Hold Recommendation on Post-Merger Student Housing REIT: Solid Fundamentals but Rising Regulatory and Demand-Side Risks Limit Upside

Unite Group plc (UTG) has received a new Hold rating, initiated by Jefferies analyst, Mike Prew.

Mike Prew has given his Hold rating due to a combination of factors that balance supportive fundamentals with rising risks and moderating returns. While the merger with Empiric Student Property adds scale, cost synergies and a stronger presence in high-tariff Russell Group university cities, he sees the equity already pricing in much of this upside, with his DCF-based price target implying only modest share price appreciation. He also notes that portfolio yields and a roughly 6% dividend yield remain attractive, but these are offset by a slowdown in top-line growth as the student housing market faces affordability pressures and increased regulatory scrutiny. In particular, the Renters’ Rights Bill and the shift away from fixed-term contracts threaten to change the economics of student lettings and could constrain supply while putting further upward pressure on rents.

At the same time, he highlights demand-side uncertainties, including the risk that the UK becomes less appealing to international students, especially from middle-income countries such as China, where domestic universities are gaining status. Domestic affordability is also a concern, with average PBSA rents sitting well above student maintenance support and leaving students, especially in London, with sizeable funding gaps. Although the combined group benefits from long-term university nomination agreements that underpin occupancy and cash flows, he expects overall returns for the sector to moderate from historically high levels. Taken together, these factors justify a neutral stance, leading him to resume coverage with a Hold rather than a more positive or negative recommendation.

In another report released today, TipRanks – Anthropic also reiterated a Hold rating on the stock with a p607.00 price target.