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(Alliance News) - Student accommodation firm Unite Group PLC on Wednesday said it is disposing of two assets for GBP100 million in total to a fund that it manages.
The assets were sold to Unite UK Student Accommodation Fund, with Unite's share of the disposals being GBP75 million. The disposals represent a net initial yield of 5.5%. The properties are located in Birmingham and Newcastle, containing 1,155 beds in total.
In addition, USAF - in which Unite holds a 25% stake and acts as a manager - announced "the launch and pricing of GBP85 million of bonds". The 3.921% bond is due June 2025.
The new bond issue "is being placed at a premium to par generating total proceeds to USAF of GBP95 million, reflecting an implied yield of 1.83%". Bond proceeds will go toward the fund's growth.
Unite Group's share of the new debt equates to around 2% of its total borrowings as at June 30, on a see-through basis. It also "supports a further marginal reduction" in Unite's cost of debt.
Unite Chief Financial Officer Joe Lister said: "The disposals by Unite to USAF form part of our plan to dispose of [GBP150 million to GBP200 million] of assets per annum during the next three years following the acquisition of Liberty Living. These planned disposals will fund our development activity and support our target to reduce [loan-to-value] to 35% by 2021."
Unite's 25% stake in USAF will fall to 23% on October 1 following an equity raise by the fund.
Shares in Unite were down 0.3% at 1,069.00 pence in London on Monday morning.
By Anna Farley; annafarley@alliancenews.com
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