Unite Regulatory News (UTG)

22 Aug 2008 07:00



Release date: 22 August 2008

On behalf of: The UNITE Group plc ("UNITE" / "Group")

THE UNITE GROUP PLC

UNITE GROUP ANNOUNCES £178.6 MILLION ASSET SALES

The UNITE Group plc, the UK's largest manager of branded student accommodation, today announces that is has exchanged contracts, unconditionally, on the sale of eleven operational direct let assets for a total cash consideration of £178.6 million, 2.8% above the assets' December 2007 valuations. The asset sales have been made in two separate transactions to different purchasers and have been made both on UNITE Group's own behalf and on behalf of the UNITE UK Student Accommodation Fund ("USAF"). The transactions deliver three key benefits:

An immediate reduction in the Group's gearing;

An increase in investment capacity within USAF;

Clear evidence supporting student accommodation valuations.

In the larger of the two transactions, UNITE Group is selling nine purpose-built student accommodation properties, comprising 3,810 beds in four markets (Southampton, Cardiff, Preston and Stoke), for £152.0 million to Liberty Living, the student accommodation arm of Brandeaux Fund Management. Of the nine properties, four are owned by UNITE Group outright (1,970 beds) and five are owned by USAF (1,840 beds).

The cash consideration applicable to the UNITE Group-owned assets being sold is £91.1 million, which compares to a 31 December 2007 valuation of £88.4 million for those assets and reflects a net initial yield of 5.7%. Completion is set for 28 August 2008 and the proceeds will be used to pay down existing debt and be reinvested into the Group's development activities over time, as attractive opportunities arise.

In the second transaction, USAF is selling two properties in Huddersfield comprising 627 beds to Swanbourne for a cash consideration of £26.6 million. This sale is being conducted on behalf of USAF and completion will occur no later than December 2008.

As a result of both transactions, USAF will receive a total cash consideration of £87.5 million, representing a net initial yield of 5.8% and compared to a 31 December 2007 valuation of £85.3 million for those assets. These proceeds will create additional investment capacity within USAF which will be applied in acquiring further assets from UNITE Group over time.

Following completion of these sales, UNITE Group will no longer have an operational presence in any of the five cities mentioned. This follows the earlier sale of smaller non-core assets and cessation of operations in Salford, Luton and Aberystwyth, and is consistent with the Group's stated strategy of focusing its capital and operations in larger and high-growth markets, notably London.

Commenting on the transaction, Mark Allan, Chief Executive of UNITE Group, said:

"These sales, at prices above the December 2007 valuations, provide strong evidence of the resilience of the student accommodation sector at a time when more general property values are under significant downward pressure. The sales are consistent with our stated strategy of focusing our capital on higher growth markets and they provide the Group with significant additional funds at a time when we expect attractive opportunities to emerge."

Ends

About UNITE Group

UNITE Group is the UK's largest manager of branded student accommodation, with a business model that focuses on being a developer and co-investing asset manager. In the 08/09 academic year, UNITE Group will operate accommodation for some 36,700 customers throughout 23 key university towns and cities across England, Wales and Scotland. UNITE Group undertakes the planning, development and management of sites, often working closely with the universities and colleges, in order to deliver high quality, well-located student accommodation at affordable prices in strong higher education markets.

Together with its development pipeline, UNITE Group manages a property portfolio valued at c. £2.9 billion on completion. UNITE Group's strategy, set out at the beginning of 2007, aims to double the size of its UK business by 2012.

With student rents resilient to economic cycles, and the continued growth in student numbers, especially from overseas, UNITE Group developments typically show high occupancy levels in a market where there is a general shortage of quality supply.

Founded in 1991, UNITE Group is listed on the London Stock Exchange (UTG) and is a FTSE 250 company.

Previous Asset Sales in 2008

In May UNITE Group announced planned asset sales of £54.0 million. These transactions followed the redemption of the UNITE Finance One ("UFO") bonds in October 2007 which, together with the creation of the UNITE UK Student Accommodation Fund ("USAF"), has enabled UNITE Group to progress towards a developer and co-investing asset manager model and to adopt a more proactive asset management strategy designed to deliver enhanced shareholder returns. This includes both the sale and leaseback of core operational properties let under long-term agreements to Universities and the sale of non-core assets which no longer fit its strategic business plan.

UNITE UK Student Accommodation Fund

UNITE Group established a £1 billion UNITE UK Student Accommodation Fund at the end of 2006. The principal objectives of the Fund are:

to release capital that is tied up in mature, stabilised investment assets for investment into higher added value development activity;

to provide UNITE Group with more growth capital in the medium term; and

to diversify UNITE Group's sources of income by providing a new, valuable revenue stream arising from management fees from the Fund.

The Fund helped transform UNITE Group's business model to that of a developer of new purpose-built student accommodation and manager of funds which own student accommodation properties operated by UNITE Group and in which the Company has a significant minority stake.

See our websites:

Investors and corporate: www.unite-group.co.uk

Students: www.unite-students.com

Graduates: www.livocity.com