The UNITE Group plc, the UK's leading developer and manager of student accommodation, announces that it has exchanged contracts, unconditionally, to sell Unite House, Bristol to M&G Secured Property Income Fund for a total cash consideration of £21.5 million, representing a net initial yield of 6.07%. As at the most recent valuation date, June 30, 2009, the property was valued at a net initial yield of 6.62%. Completion is scheduled to take place on November 16, 2009.
Unite House comprises 395 student bed spaces and was developed by UNITE in 2000, benefiting from a Nominations Agreement with the University of Bristol. UNITE will continue to operate the property following the disposal of the freehold under a leaseback arrangement for a term of 25 years, subject to an annual rent starting at £1.38 million and subject to annual increases linked to RPI. Based on actual occupancy for the 2009/10 academic year, UNITE expects the property to generate a total net operating income of £1.48 million, meaning that it will retain a profit rent of approximately £0.1 million from the operation of the asset for this academic year. At June 30, 2009, the property was valued with reference to this total net operating income at £20.7 million.
Proceeds from the sale will be used to repay borrowings and to reinvest into the Group's development activities as opportunities arise. After repayment of associated senior debt, the transaction releases approximately £7 million of net cash proceeds to the Group.
This transaction is the latest in a number of planned asset disposals by UNITE and brings the total contracted consideration from sales in 2009 to £154.3 million, including £88.2 million of development assets sold into the joint venture between UNITE and Oasis Capital Bank established in August 2009.
Mark Allan, Chief Executive of UNITE, said: "This disposal further demonstrates the strong demand in the investment market for high-quality student accommodation. The sale will enable us to repay the debt associated with the asset, further reducing our gearing, with the remaining cash becoming available to reinvest in
"Having now completed over £150 million of asset sales this year, combined with our £82 million equity raise last month, we are increasingly well positioned to secure attractive development opportunities for delivery in 2012 and beyond."