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£58 million for student accommodation

Monday, October 06, 2008

Catherine Deshayes

Student accommodation provider Unite has had the third closing of its UK Student Accommodation Fund raising £58 million of equity from institutional investors...

It completed the equity raising last week and of the total £58 million commitment, £26 million was raised from four new investors, taking the total third party equity commitments in the fund to £428 million.

Unite said it expects the new equity to be drawn down later this year and, when it is drawn, it will be priced at a small premium to the prevailing net asset value of the fund at the date of draw down.

During the fundraising period, it said that there had been secondary trading in fund units totalling around £40 million between existing investors at a small discount to NAV. Unite said these trades 'likely had an effect on the final demand for the new fundraising'.

Following the third closing and including existing cash balances and borrowing facilities at the 55 per cent target gearing level, the fund has the fire power to buy £380 million of assets.

Around £225 million will be used to buy properties from Unite before the end of the year and Unite will use the proceeds from this anticipated sale to reduce its gearing and maintain its stake in the fund at 20 per cent.

The fund's estimated net asset value as at 30th September 2008 was 100.12 pence a unit which is a 3.9 per cent decrease in the quarter predominantly due to a negative movement in the market value of interest rate swaps held by the fund.

The fund's property portfolio was independently valued at £769 million.

Joe Lister, Unite's Chief Financial Officer, said, "We are pleased to have concluded this further round of fundraising in extremely challenging market conditions.

"The new equity raised, at a small premium to net asset value, increases the fund's surplus investment capacity to £380 million, which it will use to acquire student properties from Unite later this year and in 2009," Mr Lister added.

Source: www.propertyweek.com