Empiric Regulatory News (ESP)

1 March 2016

Empiric Student Property plc

("Empiric" or the "Company" or, together with its subsidiaries, the "Group")

INTERIM RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2015

The Board of Empiric Student Property plc (ticker: ESP), the owner and operator of modern, premium student accommodation across the UK, today announced the Company's unaudited interim results for the six months to 31 December 2015.

HIGHLIGHTS

Financial

· As at 31 December 2015, our portfolio was valued at £361.7m (30 June 2015: £251.3m).

· Our portfolio of operating assets had gross annualised income of £25.1m as at 31 December 2015 (31 December 2014: £8.4m).

· We have paid or declared two dividends in respect of the six month period ended 31 December 2015, equating in aggregate to 3p per share (see Post balance sheet highlights below).

· Our total return for the period from IPO to 31 December 2015 was 19%(1).

· We raised an additional £161.4m (gross) of equity and drew down an additional £19.1m of the RBS debt facility.

Operational

· We acquired a further 2,165 beds (596 operating and 1,569 under development), bringing our total to 5,686 beds across 58 assets in 26 cities and towns as at 31 December 2015.

· The average net initial yield of our operating portfolio at acquisition is 6.4% against our period end valuation yield of 5.8%. Our portfolio is fully let(2) for the 2015/16 academic year.

Post balance sheet highlights

· We have started building our operational capacity to bring marketing, billing, booking and building and facilities management together under one brand and platform: Hello Student®.

· Dividend of 1.5p declared for the period 1 October to 31 December 2015.

· New secured debt facility of £40m agreed with Canada Life, and targeting an LTV of 35% in the near term.

· Launch of new 165m share issuance programme in order to achieve our stated objective to acquire 10,000 beds. Initial tranche to raise target gross proceeds of £90m to fund the near term acquisition pipeline.

Notes

1 Total return is calculated as change in share price plus dividends in the Company, as a percentage of the IPO issue price.

2 The Company budgets and models on the basis of 97.5% occupancy. Occupancy or income of the operational portfolio to this level and in excess is considered fully let.

The Rt Hon Baroness Dean of Thornton-le-Fylde, Chairman of Empiric Student Property plc, commented:

"We are enjoying strong financial performance, with attractive yields. Our finances are robust, our portfolio is expanding, and our new operations structure will add a new dimension to our platform for growth. With the launch of Hello Student®, we expect to broaden our reach, drive rebookers and referrals and engage students directly through a recognised brand. Our operations will become more efficient, foster loyalty in our people, and increase operating margins - underpinning the dividend returns to shareholders.

The outlook for the private student accommodation sector in the UK is strong, and the number of both UK and international students continues to rise - especially since the cap on UK and EU students was lifted in 2015 (as evidenced by the recently published HESA and UCAS numbers).

At our IPO, we set a target to own 10,000 beds within five years. Now, we are looking to achieve this target well ahead of that date. We expect to continue to deliver attractive returns as well as provide a warm welcome to our customers."

For further information on the Company, please contact:

Further information on Empiric can be found on the Company's website at www.empiric.co.uk.

Meeting for investors and analysts and audio recording of results available

A meeting for investors and analysts will be held at 9.30am today at:

Newgate

Sky Light City Tower

50 Basinghall Street

London

EC2V 5DE

In addition, later in the day an audio recording of this meeting and the presentation will also be available to download from the Company's website: www.empiric.co.uk.

Notes:

Empiric Student Property plc is a leading provider of modern, direct-let, premium, student accommodation across the UK. Investing in both standing and development assets, the Company focuses on quality, with assets generally in prime central locations in top university cities and towns in the UK, attracting international students and/or those studying beyond first year, in particular, postgraduates. For the 2015/16 academic year, Empiric's customer base comprised 69% international students from 98 countries and 78% of the Company's customers were students were beyond their first year of study.

The Company (incorporated in England & Wales), an internally managed real estate investment trust ("REIT"), listed on the premium listing segment of the Official List of the Financial Conduct Authority and was admitted to trading on the main market for listed securities of the London Stock Exchange in June 2014.

