USAF Fund Close and Announcem

RNS Number : 1142F

Unite Group PLC

06 October 2008

 



Date:                   6 October

On behalf of:         The UNITE Group plc ('UNITE')

The UNITE Group plc ('UNITE' / 'Group')

UNITE UK STUDENT ACCOMMODATION FUND ANNOUNCES £58 MILLION FUND RAISING AND ONGOING RESILIENT VALUATION PERFORMANCE 

The UNITE Group plc, the UK's leading commercial provider of student accommodation, is pleased to announce the conclusion of the third closing of the UNITE UK Student Accommodation Fund ('USAF'/ the 'Fund') and to report the Estimated Net Asset Value of the Fund as at 30 September 2008.

Third closing of USAF

As anticipated, the capital raising process closed on 3 October 2008. A total of £58 million of unconditional equity commitments have been received from leading third party institutional investors, of which £26 million has been subscribed by four new investors, taking the total third party equity commitments in the Fund to £428 million. UNITE expects the new equity to be drawn down later in 2008 and, when it is drawn, it will be priced at a small premium to the prevailing Net Asset Value ('NAV') of the Fund at the date of draw down.

During the fundraising period, UNITE has also been made aware, in its role as Fund Manager, of secondary trades in USAF units between existing investors totalling approximately £40 million, which have taken place at a small discount to NAV. These trades are likely to have had an effect on the final demand for the new fundraising. 

Taking into account proceeds from the third closing, cash balances in the Fund and its remaining borrowing headroom (at the Fund's 55% target gearing level), USAF now has the capacity to acquire further assets from UNITE to the value of £380 million. It is anticipated that approximately £225 million of this capacity will be applied in acquiring stabilised properties from UNITE before 31 December 2008. UNITE will use the proceeds from this anticipated sale to reduce its gearing and maintain its stake in USAF at 20%.

Fund performance

The Fund's estimated Net Asset Value as at 30 September 2008 was £1.012 per unit (30 June 2008: £1.053 per unit, 31 December 2007: £1.020 per unit), representing a decrease of 3.9% in the quarter (0.8% decrease year to date), predominantly attributable to a negative movement in the market value of interest rate swaps held by the Fund.

In arriving at the value of the Fund's units, its property portfolio was independently valued at £769 million. After taking account of the sale of assets during the quarter, this represents a decrease of 0.2% in the underlying gross property values in the period. 

Despite challenging conditions, valuations of student accommodation assets continue to prove resilient and are supported by consistent rental growth. Furthermore, and as previously announced, both UNITE and USAF have recently sold assets at yields that are supportive of the Fund's valuations. The Fund's portfolio has continued to experience an exceptional sales performance, with 99% of bed spaces now occupied for the 2008/09 academic year (2007/08: 96%) and like-for-like rental growth of 8%. Core rental growth of 0.8% was booked in the third quarter's valuation, which has been offset by yield expansion averaging 7bps across the portfolio.

Commenting, Joe Lister, UNITE's Chief Financial Officer, said:

'We are pleased to have concluded this further round of fundraising in extremely challenging market conditions. The new equity raised, at a small premium to net asset value, increases the Fund's surplus investment capacity to £380 million, which it will use to acquire student properties from UNITE later this year and in 2009.

'Valuations of student accommodation property continue to outperform the wider real estate sector and are well supported by transactional evidence. We are also delighted to highlight an exceptionally strong reservations performance, with 99% of the portfolio occupied for the current academic year. With future rental growth anticipated, student accommodation is well positioned to withstand these challenging economic conditions.'

ENDS

For further details please contact:

The UNITE Group plc Mark Allan  Joe Lister	Tel: [phone]
Financial Dynamics Stephanie Highett / Dido Laurimore /  Rachel Drysdale / Laurence Jones	Tel: [phone]

About UNITE Group

UNITE Group is the UK's largest manager of branded student accommodation, with a business model that focuses on being a developer and co-investing asset manager. In the 2008/09 academic year, UNITE Group will operate accommodation for some 36,000 customers throughout 23 key university towns and cities across England, Wales and Scotland.  UNITE Group undertakes the planning, development and management of sites, often working closely with the universities and colleges, in order to deliver high quality, well-located student accommodation at affordable prices in strong higher education markets.

Together with its development pipeline, UNITE Group manages a property portfolio valued at c. £2.9 billion on completion. UNITE Group's strategy, set out at the beginning of 2007, aims to double the size of its UK business by 2012.

With student rents resilient to economic cycles, and the continued growth in student numbers, especially from overseas, UNITE Group developments typically show high occupancy levels in a market where there is a general shortage of quality supply.

Founded in 1991, UNITE Group is listed on the London Stock Exchange (UTG) and is a FTSE 250 company.

UNITE UK Student Accommodation Fund

UNITE Group established the UNITE UK Student Accommodation Fund ('USAF' / the 'Fund') at the end of 2006. The Fund was initiated with the principal objectives:

• to release capital that is tied up in mature, stabilised investment assets for investment into higher added value development activity;

• to provide UNITE Group with more growth capital in the medium term;

• to diversify UNITE Group's sources of income by providing a new, valuable revenue stream arising from management fees from the Fund; and

• to provide financial returns to investors in the Fund.

The Fund helped transform UNITE Group's business model to that of a developer of new purpose-built student accommodation and manager of funds which own student accommodation properties operated by UNITE Group and in which the Company has a significant minority stake.

See our websites:

Investors and corporate: www.unite-group.co.uk

Students: www.unite-students.com

Graduates: www.livocity.com

 

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