INSANE political speed (by british standards) to try and boost energy independence from oil. (it's a great move, btw)

----

Hope there is something useful for you or others here, in these ramblings...

Please fact check anything that matters to your own investing in this post - I have fact-checked myself as I went along, as best as I can, but I don't want anyone to rely on that.

TRS

----

* It's my understanding that EPC is currently an issue for e.g. LandSec and British Land, other office property operators, basically, it seems that if they don't drop a ton of capex into old offices to replace the doors walls and windows, ventilation etc, those offices can become very hard to rent or sell. Equally, where REITs did actively upgrade old commercial property EPC with meaningful amounts of capex, it resulted in better yields, e.g. 30% rental improvement. Companies that have ESG policies or are trying to be included in ESG indices pay particular attention to this EPC stuff. Unite is in relatively good shape here with a relatively modern portfolio of properties. (There's a complexity, I believe, in that you are obliged to do this EPC stuff in order to keep renting the property out, but there's no guarantee that the tenant can actually pay the correspondingly higher rents on the other side... so far, good results, but if every office gets upgraded, will that still be true?)

Another issue for e.g. office REITS (and lately, Unite), is that when you're trading at a discount to NAV, it's quite hard to come up with a big pile of fresh cash to do any essential capex and fix up those old stuff without diluting the hell out of existing shareholders, so in the office sector you end up with voids / low occupancy instead (look at the breakdown by subsector in their reports). It's presumably hard even to sell the old offices unless you can find someone who has the cash to buy them (despite high rates) *and* do the necessary capex *and* sit with a void while the EPC upgrade work is done. If a company can't raise new capital from equity placing etc, and has maxed out borrowings, then there is also 'capital recycling' where companies sell off the property they can't afford to fix, to raise funds to fix up other property. Kind of , snake swallowing its own tail kind of thing, but, that can still work out, as we see with Unite buybacks. A REIT called SREI is apparently quite good at it. Anyway, as far as capex affects Unite, it's good they have cancelled less attractive projects rather than pushing ahead regardless e.g. empire-building, it's good they have a far lower LTV than LandSec/British Land and vast amounts of room to expand debt if its ever needed, and it's good they are having great results selling non-core property at book price.

https://www.whitecase.com/insight-alert/esg-epc-ma...

Just as a general point.

It is worthwhile to take time to look into the expected earnings of Unite Group 2-3 years out.

Assuming no price increase whatsoever in the stock.

But including inflation, reinvested dividends, buybacks, new construction, etc.

The numbers might surprise you, at the current price.

Remember to strip out the effect of the 6% dividend that is due in a couple of weeks.

TRS

Remember to strip out the effect of the 6% dividend that is due in a couple of weeks.

As I only ever look at total return, I tend to think of a 6% dividend from a UK REIT as my permanent loss of 1.2% to UK withholding tax : )

Though I suppose HMRC could certainly use a few more donations.

Jim

>> "Remember to strip out the effect of the 6% dividend that is due in a couple of weeks."

> "I only ever look at total return"

I will do my very best today to convince you there is genuinely much more to this idea than it might seem at first glance.

Sometimes, (A+B) really does not equal A + B. For many more reasons than dividend tax.

In fact I can offer *16* different practical reasons to pay attention to these large dividends and adjust for their effects.

---

Firstly, I would say that when looking backwards, total return is a sensible measure (adjusted for 'risk' in the 'danger' sense of the word).

It's also perfectly sensible when projecting forward over a holding period using a model with assumptions (again, adjusted for 'risk', perhaps).

The first reason I draw attention to the dividend issue here, is that not everyone uses models of total return.

---

Many/most investors just glance at the most recent annual/quarterly/semiannual report, or even the numbers from a screener/database, and get some value characteristics as a heuristic (either for investment, or to pick out where they will spend time investigating further).

For companies that pay small dividends or haven't been especially active with quirky corporate activity, that's fair enough, it won't make much difference.

But when a dividend is sufficiently large in % terms, it can distort the 'appearance' of a company.

That might cause someone to invest, not invest, look further, or not look further.

Perhaps if they're comparing P/E of company A with company B when deciding where to put money.