CHAIRMAN'S STATEMENT

It has been another strong period for Empiric Student Property plc. Over the interim period, 1 July to 31 December 2015, we have been growing our portfolio, our business and our reputation. As the UK student population expands and the purpose-built accommodation undersupply persists, we offer both institutional and private investors attractive returns in a stable sector, with few listed competitors.

Performance highlights

Financing

During the period we successfully completed the final two tranches of a 300 million share issuance programme ("SIP") that we launched in October 2014. During the 12 months ended in October 2015, new shares in the company were issued in four tranches, with each tranche more successful than the last, and with the final tranche significantly oversubscribed.

Our shareholder base has broadened and now includes new specialist Real Estate Investment Trust ("REIT") investors, wealth managers, pension funds, value-orientated investors and a strong following from the retail investment community. It has also become more international, as we welcomed investors from both Continental Europe and North America.

During the period, we drew down £19.1m of the additional £20m RBS facility agreed in February 2015. Post period end, we secured a further debt package of £40m with Canada Life, secured against a portfolio of four forward committed assets. The strong backing of our lenders RBS, Canada Life and Santander, at competitive rates, confirms the strength of our offering. Our near term LTV target is 35%.

We have also launched a second 12 month 165 million share issuance programme in March 2016, subject to shareholder approval, in order to achieve our stated objective to acquire 10,000 beds, with an initial target raise of £90m.

Acquisitions

Empiric has moved swiftly to commit all funds raised in high quality assets. All net proceeds from shares issued in the fundraising in October 2015 were committed by the end of December 2015, significantly ahead of target.

This is thanks to our acquisitions team, who are well-connected, proactive, fast-moving and ambitious, while remaining focused on the Company's investment policy. During the period, we have expanded and diversified our portfolio of properties and development projects, and acquired a further 2,165 beds. This includes both properties already in operation and assets under development, which are being built to our exacting specifications.

Increasingly, we have found off-market opportunities coming to us from both sellers and developers - again, a sign of our growing profile and reputation.

As of 31 December 2015, we had a total of 5,686 beds, either operating or under development, across 58 assets in 26 top university cities and towns in the UK. Our operating portfolio is fully let(1) for the 2015/16 academic year. I am happy to report that bookings across the portfolio for the 2016/17 academic year are ahead of expectations.

Dividends

With the dividend declared for the quarter ended 31 December 2015 of 1.5p per share, we will have paid out or declared two dividends in respect of the interim period, equating, in aggregate, to 3 pence per share.

Those investors who have been with us since our IPO on 30 June 2014 have achieved a total return of 19% over the 18 months to 31 December 2015(2). These strong returns validate the Company's clear and focused direction.

Operations

We are now building our operational capacity to bring more of the business under our control, improving both our efficiency and our margins. That means bringing marketing, booking, billing and building and facilities management together, under one new student-facing branded platform.

This new brand speaks directly to students, with a name to match: Hello Student®. As well as becoming a valuable IP asset, this brand will bring coherence to our offering and raise our profile with students. This is an exciting move for us.

While we continue to work with our existing management partner firms, the Board's aim is that by the beginning of the 2018/19 academic year, the new operations structure will be in place across the Company's whole portfolio, and all Empiric buildings will be marketed exclusively on our new Hello Student® website, launched on 24 February 2016.

Board

I am pleased to announce the appointment of Stuart Beevor as an independent Non-Executive Director as of 1 January 2016. A chartered surveyor by training, Stuart has 35 years of real estate experience, including nine years as a non-executive director at The Unite Group plc. His industry experience will be invaluable.

In February 2016, Alexandra Mackesy decided to stand down from the Board to follow her other interests and we wish her well for the future. She has been replaced as chairman of the Remuneration Committee by Stuart Beevor who also becomes a member of the Audit Committee.

In the interim period, we have continued to be proactive in engaging with investors and keeping them updated on all key aspects of our business. We have issued regular news updates, and our Executive Directors and I have also met many shareholders - both during the course of our fundraising activities, and as part of a regular programme of more informal meetings.

Outlook

We are enjoying strong financial performance, with attractive yields. Our finances are robust, our portfolio is expanding, and our new operations structure will add a new dimension to our platform for growth.

The outlook for the private student accommodation sector in the UK is strong, and the number of both UK and international students continues to rise - especially since the cap on UK and EU students was lifted in 2015 (as evidenced by the recently published HESA and UCAS numbers).

