41061 Unite AR22 HI-RES WEB-READY - Flipbook - Page 38
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THE UNITE GROUP PLC | Annual Report and Financial Statements 2022
FINANCIAL REVIEW continued
PROPERTY REVIEW continued
Development and university partnership activity
Committed schemes
The combination of growing student demand, slowing
supply of new purpose-built student accommodation and a
shrinking HMO sector creates significant opportunities for
new development. There is widespread acknowledgement
from universities and local authorities of the need for new
student accommodation to relieve pressure on housing
supply. As a result, the current market environment
offers the strongest opportunity for new development
in recent years.
The Group is committed to four development schemes: Derby
Road and Lower Parliament Street in Nottingham, Abbey Lane
in Edinburgh and Jubilee House in Stratford. The schemes
have a total development cost of £339 million, delivering a
blended yield on cost of 7.0% for the PBSA elements.
Our current development pipeline includes 4,863 beds,
with a total development cost of £850 million, of which
2,239 beds or 63% by development cost will be delivered
in central London.
We reviewed our development activity during the year in
light of interest rate increases and higher build cost inflation.
We have deferred starts on some developments, enabling
us to improve returns through reductions in land prices
in some cases and greater certainty over build costs. The
improvement in funding markets in recent months also
supports greater earnings accretion from our pipeline.
Reflecting this improved outlook, we have recently
committed to complete our Lower Parliament Street and
Abbey Lane schemes in time for the 2025/26 academic
year. We are now committed to four development schemes,
totalling 2,123 beds and £339 million in total development
costs. The £200 million of costs to complete these projects
is fully funded from the Group’s cash and available credit
facilities, which totalled £397 million at 31 December 2022.
We also expect to commit to further development activity
during 2023 through a combination of schemes in our
secured pipeline and new opportunities at attractive returns.
Completed schemes
During the year, we completed our developments of Hayloft
Point and Campbell House, together comprising 1,351 beds
at a cost of £229 million and a development yield of 6.0%.
Both schemes are fully let for the 2022/23 academic year.
Campbell House is fully let to the University of Bristol under
a 15-year nomination agreement and two-thirds of the total
beds at Hayloft Point are let to King’s College London under a
5-year nomination agreement. Both schemes have achieved
BREEAM Excellent ratings and EPC A ratings and are fully
electric, with no gas reliance, supporting our commitment
to net zero carbon by 2030.
Our £60 million Derby Road development, offering 705 new
beds, will complete for the 2023/24 academic year and is
located adjacent to the University of Nottingham campus.
We are trialling an enhanced design for the common areas,
which we expect to improve customer experience and our
ability to offer a Home for Success.
In January 2022, we added Lower Parliament Street, a
271-bed direct-let scheme in Nottingham city centre, to our
pipeline. We expect to deliver the fully-consented scheme
for the 2025/26 academic year.
At Abbey Lane in Edinburgh, we are planning to deliver a
segmented development offering 298 beds in cluster-flats
as well as 66 two- and three-bed clusters in a separate
block. These smaller flats will be available for postgraduate
students, university staff and other young professionals.
We are targeting completion for the 2025/26 academic year.
In December 2022, the Group acquired the land for
our Jubilee House scheme for £73 million. The student
accommodation element of the fully-consented scheme
is expected to be delivered in time for the 2026/27
academic year, with construction due to start in the second
quarter of 2023. The development will be delivered as a
university partnership, with over half of the beds let under
a nomination agreement. The mixed-use scheme will also
deliver 65,000 square feet of academic space, let for an
initial 35-year term to the Secretary of State for Levelling Up,
Housing and Communities.
Secured pipeline
The remaining 2,740 beds in our secured pipeline are
uncommitted schemes with negligible future capital
commitments. We are reviewing the expected returns from
these schemes, and will commit to them only where there
is a meaningful spread between development yields and
funding costs to adequately compensate for the risk of new
development. Where planning has not been secured, we
have been working with land vendors and our contractors to
re-visit development costs to improve returns in response
to higher funding costs. Given positive progress with
this activity, we expect to commit to further schemes at
attractive returns during the course of 2023.