Of course, not everyone invests on P/E, dividend yield etc, but quite a few people do. I'm not judging either way.

---

For example. If you were to take the price, P/E , fwd P/E, and dividend yield from the most recent results for Unite, you might get:

Price 448.60
Historic P/E: 448.60/47.5 = 9.4x
Forward P/E: 448.60/42.25 = 10.6x
Forward yield: 8.4%

Whereas in 3 weeks , 'all things being equal', it would be like this:

Price: 423.10
EPS: 47.5p
Historic P/E: 423.10/47.5 = 8.9x
Forward P/E: 423.10/42.25 = 10.0x
Forward yield: 8.9%

(plus some cash).

---

In this example, an investor might mentally categorise Unite as an '8% yielding stock' today in terms of the dividend return it produces from a year of business, but it's more like a '9% yielding stock' at the current price in reality.

That's not a big gap, but some people might have a particular goal in mind for yield, or have something yielding 8% or 9% they're comparing against.

Unite Group themselves are actually an especially interesting example of 'this or that' decision making! I believe they are interested in buybacks currently because the return from buying their own stock is better than the best yield they can find on building new property (about 7.2% net initial yield iirc). So, if you were trying to guess which price they would lose interest in buybacks with a simple yield A vs yield B model, you'd come to a different guess depending on which yield you calculate them to have.

If you're on the threshold of whether to increase or decrease your position in a share, perhaps it may matter.

If you prefer to size positions equally for reasons of personal taste, you might account for the immediate return of part of the capital.

---

There are also a remarkable number of practical real-world consequences to keep in mind.

This is just what comes to my mind as I'm writing today. Hopefully others on the board can contribute their own ideas.

1) When a stock has dropped quite a bit and is on the brink of dropping out of an index, a gap down of 6% from a dividend might be enough to push it out at just the wrong moment e.g. market cap weighted index. That could result in additional forced selling. Alternatively, it might push it *into* a value index.

2) If you use a screener filter to identify cheap stocks to investigate, you may not even realise the stock exists, if the value of the dividend pre-xd date is enough to nudge it out of the filter.

3) Depending on any capital gains tax bands / allowances / reporting threshholds that affect you, the discontinuity in the price might affect which band/threshhold you are taxed upon, or whether you have to file a tax return or not.

4) If you hold strong views about LTV ratios on REITs, it might affect your opinion about the 'true' LTV of the stock once the dividend is paid. Covenant breaches are funny, because they're like barrier options, if you breach even by 0.0001%, quite bad things can happen. So some people care about this a lot.

5) If you are a believer in Technical Analysis (I am not), the 'gap' of the dividend might fool you, or it might fool others.

I've seen stocks that were cheerfully steady in price for weeks, then suddenly there's a massive wave of selling in the 2 hours after a huge dividend was paid.

For example, a stock might have effectively already broken through some moving average in a bad way, but you don't see it on the TA graph. Because the dividend that has built up was hiding it. Suddenly, everyone notices at once and reacts at once. Again, I don't do TA, I'm not judging, it's just something to think about.

6) If you trade options as a regular person (non-professional), you might misjudge the price of an option relative to the stock by not realising the stock is soon going to dive lower.

7) If you are the kind of person who uses stop-losses, a 6% gap down might trigger the stop loss accidentally when you actually had no intention to sell.

8) Conversely, limit buys, if you aren't paying attention to the date and the divi.

9) In the case where the large dividend is a special dividend, the apparent annual yield of the company in screener databases will go wonky to an extreme degree ('dividend' -> suddenly much higher, price -> suddenly much lower). This may affect decision making or simply finding stocks.

10) In the case of ETFs and ITs, changes in the timing of when the ETF pays dividends during the year can make the apparent index yield seem higher or lower. In the UK, many companies pay a 1/3 interim dividend and a 2/3 final dividend. Most UK companies pay that big dividend around May. So there's a big dividend in one quarter from the ETF too. If the ETF manager decides to move the payment calendar around, it can make one calendar year look good or bad. I'm pretty sure I've seen this in the past where you get '5 quarterly dividends' used by mistake in the calculated calendar year yield of an ETF. British ETFs tend to have quite high yields, increasing the chance of this issue.