At our IPO, we set a target to own 10,000 beds within five years. Now, we are looking to achieve this target well ahead of that date.

On behalf of the Board, I would like to thank our investors and staff for their contribution to our success over this period.

The Rt Hon the Baroness Dean of Thornton-le-Fylde

Chairman

1 March 2016

Notes

1 The Company budgets and models on the basis of 97.5% occupancy. Occupancy or income of the operational portfolio to this level and above is considered fully let.

2 Total return calculated as change in share price plus dividends in the Company, as a percentage of the IPO issue price.

EXECUTIVE DIRECTORS' REPORT

Empiric has continued to grow strongly in the six months to 31 December 2015. We have acquired a further 2,165 beds during the period - giving a total of 5,686 beds - over halfway towards the target of 10,000 beds within five years we set at the time of our IPO in June 2014.

The fundamentals of the market remain very positive in terms of the demand/supply metrics, pipeline of acquisition and development opportunities, and government policy.

We are pleased also to report a fully let operating portfolio for the 2015/16 academic year and strong demand for 2016/17 with bookings running ahead of expectations.

We continue to build our operational capability, and in February 2016 launched a new student facing brand and platform: Hello Student®.

Financial results

Our operating profit for the six months to 31 December 2015 was £15.0m (31 December 2014: £2.4m), which included revaluation gains of £11.4m and rental income from standing assets of £9.4m.

Our share from joint ventures in the period amounted to £0.6m relating to the uplift in fair values of the properties as well as share of trading at Brunswick Studios in Southampton which opened for the 2015/16 academic year.

Our profit for the period was £14.0m (31 December 2014: £3.2m). That equates to basic earnings per share of 4.35p (31 December 2014: 3.26p) and 4.31p per share on a fully diluted basis (31 December

2014: 3.23p).

The unaudited basic Net Asset Value per share as at 31 December 2015 was 105.4p, prior to adjusting for the second interim dividend of 1.5p per share (30 June 2015: 103.2p per share prior to adjusting for the fourth interim dividend of 1p per share). Net Asset Value is shown net of all property acquisition costs and dividends paid during the period.

The Group's basic EPRA earnings per share for the period were 0.70p per share (31 December 2014: 0.11p per share). The basic EPRA NAV per share as at 31 December 2015 was 105.6p (30 June 2015: 103.4p).

No Corporation Tax has been charged this period as the Group remains REIT compliant, in fulfilling all its required obligation including distribution of at least 90% of its property related net income.

Dividends

For the six months to 31 December 2015, we have paid or declared dividends of 3p per share, including the 1.5p per share declared post the period end.

Financing

During the period, we raised, in aggregate, gross proceeds of £161.4m in equity through two separate tranches (in July and October 2015) of the twelve month share issuance programme launched in October 2014 ("SIP").

We have been pleased with the increasing interest in our equity, with the final tranche of the SIP being substantially oversubscribed.

In addition, we drew down £19.1m of the extended debt facility previously agreed with the Royal Bank of Scotland. As a result, our aggregate loan-to-value ratio as at 31 December 2015 was 20.3% (30 June 2015: 26.3%).

Portfolio

As of 31 December 2015, our portfolio comprised 5,686 beds across 58 assets in 26 cities. This includes 39 operating properties (3,218 beds), five forward commitments (712 beds), 11 forward funded assets (836 beds due for September 2016 and 428 beds due for September 2017), and three developments

(492 beds).

The portfolio of operating properties is fully let1 for the 2015/16 academic year with a gross annualised rent of £25.1m compared to £18.4m as at 30 June 2015, an increase of 36.4%. £1.1m of the gross annualised rent (representing 4.4%) was attributable to commercial revenue compared with £0.8m

(4.3%) as at 30 June 2015.

The average valuation yield of the operating properties as at 31 December 2015 was 5.8% (30 June 2015: 6.1%) reflecting a valuation uplift of 10.3% compared to acquisition price. Yields have been enhanced by a number of assets which were previously under development being completed in time for the 2015/16 academic year and becoming income producing.

