Unite Regulatory News (UTG)

THE UNITE GROUP PLC

("UNITE" / "Group" / "Company")

Interim Management Statement

CONTINUED STRONG PERFORMANCE, EXCELLENT PROGRESS IN

FINANCING AND DEVELOPMENT

The UNITE Group plc, the UK's leading developer and manager of student accommodation, today publishes its interim management statement for the period 1 July to 15 November 2013.

Highlights

· Strong lettings performance for the 2013/14 academic year with average occupancy of 98% (2012/13: 96%) and in addition on track for 3% rental growth for the full year.

· Marketing has commenced for the 2014/15 academic year with positive early traction supportive of similar levels of occupancy and rental growth for 2014.

· Continued elevated levels of investment activity in the student accommodation market with £1.65 billion of transactions concluded in the year to date.

· Development programme is progressing well. LSAV London pipeline is 65% allocated and three regional development opportunities are now held under lock-out agreements, equivalent to 75% of target activity following the placing in June. The first of these projects is expected to be contractually secure before year end.

· Planned OCB joint venture realisation progressing in line with our expectations.

· Further strong progress in financing activity. Convertible bond issue in October raised £90 million, USAF bond issue completed in November raising £185 million and the Group's see through average cost of debt has fallen to 4.8% from 5.3% at 30 June.

Mark Allan, Chief Executive of The UNITE Group, commented:

"UNITE continues to perform strongly in all areas. Demand for our accommodation is very high, reflecting the quality of service provided, and we are firmly on track to deliver a strong financial performance for the full year, in line with the Board's expectations.

Our financial position is stronger than ever and we are making excellent progress in securing new development opportunities. These opportunities, together with our established brand, strong University relationships and positive market fundamentals, form the basis of our plans for long term sustainable growth."

Operations - sales, rental growth and profitability

Occupancy across the portfolio is 98% for the 2013/14 academic year and, as previously advised, we expect average rental growth across our portfolio for the full year to be 3%, in addition to the occupancy improvement. Performance in all key markets has been strong although there has been some continued disruption in pockets of the London market as new competing supply is absorbed. This is consistent with our experience over the past 12 months and we expect this to stabilise over the next couple of years as demand continues to grow and the level of new supply reduces. Less than 10% of our total investment portfolio is affected by this disruption.

Marketing for the 2014/15 academic year commenced in early November. Our proposition supports our view of 3% average rental growth for 2014/15, in line with the current year, and early bookings activity has been encouraging and supportive of targets. Customer satisfaction remains strong and we are making further improvements in our use of digital and social platforms to support portfolio investment and front line management activity, engaging with students more effectively through their preferred channels.

Development activity

The development of UNITE's scheduled 2014 completions is progressing in line with plan and our targeted 2015 completions will commence on site shortly.

Longer term we continue to make good progress with our LSAV London development pipeline, in which UNITE has a 50% stake. In September, the joint venture secured a new site and outline planning consent for around 700 beds in Wembley Park, targeted for 2016 delivery. Together with the earlier acquisition of sites in Angel Lane, Stratford (2015 completion) and Islington (2016 completion), approximately 65% of LSAV's target development pipeline has now been secured. Land and build costs in London continue to show signs of inflation but, based on current activity, we expect to secure the remainder of LSAV's target pipeline in 2014 in line with target returns.

We are also making good progress in deploying the proceeds from our share placing in June into a highly selective regional development programme. We have now secured three prospective projects under lock-out agreements and are proceeding towards exchange of contracts over the next few months. Together, the three prospective projects would account for approximately 75% of our planned regional development programme and all are supportive of our target returns of 9.5% - 10% yield on cost.

Following our recent financing achievements our planned development activity, including both LSAV and our regional programme, are fully funded; all required equity and debt finance is in place. We continue to expect this development activity to contribute substantial growth in future earnings and net asset value per share.

Yields and asset disposals

The investment market for student accommodation assets continues to mature with approximately £1.65 billion of transactions concluded year to date, including significant sales of former Opal assets (a predominantly regional direct let portfolio being sold in parts out of administration). Firm yield evidence is not yet available for the Opal transactions but the level of bidding competition for the assets was strong.

We expect investor appetite for the student accommodation sector to remain elevated in 2014 although it is also likely that the volume of stock offered for sale will remain high, particularly following the closure to redemptions of two regionally-weighted retail investor funds in the sector. Overall we expect investor demand to exceed the supply of available stock meaningfully but it is currently too early to establish the extent of any positive impact on yields in the year ahead.

