Unite loses income on 60% of beds as students stay home

The listed student accommodation developer and operator, with sites in Liverpool and Manchester, expects a £125m drop in cashflow this year, after it allowed students to cancel rent payments for the third term of the 2020 academic year.

In a statement to the stock market, Unite said the forgoing of rent payments meant the company would not be receiving income on 46,000 beds, representing around 60% of its portfolio.

Unite said: “Overall, we expect a reduction in income from the 2019/20 academic year of 16-20% on a group share basis”, which while significant, was “an improvement on our previous expectations.”

Unite’s response to the coronavirus pandemic forms part of a mixed bag across the student accommodation sector, with some operators writing off rent fees entirely for the third term while students are not in occupation, while others are still asking for full payment.

The National Union of Students has called on all accommodation providers to cancel rents for the third term of 2020, and a statement from the Department for Education has asked operators to “consider fairness” when making decisions over whether to charge rent.

While facing criticism, private sector landlords who are continuing to charge rent have pointed out that students are continuing to receive tuition fee and maintenance payments while living at home, which would usually go towards paying for accommodation.

In its coronavirus update statement, Unite said overall, the company was expecting up to a £120m reduction in cashflow this year, and was taking action to plan for a potential four week delay to the start of the 2020/2021 academic year should Covid-19 disruption continue.

In order to make savings, Unite said executive directors, senior management and non-executive directors would be taking between 10% and 30% cuts in salary and pension contributions, for a four month period. The company has not accessed the Government’s furlough scheme.

On the development side, Unite is conserving money by putting developments in London and Bristol on hold, which were due to complete in 2022.

For projects elsewhere which were due to complete this year, Unite acknowledged they could be delayed by the temporary site closures which took place and the amended working practices in response to the Covid-19 outbreak.

However, work has now restarted across all sites, with reduced numbers of operatives to maintain social distancing.

Unite is on site in Manchester with a 32-storey tower on New Wakefield Street, designed by SimpsonHaugh, as well as building out a 1,000-bedroom development next to Liverpool Lime Street station.

Richard Smith, Unite’s chief executive, said: “We are committed to doing the right thing for our customers, colleagues and other stakeholders, despite the unprecedented times we face. This underpinned our decision to forgo rent for students wishing to return home for the remainder of the current academic year and the reduction in Board remuneration announced today.”

The share price in Unite was up 38p this morning to 809p, having suffered from a drop from a high of 1,339p in February.