UNITE raises £167 million for fund

 

Unite Group, Britain's largest student accommodation provider, said on Tuesday a capital raising for a fund and an associated disposal of assets would allow it to focus on site acquisitions and development.

Unite said it had raised 167 million pounds in the capital hike for the Unite Student Accommodation Fund (USAF), and then sold the fund a portfolio of five assets for 95.4 million.

Chief Executive Mark Allan said the disposals - at a net initial yield of 6.35 percent, or 18 percent over their June 30, 2009, book value -- would allow Unite to focus on growth through site acquisitions and the progression of future development.

Unite would also retain an "economic interest in the income generating properties held within USAF through our co-investment stake in the fund", he said.

USAF now has the capacity to invest up to a further 225 million pounds in acquisitions from it, or other income generating student accommodation assets from third parties, and fund a programme of refurbishments within its portfolio.

Noble Group analyst Michael Burt said the importance of the USAF fundraising should not be underestimated for Unite.

"It provides the company with a guaranteed means of recycling capital for its development business at no pricing risk" Burt said in a statement.

Unite said proceeds from the asset sale would be used to pay down debt of 66 million pounds, and to invest in 18.6 million pounds worth of new units in USAF.

A further 6.5 million would be used to pay down interest rate swaps, reducing Unite's cost of debt to 6.5 percent. 

After the capital hike, Unite's stake in USAF is 16.3 percent.

By 8:50 a.m. British time, Unite shares were up 1 percent at 277.9 pence.