11) As you note, dividend tax is an issue. 20% is a lot compared to 0% on capital gains, and in some countries, it's even higher than 20%. Scandinavia, usually 36-40% I think. Even in the UK, top rate on a REIT is 45%. For those people, if they happen to have discovered a share around the 'big xd' date, but delay making their new investment until the day after the xd instead of the days just before, they will get almost 3% extra shares! (6% x 0.45). And thus 3% extra long term total return, for a few days patience and a little bit of attention.

12) In some countries, unusual non-linear effects kick in when your income crosses a threshold value. The UK is famous for strange threshhold effects. A large dividend might just be enough to push someone's income past a limit. e.g. Buy X shares of stock A today, get the divi, and suddenly you don't qualify for free childcare any more. Buy X shares of stock A on the following week after the xd date, no problem (this year). I know of people this has happened to e.g. with a small company bonus. Google: 'childcare cliff edge'. It's a real problem.

13) OK, this one is kind of a stretch, but if you need to liquidate the portfolio in a hurry, 5-6% of your investment is inaccessible for a month or so. Not an issue for professional traders, but for normal people, who knows?

14) Emotions are real! (for most people). Waking up and seeing your stock down ANOTHER 6% instantly can be the gut punch that ruins a day, and worse, it can be the straw that breaks the camel's back and makes someone give up and sell, when really they're no worse off than the day before.

15) Another example of emotions - revenge trading. It's extremely common for people to resent not catching 'the bottom' or think 'wow, it's even more attractive, more more more!'. Big dividends can trigger accidental revenge trading.

All these kind of complications can make it important to pay close attention to stocks that pay >5% dividend at some point during the year.

The way I enforce this on myself in practice, is to always calculate the underlying price taking into account how much of the next divi / annual divi is accrued in the price. It doesn't make me any richer or poorer directly, it just reduces my chance of being caught out by some of these odd practical effects.

Can anyone suggest any more situations I haven't thought of?

TRS

typo:

> huge dividend was paid.

should be

ex dividend date of a huge dividend.

TRS

Random notes.

1. Bond yields moving up due to Trump's war make new PBSA projects even more difficult / unattractive to start.

2. They also reduce book value on properties, which may affect any property sales taking place just now.

3. Inflation likely to be a bit higher than expected. UTG has its interest costs locked in. Within 6-12 months inflation will feed into index-linked rental agreements.

4. However, on the negative side, Unite usually has energy costs and has staff. Those may be impacted by inflation / energy price spike.

5. UTG a bit of a laggard today as other UK REITs moved up rapidly. However, it had dropped less on the way down in the last month. It used to be fairly high beta w.r.t general market moves but now it's acting low beta?

6. Divi xd shortly.

TRS

https://www.investegate.co.uk/announcement/rns/uni...

The top part of the page is AI autogenerated stuff, skip down to PRESS RELEASE for the official company trading update.

My own summary...

- Had hedged energy costs for years in advance so unaffected by energy prices.

- Had hedged debt costs for years in advance so unaffected by interest rate moves (other than repricing of book value of properties / yield expansion).

- Seeking approval to buy back up to 15% of the company.

- Operations / lettings in line with where they expected.

- Effect of new laws on letting property generally positive for PBSA.

- They have not sold the stuff they are trying to sell yet. Not so good!

- "Our planned disposals include a portfolio of c.7,000 beds in exit cities and lower-growth locations for which we have seen strong initial interest from investors"

which sounds nice, but I would assume that initial interest has been tempered by the sudden shift in interest rates / economic uncertainty thanks to Mr Trump...

TRS


PS. I will be away for a while. See you all in a few weeks!

Trading Update call transcript April 10th.

https://finance.yahoo.com/quote/UTG.L/earnings/UTG...

Some interesting bits in the transcript (I haven't listed to the audio version of the call).

Please remember to check the transcript yourself or listen to the audio call, rather than take my selection of snippets on faith.

