GCP Student Living boosted by solid demand

The quality of the portfolio is very high, as most of it is concentrated in and around London, where supply-side constraints are extremely high, given the competition for space from office, commercial and residential operators. Not surprisingly, the portfolio achieved full occupancy in the year to June, while rental growth of 4.1 per cent exceeded the 2.9 per cent national average for private student accommodation.

Acquisitions included Circus Street in Brighton, which will provide 450 beds and 30,000 sq ft of commercial office space. After the year-end, GCP entered into a conditional agreement to acquire and forward fund the construction of another site in Brighton comprising around 550 beds and 1,500 sq ft of retail space. Part of this will be financed through existing facilities, although further debt or equity issuance may be necessary.

The dividend is currently two-thirds covered by adjusted earnings. However, the Circus Street development in Brighton is due for completion in September 2019, while the Bloomsbury site in London opens to students this month, and subsequent rental income is expected to be more than sufficient to fully cover the dividend.

Analysts at Stifel are forecasting adjusted net asset value of 148p a share at the December 2018 year-end (from 138p in 2017).