Empiric boss on whether its results make the grade

It is A-Level results day and Empiric Student Property’s chief operations officer Lynne Fennah is “cautiously optimistic”. A bump for universities coincides with the REIT’s H1 results, which saw it swing to a loss as a result of Covid-19 revaluations. CBRE’s assumption of 50% occupancy for 2020/21 stripped £42m off the portfolio value, with income halved. But at 12 August Empiric had reached 65% occupancy for next year, exceeding the conservative valuations – though with a way to go against typical levels of 85%. Fennah says: “Usually I would be advising the markets what I think occupancy will be in September, but I think with so much uncertainty that Covid has created, at this time I just don’t feel it is prudent to do so. “I do, however, feel cautiously optimistic. We’ve had a high level of enquiries, which suggests that we’re going to see a very late booking cycle.” Wide transformation Empiric student mix is typically a third domestic, a third international Chinese, and a third international from other countries. But current booking levels have swayed in favour of domestic booking at 40%. It lost £4.5m through refunds in H1 and a further £700,000 through lost summer bookings. The REIT has expected lost rents for the 2019/20 academic year of £7.2m, compared with earlier expectations of £13m. The loss of earnings has led Empiric to suspend its dividend. However, Fennah points out that excluding Covid-19 costs, it was on track for a full payout in line with a 7.8% increase in underlying revenue. “We actually would have been at 100% dividend cover for the first time in Empiric’s history,” she says. “Given that when I joined the group we reported a 33% dividend cover, that’s quite a transformation.” Fennah joined Empiric in April 2017 from Palmer Capital. Over the last three years she has had a number of roles as head of facilities management, IT and HR as part of a wider company transformation. “Three years ago the company had an operating platform that wasn’t fit for purpose, and I joined to be CFO and to help that journey to bring everything in-house and transform the operational platform,” she says. “That transformation has put us in an excellent place to trade through the difficulties that this pandemic is throwing up and allowed us to come out very strong and ready for growth the other side when that comes in a year or so’s time.” Anticipated boost This year Fennah also adopted the chief executive responsibilities in an interim role, holding the fort for incoming CEO Duncan Garrood, who is expected to join before January 2021. She is readying the business for his arrival and anticipated growth when investor sentiment picks up. At the start of the pandemic the group was forced to pause a number of sales that were under offer and it hopes to restart that process soon. She comes back to the underlying pickup as a strong base for expansion post-Covid. “Our underlying result is that we have achieved the dividend cover that we wanted to be at and we need to start thinking about growth plans,” she says. “That’s a perfect opportunity for a new property director joining to start looking at that later this year, early next year. There is definitely a potential for strong growth.” At the end of the period the portfolio comprises 8,835 beds, which is expected to grow to 9,156 by the 2021/22 academic year. For now Fennah is laying that foundation for future growth, no matter the grades. To send feedback, e-mail emma.rosser@egi.co.uk or tweet @EmmaARosser or @estatesgazette Photo courtesy of Empiric