Acquisitions

The UK student accommodation market is becoming increasingly vibrant though we usually only face limited competition for buildings that fit our core profile - 50-200 beds in a typical lot size range of £5-15m. These are often too big for the regional developers, too small for larger institutional buyers, but ideal for Empiric.

We have become a known and trusted buyer in the market and have seen an increasing number of vendors coming to us directly with off market transactions. As such, our acquisitions team has identified a strong pipeline of attractive investment opportunities.

Valuation

Our property portfolio has been independently valued by CBRE in accordance with the RICS Valuation - Professional Standards January 2014 (the "Red Book"). As at 31 December 2015, the property portfolio had a market value of £361.7m (excluding the joint venture interests not currently owned by the Group) (30 June 2015: £251.3m), of which £310.7m was attributable to operating assets (30 June 2015: £218.8m).

Operations

This is an exciting time for our business as we develop our brand, restructure our operations to improve efficiency and net margins, and raise our profile further.

At IPO in June 2014, property marketing, management, and maintenance were outsourced to a limited number of management companies to facilitate our emphasis on investing in standing and development assets.

We are now increasingly focused on improving net margins from, and control of, our portfolio as well as developing a much closer relationship with our customers.

Hello Student®

We have created a marketing, booking, billing and accounting platform with a characterful, consistent brand of its own: Hello Student®.

The Hello Student® website, launched in February 2016, will give us a direct relationship with our customer and significantly increase recognition of us in the international student accommodation market.

The underlying technology will streamline the booking process and flow of data for management reporting and control. This is being facilitated through the use of proven booking and accounting platforms and we have invested in an experienced and dedicated team to operate it.

Our aim is for all properties to be marketed exclusively on the Hello Student® website by September 2018.

Over the six months to 31 December 2015, we acquired or committed to a further 2,165 beds across 18 assets, details of which are set out below:

Table 1 - Assets acquired or committed to in the six months to 31 December 2015

(1) These assets were acquired as forward commitment investments in August 2015 and September 2015, respectively, but which had commenced operations as at 31 December 2015.

(2) Date of commitment

(3) These figures represent internal management calculations of the total development costs to completion for each project as at 31 December 2015.

Developing operations

In addition to the website, Empiric has started to employ building managers who will represent the Hello Student® brand. By employing managers directly, we offer a career path from regional to corporate level, reinforcing loyalty to the Company and promotion of the brand.

Alongside this, we have begun to consolidate our facilities management for the portfolio through an agreement with a specialist national company to achieve a consistent, high quality service at an optimum cost.

Six sites are already running with this structure, and more will be rolled in on a phased basis. We expect the structure to be fully in place across our portfolio by September 2018.

Savings and returns

As we consolidate the number of third party service providers, we expect to see our net margins improve as the cost of managing, maintaining and marketing our beds reduces through both operational efficiencies and economies of scale.

Market update

The student accommodation sector is becoming more established as an alternative real estate asset class.

Stability

This market is relatively non-cyclical. Over the past ten years, analysis of yields from other main property sectors shows them tightening dramatically in 2006/7 then loosening equally dramatically in 2008/9. Student property yields did not suffer such volatility with the sector enjoying steady rental growth.

The performance of our sector against other property benchmarks - sustainability, supply and demand metrics, government policy, and alternative use - suggests stability and deliverable growth.

Growth

The fundamentals remain compelling with continued growth in student numbers in the UK. More British school leavers now go to university, up from 7% a generation ago to 33% in the current academic year and increasing numbers go onto second degrees.

Government policy has helped to drive this growth. More students from low-income backgrounds go to university despite the removal of low-income grants. HESA numbers released in January 2016 confirm that the student numbers completing the 2014/15 academic year were up again on the previous year.

The number of international students coming to the UK has grown significantly over the same period as a result of the UK government actively encouraging the "export" of British higher education. With the removal of the cap on UK and EU student numbers in 2015, the number of EU students in the UK has increased as evidenced by recent figures on first year acceptances from UCAS.

Britain captures approximately 13% of the international student market. While the quality of our universities is the significant factor, the British cultural offering and experience is also a powerful driver.

Nearly 70% of our residents were international students in the year 2014/15 and this has remained the same in the year 2015/16.

