Planned asset sales

RNS Number : 9282U

Unite Group PLC

21 May 2008

 



Release date        21 May 2008

THE UNITE GROUP PLC

UNITE ANNOUNCES £54 MILLION PLANNED ASSET SALES

The UNITE Group plc, the UK's largest provider of student accommodation, announces the successful planned sale of four assets subject to long-term university agreements for a total consideration of £47.5 million in two sale and leaseback transactions. It has also completed a number of other smaller disposals totalling £6.5 million, as it continues its transition towards a developer and co-investing asset manager business model.

The transactions follow the redemption of the UNITE Finance One ('UFO') bonds in October 2007 which, together with the creation of the UNITE Student Accommodation Fund ('USAF'), has enabled UNITE to progress towards a developer and co-investing asset manager model and to adopt a more proactive asset management strategy designed to deliver enhanced shareholder returns. This includes both the sale and leaseback of core operational properties let under long-term agreements to Universities and the sale of non-core assets which no longer fit its strategic business plan.

Sale to Morley's Lime Property Fund

UNITE has exchanged contracts, unconditionally, on the sale and leaseback to Morley's Lime Property Fund of a portfolio of three purpose-built student accommodation properties comprising 800 bed spaces let under long-term agreements to Universities in Portsmouth, Coventry and London for a total cash consideration of £36.9 million to be satisfied at completion. The purchase price equates to a net initial yield of 5.7% and completion is scheduled to take place on 4 June 2008.

Sale to Rainlodge Ltd, advised by Consensus Business Group

UNITE has also completed the sale and leaseback of another property let under a long-term agreement in Leeds. The property which comprises 190 bed spaces was sold to Rainlodge Ltd, advised by Consensus Business Group for £10.6 million representing a net initial yield of 5.7%.

In accordance with its operational strategy, UNITE will retain full long-term responsibility for the ongoing management of the buildings, as well as a share in the anticipated net income remaining after management costs. The remainder will be passed through to the purchasers as rent payable under long-term lease agreements between the parties.

These asset sales are further evidence of UNITE's track record in undertaking sale and leaseback transactions that enable it to recycle its capital into higher value-add activities such as development, whilst retaining management responsibility for core operational assets. UNITE has undertaken five such transactions in the last four years, with a total consideration of £170 million.

Other sales

UNITE has also made progress in its planned disposals of a number of smaller non-core assets. It has completed the sales of a further five properties to individual purchasers for a total consideration of £6.5 million. The properties, located in Luton, Salford, Bristol and two in Liverpool, have been sold because they are not consistent with UNITE's business model, either because of location or lack of asset management opportunities.  UNITE will not retain the management of these buildings and full control of the assets has passed to the new owners.

In total these nine properties comprise an aggregate of 1,308 bed spaces, representing around 3% of UNITE's completed portfolio. They were valued at £56.8 million at 31 December 2007 and the total consideration is 4.9% below that book value. This reflects the fact that the majority of these assets are subject to long-term letting agreements with RPI linked or fixed rental uplifts where, as expected, yields have softened during 2008 in line with the broader property market. This contrasts to the significant majority of UNITE's portfolio, which is let directly to students, and has seen strong year on year income growth and is therefore expected to have proven relatively resilient to outward yield movement. Following these sales, UNITE owns approximately £150 million of assets that are subject to long-term agreements, of which around half are intended for redevelopment and the remainder are likely to be marketed for sale in due course.

Commenting on the transactions, Mark Allan, Chief Executive of UNITE, said:

'These planned disposals demonstrate continued investor appetite for student accommodation assets, and we are pleased to have concluded these transactions despite challenging market conditions. Since unwinding the UNITE Finance One bonds in late 2007, we have made good progress in establishing our developer, co-investing asset manager business model and we are confident that this will leave UNITE well placed to deliver enhanced shareholder returns.'

Ends

The UNITE Group plc Mark Allan  Joe Lister Tabitha Aldrich-Smith	Tel: [phone]
Financial Dynamics Stephanie Highett / Dido Laurimore / Laurence Jones	Tel: [phone]

About UNITE 

UNITE is the UK's leading provider of student accommodation, with a business model that focuses on being a developer and co-investing asset manager. It operates accommodation for 38,000 students across 129 properties throughout 29 key university towns and cities across England, Wales and Scotland.  UNITE 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 and hospitality services at affordable prices in strong higher education markets.

Together with its development pipeline, UNITE has a property portfolio valued at c. £2.9 billion on completion. UNITE's strategy, set out at the beginning of 2007, aims to double the size of its UK business by 2012. In 2007 UNITE expanded into the new field of graduate housing in London, by opening a 62 studio project in Marylebone. It has a further four projects planned in London for 2008/09.

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

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

UNITE UK Student Accommodation Fund

UNITE established a £1 billion UNITE UK Student Accommodation Fund at the end of 2006. The principal objectives of the Fund are:

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

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

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

The Fund helped transform UNITE'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 and in which the Group 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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