Subject: Re: Unite Group (UTG), UK, falling knife.
Trading Update call transcript April 10th.
https://finance.yahoo.com/quot...
Some interesting bits in the transcript (I haven't listed to the audio version of the call).
Please remember to check the transcript yourself or listen to the audio call, rather than take my selection of snippets on faith.
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BTL landlords and Rental Rights legislation:
"The Renters Rights comes into play on beginning of May of this year, so we don't think it'll have a significant impact on this year's academic cycle as students were generally moving out by that stage. New tenancies assigned for 2026, 2027 academic year will start to be impacted. Those new tenancies, if you're a registered PBSA operator, you'll be exempt from the Renters Rights Act, whereas private landlords won't have that benefit. "
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Focus is on predictable, steadily rising earnings:
" Hopefully, you recognize that we're focused on driving the performance of the business and getting the portfolio to a place where we can return to that more consistent, predictable, and growing earnings. "
" That's why the targets we set out of 80% high tariff and 60% noms, and really narrowing the focus of the portfolio to 18-20 cities is fundamental to that repositioning and enabling us to get back to that more consistent, predictable earnings growth that we really need to get back to."
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They seem willing to think about a discount on asset sales *if* they can use it immediately for e.g. buybacks:
"The first, just to continue the theme of disposals, against the backdrop of declining valuations and the GBP 500 million of disposals being marketed, what's the range of discount you might be willing to absorb to get the disposals to your target levels? I'm happy to take that one, Joe. Thanks, Akanksha. Yeah, we're in the market at the moment. We'll get feedback on pricing on those assets in the coming weeks and months. As I think we said previously, ultimately, we look at the returns we think we can generate from the assets at the prices at which they're likely to transact, and then we compare that against our alternative use of capital. That will inform our thinking on price."
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Acceleration of asset sales while buybacks / other projects are an option:
"When we're thinking about the quantum and timing of disposals, as I say, we've currently got a target of GBP 300 million-GBP 400 million of disposals. We set that out in November as a multi-year program. I guess with that announcing today an acceleration, it's a recognition that we can't take sort of 3-4 years to deliver against that disposal program. "
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Asset sales are a mix of successful / unsuccessful buildings, and total asset sales to be quite big vs market cap:
" We're making good progress against this target with GBP 130 million under offer or completed, with the St Pancras Way disposal to USAF expected to close in May. We have a further GBP 500 million of assets being marketed across a portfolio of lower growth assets, development land, non-student assets, and from the Empiric portfolio."
"As we set out at the time of the prelims, we guided that we thought the yield on those GBP 300 million-GBP 400 million of disposals would be about 5.5%-6.5% as a blend. What that includes is a mix of assets. You've got lower growth assets in there, which are those sort of strategic disposals to help position the portfolio more towards higher tariff universities. We think they will be slightly higher yielding, more like 6%-7.5%. However, we also have then within that GBP 300 million-GBP 400 million, the disposal of St. Pancras Way, and we're also looking to sell some non-strategic assets, including our build-to-rent asset in London and some of our development sites. That brings the overall yield down slightly"
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Surprising level of interest in the assets on offer + interesting comments about impact:
"We recognize that selling assets into this market is not straightforward, but we are encouraged by the depth of investor demand and those looking at our portfolios of assets. We have over 70 investors currently in the data room for the larger portfolio, and given the quantum and range of assets being marketed, this means that we are well-placed to deliver on this target. Delivering on these disposals would improve current occupancy by three points, improve nominations by three points, and also improve our operating margins, showing the drag that the tail of the portfolio is having on our overall performance."
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Earnings for current year:
"we're reiterating the guidance for GBP 0.415-GBP 0.43 of Adjusted EPS for this year"
"the 2026 earnings guidance assumes GBP 100 million of share buyback."
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Prestige universities are great for business stability & growth:
"I was having really positive conversations with the high-quality university partners. As I mentioned, they're extending existing arrangements. We've been winning tenders versus other operators, and seeing more beds from those operators. Where they're multi-year agreements, we've seen rental growth uplifts typical with what we've had historically, and I'd say a strong performance with those universities. "
TRS