Student accommodation provider Unite Group (UTG) ticked up 0.1% to £10.73 on news it has acquired an 800-bed development in Paddington in central London.

The rehabilitation of the share price has accelerated on news of vaccine progress and the hopes this might lead to a more normal in-person university experience in the next academic year.

£150 MILLION REFIT

This latest deal saw Unite exchange contracts with Travis Perkins (TPK) to acquire the site. Development costs are estimated at £150 million, to be funded from Unite's £300 million fundraise over the summer.

Subject to planning approval, Unite said it aimed to have the site operational for the 2023-24 academic year.

The accommodation would deliver a development yield in line with the company's enhanced targets for university partnerships in central London, it said.

The development would also include a ground floor retail unit for Travis Perkins. Unite also announced that it expected a reduction in rental income of up to 20% compared to 2019-20 in the current academic year.

No details were given for how much Unite has paid to buy the site.

UPDATE ON CHECK-INS AND RENTAL INCOME

Check-ins have increased from 70% on 8 October to 80% which leaves 8% of reserved beds still to check in, of which around 40% were originally scheduled for January move-in and 60% are late arrivals.

Numis analyst Robert Duncan said: ‘With recent positive news flow regarding Covid vaccines and Government policy supportive of students remaining at university, notwithstanding near term uncertainty, we believe the fundamentals of the UK PBSA (purpose-built student accommodation) market remain supportive for longer term performance with UTG well placed to deliver substantial value for shareholders.’

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Issue Date: 20 Nov 2020