USAF Acquires 3,000 Bed Student Portfolio for £137 Million
Unite Students, the UK's leading developer and manager of student accommodation, announces that the Unite UK Student Accommodation Fund ("USAF"), in which the Group has a 21% stake, has acquired a 2,904 bed student accommodation portfolio for £137 million. The acquisition was funded through a combination of cash resources and existing debt facilities following USAF's recent fund raising in March 2014.
The portfolio comprises nine regional assets and represents the entire portfolio of the Cordea Savills Student Hall Fund, a private student accommodation fund. The acquisition increases USAF's property portfolio value by 10% from £1.375 billion to £1.512 billion, comprising 24,577 beds in 68 properties across 22 UK towns and cities.
Two of the properties acquired are already operated by Unite under sale and leaseback arrangements so the Group's operational portfolio will increase by a net 1,862 bed spaces as a result of the acquisition. These two assets, in Bath and Portsmouth and representing approximately 35% of the acquired portfolio by value, benefit from long term nominations agreements with Universities and have significant reversionary potential. Taking account of recent disposals and planned completions later in the summer, the Group will be operating 43,953 bed spaces for the forthcoming 2014/15 academic year (41,072 in 2013/14).
The newly acquired assets are complementary to Unite Students' existing portfolio, with approximately 90% by value located in strong regional locations where the Group already has a significant operational presence and which are considered to be core. These core locations are Bath, Birmingham, Bristol, Edinburgh, Leeds, Loughborough and Portsmouth. The portfolio also includes two smaller assets in Preston and Bradford which will continue to be operated by a third party manager and are likely to be sold in due course.
The consideration paid equates to a net initial yield of 6.3% and the acquisition will be immediately accretive to USAF's earnings and marginally accretive to its NAV. Unite's share of these incremental earnings, together with additional management and acquisition fees, is expected to add approximately £2 million (1 pence per share) to the Group's Adjusted Earnings over the remainder of 2014 and approximately £2 million (1 pence per share) per annum on a recurring basis going forward. Following the transaction, USAF's loan to value ratio is 42%, in line with its current leverage targets.
USAF continues to achieve good rental growth and high occupancy levels across its portfolio.
Commenting on the acquisition, Mark Allan, CEO of Unite Students said: "We are delighted that USAF has been able to complete this important acquisition from Cordea Savills. The combination of Unite's existing operational presence across the country, USAF's financial capacity and the Group's position as lessee on two highly reversionary assets means that a combination of Unite and USAF is uniquely well placed to unlock the potential of an excellent regional portfolio."