---

BTL landlords and Rental Rights legislation:

"The Renters Rights comes into play on beginning of May of this year, so we don't think it'll have a significant impact on this year's academic cycle as students were generally moving out by that stage. New tenancies assigned for 2026, 2027 academic year will start to be impacted. Those new tenancies, if you're a registered PBSA operator, you'll be exempt from the Renters Rights Act, whereas private landlords won't have that benefit. "

---

Focus is on predictable, steadily rising earnings:

" Hopefully, you recognize that we're focused on driving the performance of the business and getting the portfolio to a place where we can return to that more consistent, predictable, and growing earnings. "

" That's why the targets we set out of 80% high tariff and 60% noms, and really narrowing the focus of the portfolio to 18-20 cities is fundamental to that repositioning and enabling us to get back to that more consistent, predictable earnings growth that we really need to get back to."

---

They seem willing to think about a discount on asset sales *if* they can use it immediately for e.g. buybacks:

"The first, just to continue the theme of disposals, against the backdrop of declining valuations and the GBP 500 million of disposals being marketed, what's the range of discount you might be willing to absorb to get the disposals to your target levels? I'm happy to take that one, Joe. Thanks, Akanksha. Yeah, we're in the market at the moment. We'll get feedback on pricing on those assets in the coming weeks and months. As I think we said previously, ultimately, we look at the returns we think we can generate from the assets at the prices at which they're likely to transact, and then we compare that against our alternative use of capital. That will inform our thinking on price."

---

Acceleration of asset sales while buybacks / other projects are an option:

"When we're thinking about the quantum and timing of disposals, as I say, we've currently got a target of GBP 300 million-GBP 400 million of disposals. We set that out in November as a multi-year program. I guess with that announcing today an acceleration, it's a recognition that we can't take sort of 3-4 years to deliver against that disposal program. "


---

Asset sales are a mix of successful / unsuccessful buildings, and total asset sales to be quite big vs market cap:

" We're making good progress against this target with GBP 130 million under offer or completed, with the St Pancras Way disposal to USAF expected to close in May. We have a further GBP 500 million of assets being marketed across a portfolio of lower growth assets, development land, non-student assets, and from the Empiric portfolio."

"As we set out at the time of the prelims, we guided that we thought the yield on those GBP 300 million-GBP 400 million of disposals would be about 5.5%-6.5% as a blend. What that includes is a mix of assets. You've got lower growth assets in there, which are those sort of strategic disposals to help position the portfolio more towards higher tariff universities. We think they will be slightly higher yielding, more like 6%-7.5%. However, we also have then within that GBP 300 million-GBP 400 million, the disposal of St. Pancras Way, and we're also looking to sell some non-strategic assets, including our build-to-rent asset in London and some of our development sites. That brings the overall yield down slightly"

---

Surprising level of interest in the assets on offer + interesting comments about impact:

"We recognize that selling assets into this market is not straightforward, but we are encouraged by the depth of investor demand and those looking at our portfolios of assets. We have over 70 investors currently in the data room for the larger portfolio, and given the quantum and range of assets being marketed, this means that we are well-placed to deliver on this target. Delivering on these disposals would improve current occupancy by three points, improve nominations by three points, and also improve our operating margins, showing the drag that the tail of the portfolio is having on our overall performance."

---

Earnings for current year:

"we're reiterating the guidance for GBP 0.415-GBP 0.43 of Adjusted EPS for this year"

"the 2026 earnings guidance assumes GBP 100 million of share buyback."

---

Prestige universities are great for business stability & growth:

"I was having really positive conversations with the high-quality university partners. As I mentioned, they're extending existing arrangements. We've been winning tenders versus other operators, and seeing more beds from those operators. Where they're multi-year agreements, we've seen rental growth uplifts typical with what we've had historically, and I'd say a strong performance with those universities. "

TRS

One wonders why big asset managers from across the pond like Brookfield or Blackstone don’t buy the whole company.

One does indeed wonder. IMHO it is one of the lowest hanging fruits in the real estate market right now.

If you had $3 billion, you could buy it, sell off all the buildings over 2-3 years for 5-10% below book, and double your money.

On top of that, you could relist the residual building management business as a new business *and* cash in the debt/energy hedges for another bonus.

TRS

Post New

US Policy FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.