Unite Students plans to recoup 75% of cladding costs from contractors

Student developer Unite Students has said it expects to recoup up to three quarters of the money it will spend remediating dangerous cladding.

The developer said it ultimately expects to get back between 50 and 75 per cent of cash spent on on remediation “through claims from contractors”, it said in its 2023 financial results announcement.

However, Unite warned investors: “The settlement and recognition of these claims is likely to lag [behind] costs incurred to remediate buildings.”

The company expects to complete remediation of buildings by the end of 2028, but said costs associated with the work should reduce substantially from 2026.

Under the Building Safety Act, developers need to put aside funding to deal with cladding on all residential buildings over 11 metres high.

At the end of 2022, the student developer had outstanding provisions of £113.3m. The company has now revealed it made additional provisions of £86.2m during 2023 for work on 10 projects, with the outstanding provision at year-end amounting to £42.3m.

The group also said it successfully claimed £13.6m from contractors in out-of-court settlements last year, relating to issues at three buildings. Unite Students previously received £17.7m from George Downing Construction through an out-of-court settlement.

Last year Unite Students completed fire-safety work at 16 buildings in its portfolio.

The company said: “Fire safety is a critical part of our health and safety strategy, and we have a track record of leading the sector on fire-safety standards through our proactive approach.”

The student-housing giant posted a pre-tax profit of £102.5m for 2023, down from £350.5m in 2022. The company said its student homes are 99.8 per cent occupied for the 2023/24 academic year.

The firm also revealed it will stick to the build-to-rent (BTR) market, but said it did not “expect to increase our capital commitment to BTR in the short term”. However, it added it was looking at plans for more BTR schemes “through co-investment with institutional investors, where Unite would act as asset manager”.

“Subject to identifying suitable opportunities, this structure would enhance returns for the group while limiting capital requirements as we develop our understanding of the opportunity in the BTR sector,” it said.

Unite Students chief executive Joe Lister welcomed the “strong set of results”, which he said were driven by rental growth, full occupancy and substantial investment into its portfolio.

“We are trusted by students, parents and universities to deliver high-quality, safe and affordable accommodation where it is needed the most,” he said.

“Our strong leasing performance supports continued earnings growth in 2024 and we are confident that our all-inclusive offer, student-support programmes and balanced approach to rental increases will continue to provide real value for money.”

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