A new approach to university accommodation

Mark Allan has never shared a damp, cold house with five people and a family of mice. He has never had to work a whole summer because his landlord did not pay back his deposit, nor has he had his computer stolen because of a dodgy lock on the front door. The chief executive of Unite, the student accomodation provider, did not go to university.

Despite having never lived in student accommodation, Mr Allan is one of the biggest student landlords in the UK, responsible for the upkeep of 126 developments that house almost 40,000 students in 23 towns and cities.He may not have his own unpleasant memories to draw upon when he is looking for ways to improve the living standards of the nation’s undergraduates, but the fact that he isn’t drawing on bitter personal experience doesn’t make him any less motivated in trying to improve the service that Unite offers.

The company — the only quoted business dedicated exclusively to the student sector — is trying to break the mould and “introduce customerfocused attitudes” in a sector where they have been conspicuously absent in the past, he said.

Mr Allan, 37, a chartered accountant, is also motivated to improve accommodation by the prospect of meeting people who have lived in Unite buildings, or more terrifyingly, their parents.

“An increasing number of people have either lived with us or know someone who has,” he said. “Whenever people tell me that their son or daughter lives or lived with us, my first reaction is: ‘Oh no, what did we do wrong?’ But the feedback is positive more often than not.”

On the occasions when it has not been — such as the time when the daughter of the head of the Fire Service was stuck in a lift during a fire drill, or when cleaners discovered that a student had left behind a 6ft snake at the end of term — he made changes. “We beefed up the wording of our ‘no pets’ policy after that incident,” he said.

Whatever his motivation, it is clear that Unite accommodation is a far cry from the traditional image of student digs. Most of the stock is less than five years old. Rooms have en suites. A student typically rents a single bedroom and shares a kitchen and living area with three or four others. Communal facilities include common rooms, laundry rooms and vending machines. Each property has 24-hour CCTV, entry is by swipecard and supervisers make regular patrols of properties, to soothe the nerves of worried parents.

Students do pay more for these small luxuries — Unite rents are slightly more expensive than you would pay to live in a shared private house, starting at about £75 a week outside London and £125 in the capital. The pricing structure is clear, making it easier for students to budget, Mr Allan said.

Providing good-quality housing in a sector noted for the lack of it has advantages, and not merely for the students signing up for three years of university life. Unite’s business model has helped to make student accommodation a credible investment class. “With very few exceptions, there is practically no university that has enough accommodation of its own to provide housing for its first-year and international students, so our model works in most markets,” Mr Allan said. “The majority of our completed portfolio is owned by funds in which Unite has a significant minority stake, alongside investor partners. By selling our investment properties into these funds, we can release cash and borrowing capacity for reinvestment into development, but also retain an interest in the ongoing performance of the properties. We still manage all of these under the Unite banner, and receive fees for doing so.”

The most recent example of a joint venture came last month, when Unite received £39 million from the Bahrain-based Oasis Capital Bank for a 75 per cent stake in three London student accommodation blocks.

This business, Mr Allan makes clear, is a growth market. The lack of finance has squeezed supply, making it difficult for students to find places to live — and nowhere is this more evident than in the capital. The pressure on student housing is greatest in London and it is there that Mr Allan, who lives in Bristol and London, is focusing his development efforts.

“We already have more than 5,000 rooms there but are still well below capacity — there are more than 250,000 students in London, which is bigger than the student populations of Manchester, Glasgow, Leeds, Sheffield and Newcastle combined, but only 45,000 purpose-built bedrooms, so there is a huge demand/supply imbalance.”

The problem is, however, nationwide. In the UK as a whole, Mr Allan said that this month and next 40,000 additional students would arrive at university, but only 6,500 extra beds would be provided. “Next year it will be worse, with only 4,000 beds, and, with development finance hard to come by, I would be surprised if there are more than 2,000 extra beds delivered in 2011,” he said.

Statistics such as these, which seem alarming enough to convince any investor, trip off his tongue. But a deep knowledge of the numbers is what he is there for. He started his professional life at KMPG, where he trained as an accountant for four years after he finished his A-levels. He specialised in raising capital for small businesses, including initial public offerings (IPOs) on AIM. “I was mainly undertaking due diligence on behalf of the sponsors. Unite was the last of these; the other large one being Connaught [the building services company], with whom we have recently established our joint venture.”

He joined Unite after its IPO in 1999. “I was definitely more suited to being a principal rather than an adviser, and I liked the business model and more importantly, the people,” he said. As corporate finance director, he increased the group’s debt facilities, leading equity raisings and acquiring Unilodge, the student accommodation provider, in 2001. His money-raising skills have remained at the fore. Since 2005, Unite has raised more than £500 million from investors, attracted by the high rental growth — 10 per cent a year for the past two years — and the low arrears rate of 1.5 per cent.

Some landlords would be wary of having students in their properties, but Mr Allan places a lot of faith in the goodwill of tenants: “Our philosophy is that if you give tenants a property that is well maintained and look after it whilst they’re living there, they are more likely to treat it with respect.”

The proof of his faith in the model is that he says he would be happy if his children, two girls aged 12 and 10 and a boy aged 2, choose to live in Unite accommodation when they go to university. “I’m sure they’ll stay in Unite accommodation when they get there — provided they book early to avoid disappointment.”


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