Bridging the gap

Despite the influx of students, the supply and quality of university accommodation has not managed to keep up. University investment priorities have focused on the development of academic facilities rather than on living accommodation.

The private sector is responding but the structural imbalance between supply and demand remains, with some cities still having fewer Purpose Built Student Accommodation beds (university and private sector combined) than the number of first year students.

Post balance sheet events

The Board has declared an interim dividend of 1.5p per share in respect of the period 1 October to 31 December 2015, payable on 23 March 2016 to shareholders on the register on 11 March 2016. The ex-dividend date will be 10 March 2016.

In addition, we have agreed an additional £40m secured debt facility with Canada Life. This facility will be secured against four of our forward committed assets to be drawn down at the time of practical completion of those assets.

We also announced the launch of our second share issuance programme ("SIP2"), subject to shareholder approval. Under SIP2, we will be able to issue up to 165m shares over the next 12 months to finance further acquisitions in order to achieve our 10,000 bed target. The first tranche of SIP2 comprises a placing, open offer and offer for subscription of up to 83.7m shares at an issue price of 107.5p per share to raise target gross proceeds of up to £90m.

Outlook

We have a strong portfolio of both operating and development assets which will continue to grow given the robustness of our pipeline.

We are now well on track to reach our target of 10,000 beds within five years set at IPO.

With the launch of Hello Student®, we expect to broaden our reach, drive rebookers and referrals and engage students directly through a recognised brand.

Our operations will become more efficient, foster loyalty in our people, and increase operating margins - underpinning the dividend returns to shareholders.

We enjoy strong support from shareholders, debt providers, and a robust marketplace. We expect to continue to deliver attractive returns as well as provide a warm welcome to our customers.

Paul Hadaway

Chief Executive Officer

Tim Attlee

Chief Investment Officer

Michael Enright

Chief Financial Officer

1 March 2016

Note

1 The Company budgets and models on the basis of 97.5% occupancy. Occupancy or income of the operational portfolio to this level and above is considered fully let.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the operating and financial review herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure Rules and Transparency Rules of the United Kingdom's Financial

Conduct Authority namely:

· an indication of important events that have occurred during the first six months of the financial period and their impact on the condensed financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial period; and

· material related party transactions in the first six months.

A list of the current Directors is shown on page 40 of the Company's Interim Report. Shareholder information is as disclosed on the Empiric Student Property plc website, www.empiric.co.uk.

For and on behalf of the Board

The Rt Hon the Baroness Dean of Thornton-le-Fylde

Chairman

1 March 2016

INDEPENDENT REVIEW REPORT TO EMPIRIC STUDENT PROPERTY PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the six months ended 31 December 2015 which comprises the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and the related explanatory notes that have been reviewed.

We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim financial report is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of interim financial reporting in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the 6 months ended 31 December 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

BDO LLP

Chartered Accountants and Registered Auditors

London

United Kingdom

1 March 2016

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Condensed Consolidated Statement of Comprehensive Income

There was no trading in the period from incorporation on 11 February 2014 until IPO on 30 June 2014 and therefore there is no difference in the trading results for the period from 11 February 2014 to 31 December 2014 and the six months to 31 December 2014. Therefore the Condensed Consolidated Statement of Comprehensive Income for the period from 11 February 2014 to 31 December 2014 has not been presented.

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Changes in Equity

Period from 1 July to 31 December 2015 (unaudited)

Period from 1 July to 31 December 2014

Period from 11 February 2014 to 30 June 2015 (audited)

Condensed Consolidated Statement of Cash Flows

Condensed Notes to the Financial Statements

1. Accounting policies

1.1 Trading period

The condensed interim financial statements of the Group reporting period is from 1 July 2015 to 31 December 2015.

1.2 Going concern

The Group has performed strongly since IPO, having raised in excess of £385m from five equity placements and in excess of £100m of debt. The Group has deployed these funds across a portfolio of operating assets that have stable income streams and potential for capital appreciation, in addition, the Group has committed to a number of developments which will become operational in 2016 and 2017. As at 31 December 2015 the Group held £148m of cash that had not been invested in property but is expected to be invested in line with these objectives.

The Directors are therefore satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, for a period of not less than 12 months from the date of this report.

