- Specialist student landlord sells a London asset at a price which is 1% below book value
- UNITE launches a follow-on buyback with part of the proceeds
- This makes sense with the stock trading at a 50% discount to historic NAV
- Share price unmoved all the same
“A sale of a London asset for a price which is 1% below book value looks like a good deal for specialist student landlord UNITE, especially when its shares languish at eleven-year lows and a 50% discount to net asset, or book, value per share,” says AJ Bell investment director Russ Mould.
“However, the share price is not responding, even though some of the proceeds are going on a new, £65 million buyback, perhaps partly because the buyer is the fund in which UNITE is an investor and perhaps partly because investors remain wary of the student sector, amid the ongoing political rumpus over university tuition fees and whether they may frighten away potential future students from higher education.
“UNITE has sold its St Pancras Way building in Camden, London for £186 million, a price which represents a 1% discount to the valuation of the asset on the FTSE 250 index member’s balance sheet. Unite’s share of the £186 million sale price is £126 million.
“At first glance, this looks like a major result for the Real Estate Investment Trust (REIT), as it seeks to reassure investors about the value of its property portfolio. At the end of 2025, the REIT’s net asset value, or book, value per share stood at 966p, only a fraction below the peaks of 2024.
Source: Company accounts
“The share price, however, languishes at levels last seen in 2015.
Source: LSEG Refinitiv data
“This apparent disconnect reflects the impact of higher interest rates on asset valuations; how UNITE’s dividend yield is less relatively attractive compared to government bond yields, again thanks in part to increases in the Bank of England base rate from historic lows; concern over rising construction and build costs, thanks to both wages and raw materials; and worries that the structure and expense of student loans will lead to a drop in the number of those who go into higher education.
“Investors are also looking at how UNITE is selling the asset to a fund in which it owns a stake, USAF. UNITE is getting £115 million in cash and the rest in units in the fund, to take its stake in USAF to 32%.
“The release of cash and retention of a stake in a prime, London-based asset looks sensible, as does the decision to funnel £65 million of the proceeds into a new share buyback, adding to an existing £100 million programme.
“It certainly makes more sense, from investors’ point of view, for UNITE to buy back shares that trade at one of the very deepest discounts within the beleaguered REIT sector.
Source: Company accounts for historic NAV per share figures, LSEG Refinitiv data.
“In effect, UNITE is buying back assets at a price of just 50p in the pound, and this makes more sense to investors than constructing a building that automatically draws a valuation of just 50p for every £1 spent.
“This means UNITE is now really a cash yield, or income, story from an investment perspective, especially after the trading alert for 2026 issued alongside 2025’s full-year results back in February. UNITE cut its forecast for bed occupancy rates, thanks to lower domestic student numbers and a muted recovery in demand from overseas students that leave the market with too many beds and too many new buildings for too few tenants, especially in non-Russell Group universities.
“Management is responding to this new market environment with a plan to sell some £300 million to £400 million in assets, focus on Russell Group universities and recycle cash into buybacks and shareholder returns.
“Investors are clearly yet to be convinced, and the fading prospects for interest rate cuts this year are not helping, but lower base rates and gilt yields over time, along with a stabilisation in occupancy rates and student numbers would both be good for sentiment, even if the debates over the cost of student loans, the potential impact of AI on students’ employment prospects and the wider economic backdrop suggest none of those may happen in a hurry.”
