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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Author: TheReitStuff ⎊☼🐝  😊 😞
Number: of 86280 
Subject: Re: Unite Group (UTG), UK, falling knife.
Date: 02/25/26 7:58 PM
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> Would any of the properties they are selling be changed from student to residential?

I have thought of writing to them about this sort of issue.

It's actually offensive to me that they have some rooms sitting empty in towns where young professionals can't find homes. In some cases, those professionals were tenants in the halls before graduation!

I would think that it is trivial to convert some types of student accomodation to residential and other types of accomodation to touristic. I mean, I've often stayed in students halls running in tourist mode while on holiday in Europe.

Some halls are structured in a kind of '6-8 person flat' style (Empiric did this, I think). Those suit residential conversion.

Some halls are 20 rooms along a corridor and a kitchen with a larger staffed canteen somewhere else. Those are more suited to hotels.

> Could management be kitchen sinking the set up?

It certainly sounded that way even in October when they said earnings will get a shock in 2026. One of the big problems for REITs is when a building is empty or money is sitting in the bank unused. The bid situation is probably causing both of those things over a 6 month period.

As for 'lowering expectations', I don't have the feeling they are doing that intentionally. I think there's some legitimitate slowness that will change over time based on pricing and government policy re: students, visas etc.

> How will Unite aim to transform the Empiric occupancy rates?

To give a quick example, Unite has a Chinese platform for marketing accomodation to students while they're still in China. Empiric didn't have that, I believe.

Another example. In many cities, Unite has a 99% occupancy but Empiric has a 90% occupancy. They can direct the people they couldn't accomodate into the Empiric buildings.

Another example. Unite is big enough to have their systems integrated with the university's own platforms for applications, acceptances etc. Empiric isn't.

The Empiric bid makes a lot more sense if you view it as 'sell off properties for residential use in cities where it's harder to fill them with students, and buy ready-made student accomodation in cities where we have more demand than we can accomodate'.

> If the U.K. experienced a recession and base rates continued to fall to say 2%, presumably Unite would be a large beneficiary from lower rates eventually?

Sort of correct.

- They borrow effectiely at 3-8Y lengths I believe. If rates at that timescale fall, Unite's profit margins grow quite a bit (as do the NAV valuations on the properties they own).

- People often go to university when unemployment is high, to get new qualifications/skills.

- When the base rate falls, yield seekers buy the hell out of yieldy shares.

Basically REITs win a lot when rates go up (asset values improve, earnings improve, business risk diminishes), and as investments they become more attractive too.

All IMHO etc.

TRS
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This community has written 589 posts about Non-US Stocks. The article-length ones it recommended most:
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