1.3 Basis of preparation

The condensed interim financial statements for the six months ended 31 December 2015 have been prepared in accordance with the Disclosure Rules and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and with IAS 34, Interim Financial Reporting, as adopted by the European Union.

The condensed consolidated financial statements for the six months ended 31 December 2015 have been reviewed by the Company's Auditor, BDO LLP, in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity and were approved for issue on 1 March 2016. The condensed consolidated financial statements are unaudited and do not constitute statutory accounts for the purposes of the Companies Act 2006.

The comparative financial information presented herein for the period to 30 June 2015 does not constitute full statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Group's annual report and accounts for the period to 30 June 2015 have been delivered to the Registrar of Companies. The Group's independent auditor's report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

The Group's financial information has been prepared on an historical cost basis, except for investment properties and interest rate derivatives which have been measured at fair value. The consolidated financial information is presented in sterling which is the Group's functional currency.

The accounting policies adopted in this report are consistent with those applied in the Group's statutory accounts for the period ended 30 June 2015 and are expected to be consistently applied during the year ending 30 June 2016, other than those implemented in the period as a result of new transactions.

1.4 Significant accounting judgements, estimates and assumptions

The preparation of the Group's interim financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Judgements

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated interim financial statements:

(a) Operating lease contracts - the Group as lessor

The Group has acquired investment properties which are subject to commercial property leases with tenants. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the duration of the lease terms and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the leases as operating leases.

(b) Fair valuation of investment property

The market value of investment property is determined, by real estate valuation experts, to be the estimated amount for which a property should exchange on the date of the valuation in an arm's length transaction. Properties have been valued on an individual basis. The valuation experts use recognised valuation techniques and the principles of IFRS 13.

The valuations have been prepared in accordance with the RICS Valuation - Professional Standards January 2014 (revised April 2015) ("the Red Book"). Factors reflected include current market conditions, annual rentals, lease lengths, and location. The significant methods and assumptions used by valuers in estimating the fair value of investment property are set out in Note 5.

For properties under development the fair value is calculated by estimating the fair value of the completed property using the income capitalisation technique less estimated costs to completion.

(c) Fair value for derivatives

In accordance with IAS 39 the Group values its derivative interest rate swaps at fair value. The fair values are conducted by an independent valuer on behalf of the Group, using a number of assumptions based upon market data.

2. Finance cost

3. Corporation tax

Taxation on the profit or loss for the period not exempt under UK REIT regulations comprises current and deferred tax. Taxation is recognised in the profit and loss within the Group Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised as direct movement in equity, in which case it is also recognised as a direct movement in equity.

Current tax is expected tax payable on any non-REIT taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

4. Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.

Reconciliations are set out below.

The ordinary number of shares is based on the time weighted average number of shares throughout the period.

5. Investment property

In accordance with IAS 40, the carrying value of investment property is their fair value as determined by external valuers. This valuation has been conducted by CBRE Limited, as external valuers, and has been prepared as at 31 December 2015, in accordance with the Appraisal & Valuation Standards of the Royal Institution of Chartered Surveyors ("RICS"), on the basis of market value. This value has been incorporated into the financial statements.

The independent valuation of all property assets uses market evidence and also includes assumptions regarding income expectations and yields that investors would expect to achieve on those assets over time. Many external economic and market factors, such as interest rate expectations, bond yields, the availability and cost of finance and the relative attraction of property against other asset classes, could lead to a reappraisal of the assumptions used to arrive at current valuations. In adverse conditions, this reappraisal can lead to a reduction in property values and a loss in net asset value.

All investment property is categorised as level 3. There have been no transfers between Level 1 and Level 2 during any of the periods, nor have there been any transfers between Level 2 and Level 3 during any of the periods.

The valuations have been prepared on the basis of Market Value ("MV") which is defined in the RICS Valuation Standards, as:

"The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgably, prudently and without compulsion."

The descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining fair values are as follows:

(a) Unobservable input: Rental values

The rent at which space could be let in the market conditions prevailing at the date of valuation. The rent range per week are as follows;

(b) Unobservable input: Rental growth

The estimated average increase in rent based on both market estimations and contractual arrangements. The assumed growth in valuations are as follows;

(c) Unobservable input: Net initial yield

The net initial yield is defined as the initial gross income as a percentage of the market value (or purchase price as appropriate) plus standard costs of purchase. The range in net initial yields are as follows;

(d) Unobservable input: Physical condition of the property

(e) Unobservable input: planning consent

No planning enquiries undertaken for any of the development properties.

