Student accommodation investor Unite (UTG) said it had exchanged contracts to acquire a new 300-bed development site in central Edinburgh that formed part of a wider mixed-use redevelopment. Its shares ticked up 0.2% to 941p on the news.
The company said it was targeting delivery of the direct-let development for the 2023/24 academic year, though added the timetable may be accelerated, subject to planning consent.
Development costs were estimated at £24 million, delivering a development yield in line with the company’s enhanced 8.5% target for provincial markets.
‘This acquisition represents one of three new development and forward funded schemes either contracted or under offer for a total development cost of around £250 million,’ chief executive Richard Smith said.
‘The scheme will be funded through the proceeds of our recent placing and delivers enhanced returns relative to pre-Covid-19 levels.’
This shows long-term thinking on the part of management as they look to take advantage of lower prices for sites in the wake of the pandemic.
Nonetheless there are concerns about the impact of coronavirus and travel restrictions on the student accommodation sector as fewer students come from overseas and with potential limits on even domestic students resuming in-person studying.
At the beginning of July Berenberg analysts commented: ‘Although 97% of universities plan to provide in-person teaching this autumn, there are a number of occupancy headwinds.
‘We expect international enrolment rates to fall substantially, while the cancellation of freshers’ week and the suspension of large-format in-person lectures are likely to delay occupation, resulting in some additional rental forbearance this autumn.’