Unite reviews investment plans as funding costs soar

Student housing giant Unite has said it is reviewing its future investment plans because of soaring borrowing costs.

The Bank of England raised the interest rate to 2.25% from 1.75% last month. 

Unite said in its trading report today: “In light of rising funding costs for new debt, we are reviewing our future investment plans to ensure investment activity delivers earnings accretion and attractive total accounting returns, while maintaining a robust balance sheet.”

This comes on the same day the developer has announced it has bought a 178-unit build-to-rent property in Stratford, East London, for £71m. 

It said that the acquisition would enable it to “test its operational capability to extend its accommodation offer to young professionals”.

In its interim results for the six months to 31 June, Unite in the summer reported a £334.1m profit, compared toa £130.4m for the first half of the  year. The firm made a profit of £343.1m for the 2021 calendar year, following a £120m loss in 2020 during the pandemic.

Richard Smith, chief executive of Unite said of the 2022/23 academic year the company had delivered “very strong operational performance”, which he said reflected “the appeal of our high-quality portfolio and affordable rents”.  

“Despite the challenging economic environment, the business remains well positioned thanks to increasing student numbers and a growing shortage of high-quality, purpose-built student accommodation across our markets,” Smith said. 

However, while Unite noted in the trading update it was “well protected” against the impacts of inflation on our cost base it was “not immune”. 

It said: “We are seeing increased pressure on staffing costs for our frontline teams, driven by competition for staff in the hospitality and service sectors and increases in the Real Living Wage.”

The Unite group reported it had successfully delivered 1,351 new beds for the 2022/23 academic year, as well as refurbishing 1,629 beds in Manchester.

When the Bank of England hiked the interest rate to 1.75% from 1.25% in August property firms warned the move could slow the housing market.