6. Joint ventures

In July 2014 the Group entered a joint venture with Real Estate Venture Capital Ltd (Revcap) to develop a 178 room site in Glasgow called Willowbank. The total cost of the development is expected to be £14.0m. Funding for the development has been obtained with a contribution of equity, (50% from each entity), and senior debt from Close Brothers. The completion date for the development of the property is scheduled for 31 July 2016.

In July 2014 the Group entered a joint venture with Revcap to develop a 173 room site in Southampton called Brunswick House. Funding for the development was obtained with a contribution of equity, (50% from each entity), and senior debt from Close Brothers. Following completion, Brunswick House became operational and is fully let for the 15/16 academic year.

7. Borrowings

Bank borrowings are secured by charges over individual investment properties held by certain asset-holding subsidiaries. These assets have a fair value of £224,250,000 at 31 December 2015. In some cases the lenders also hold charges over the shares of the subsidiaries and the intermediary holding companies of those subsidiaries.

Any associated fees in arranging the bank borrowings unamortised as at the period end are offset against amounts drawn on the facilities as shown in the table below:

8. Interest rate derivative

The Group has used an interest rate swap and an interest rate cap derivative to mitigate exposure to interest rate risk The total fair value of these contracts are recorded in the statement of financial position. There has not been any transfers of assets or liabilities between levels of fair value hierarchy in the period.

The interest rate derivatives are marked to market by the relevant counterparty banks on a quarterly basis in accordance with IAS 39. Any movement in the fair values of the interest rate cap are taken to the net finance costs in the Group Statement of Comprehensive Income.

Fair Value Hierarchy

The fair value of contracts are recorded in the Group Consolidated Statement of Financial Position and is determined by forming an expectation that interest rates will exceed strike rates and discounting these future cash flows at the prevailing market rates as at the period end.

All movement in the fair value of derivatives has been categorised as level 2. There have been no transfers between Level 1 and Level 2 during any of the periods, nor have there been any transfers between Level 2 and Level 3 during any of the periods.

9. Share capital

10. Reserves

11. Net Asset Value per share (NAV)

Basic NAV per share is calculated by dividing net assets in the statement of financial position attributable to ordinary equity holders of the parent by the number of Ordinary Shares outstanding at the end of the period.

EPRA NAV is calculated as net assets per the Consolidated Statement of Financial Position excluding fair value adjustments for debt related derivatives.

12. Capital commitments

The Group and Company had capital commitments amounting to £6.2 million in respect of its direct joint venture development, Willowbank (Glasgow) at 31 December 2015.

As at 31 December 2015 the Group had total capital commitments of £155 million made up of £75 million relating to forward funded developments and £80 million relating to forward commitments to purchase property.

13. Related party disclosures

Key management personnel

Key management personnel are considered to comprise the board of directors.

Share capital

The below table details the share transactions of related parties over the period.

Loan to related party

During the period the Group contributed funds on behalf of Revcap into the Brunswick and Willowbank joint venture, of £1.7 million and £0.34 million respectively. These amounts are recognised as other receivables. 

Revcap is deemed to be a related party as a partner of one of its affiliated companies, Stephen Alston, is a non-executive director of the Company.

Share-based payments

On 9 November 2015 the Company granted nil-cost options over a total of 282,923 ordinary shares pursuant to the deferred shares element of the annual bonus awards for the 2014/2015 financial year and 1,288,367 ordinary shares pursuant to the Empiric 2014 Long Term Incentive Plan to the Company's three executive directors, as set out below:

14. Reconciliation of profit before income tax to cash generated from operations

15. Subsequent events

The Board has declared an interim dividend of 1.5p per share in respect of the period 1 October to 31 December 2015, payable on 23 March 2016 to shareholders on the register on 11 March 2016. The ex-dividend date will be 10 March 2016.

The Company has agreed an additional £40m secured debt facility with Canada Life. This facility will be secured against four forward committed assets to be drawn down at the time of practical completion of those assets.