As set out with our interim results in August, we have taken the decision, alongside our joint venture partner OCB, to liquidate our OCB joint venture via an orderly sale of its three assets. The disposal is proceeding in line with plan and we expect to conclude a sale in the first few months of 2014, following which we intend to invest our share of proceeds in acquiring units in UCC, our London focussed joint venture with GIC RE. Certain non-core asset disposals are taking longer to conclude than anticipated and we now expect to have sold approximately £50 million of non-core assets by the year-end, down from previous guidance of £75-100 million, with the remaining planned disposals deferred into 2014, although our view of realisable value remains unchanged.

Financing

Financing activities throughout the period have succeeded in strengthening the Group's balance sheet, diversifying sources of funding, extending the maturity and lowering the cost of debt. Of particular note were our £90 million issue of unsecured convertible bonds and our second long term bond issue in USAF.

The convertible bond matures in 2018 and has a coupon of 2.5% per annum. The bonds will, subject to meeting certain conditions, be convertible into fully paid ordinary shares at a conversion price of £5.10, a 41% premium to our last reported NAV per share. The proceeds provide the balance of funding for the Group's regional development programme. As a result of the transaction, the Group benefits from a £9.3 million (5 pence per share) uplift in Adjusted NAV representing the value of the equity component of the transaction. However, following the transaction, the Group has repaid various senior debt facilities with near term maturities and cancelled associated swaps, crystallising a charge of £6.5 million (4 pence per share) which had previously been expected to arise in 2014. Consequently the impact of the convertible issue on 2013 NAV will be broadly neutral.

USAF's second bond issue, arranged on 5 November, was a £185 million 12 year secured bond fixed at a rate of 3.9%, a spread of 112 basis points over the reference gilt. The proceeds have been used to repay secured debt that was due to mature in the next two years and as a result USAF incurred swap break costs of £6 million relating to the debt that was repaid. UNITE's share of these swap break costs was £1 million.

As a result of the above activity the Group's weighted average see through cost of debt has now fallen to 4.8% on a pro forma basis from 5.3% at 30 June 2013 and 5.5% a year earlier. The proportion of the Group's debt that is unsecured has increased to 41% and the see-through weighted average loan maturity stands at 5 years. The remaining financing priority for the Group now relates to the replacement of £225 million of senior debt in UCC which is scheduled to mature in 2014. This financing is in process and is expected to conclude in early 2014.

Summary and outlook

We remain focused on three clear strategic priorities; to continue growing recurring profit and cash flow through the delivery of rental growth, portfolio growth and cost savings; to establish a sustainable capital structure; and to enhance our portfolio quality further through our highly selective development activity and non-core asset disposal programme. We have made excellent progress against all three of these priorities, which we expect to be reflected in our 2013 results.

The delivery of these objectives is enabling the business to generate deeper and more effective brand loyalty, establishing a clear leadership position in the sector which resonates with students, their parents and Universities. This will be crucial to the Group's longer term success.

ENDS

Conference Call

There will be a conference call for analysts and investors at 09.00am today. To participate in the call, please dial:

Dial in No: 44-208-515-2313

Event title: UNITE Group Interim Management Statement Conference Call

For further information, please contact:

Notes to editors:

About The UNITE Group

The UNITE Group is the UK's leading developer and manager of student accommodation, with a business model that focuses on two core areas:

1. Development and Asset Management: UNITE undertakes the acquisition, planning and development of purpose-built student accommodation in the UK. Through the continuous assessment of quality and location of its investment portfolio, UNITE is well positioned to deliver value-adding strategies to those assets where further opportunities are identified. Working on behalf of its partners, UNITE acts as Fund Manager for the UNITE UK Student Accommodation Fund in which it owns a 16.3% share. UNITE also manages a number of Joint Venture partnerships.

2. Professional property management: UNITE is home to 42,000 students in over 130 properties across 23 of the UK's strongest university cities, and has consistently proven high occupancy levels across its portfolio.

The Group works closely with higher education institutions in order to deliver high quality, well-located student accommodation at affordable prices in strong higher education markets. In 2012, UNITE won the South West Business in the Community (BITC) Carbon Reduction Award for its environmental initiatives and was recognised as the residential regional sector leader for sustainability by the Global Real Estate Sustainability Benchmark (GRESB).

Founded in 1991, UNITE is a FTSE 250 company listed on the London Stock Exchange (UTG). For more information, please visit www.unite-group.co.ukor www.unite-students.com.