Launch and pricing of £125 million USAF bond financing

The Unite Group plc, the UK’s leading developer and manager of student accommodation, today announces the launch and pricing of £125 million of bonds issued by the Unite UK Student Accommodation Fund (USAF) under its existing debt funding platform established in June 2013.

USAF is the largest specialist student accommodation fund in the UK, currently holding a portfolio of 78 properties valued at over £2.1 billion which are located in 24 university towns and cities across the UK providing over 26,800 bed spaces. Unite is the largest investor in USAF with a holding of 23 per cent.

The £125 million is a further issuance under the existing 3.921 per cent bond due June 2025. The new issue is being raised at a premium generating total proceeds to USAF of £137 million, reflecting an implied yield of 2.744 per cent (representing a spread of 1.45 per cent over the reference gilt yield). The proceeds will be used to repay secured debt that is due to mature in the next year and to fund further growth in USAF. The bonds are expected to be rated A (sf) by S&P Global Ratings and A (sf) by Fitch Ratings, in line with USAF’s existing bonds issued in 2013, at a loan to value of 47 per cent.

The funds raised extend USAF’s financing platform, increasing USAF’s weighted average debt maturity from seven years at the start of the year to eight years, whilst also resulting in an overall reduction in its total cost of interest from 3.5 per cent at the start of the year to 3.4 per cent.

Unite’s share of the new debt represents approximately 4 per cent of the Group’s total net debt, on a see-through basis, as at 31 December 2015 and will continue to support the improvement on the Group’s key debt statistics on a see-through basis.

Joe Lister, Chief Financial Officer of the Unite Group plc, commented:

“The launch and pricing of the new bond builds on USAF’s robust financing platform at attractive pricing levels. Maintaining a strong investment grade rating provides continued benefits in giving access to longer term finance, at competitive rates from a range of capital sources.”