Unite's accommodation fund launches £125m bond issue

Student accommodation developer and manager The Unite Group announced on Friday the launch and pricing of £125m in bonds issued by the Unite UK Student Accommodation Fund (USAF), under its existing debt funding platform established in June 2013.

The FTSE 250 firm said the USAF is the largest specialist student accommodation fund in the UK, currently holding a portfolio of 78 properties valued at more than £2.1bn, located in 24 university towns and cities with more than 26,800 beds.

Unite is the largest investor in USAF with a holding of 23%.

The £125m is a further issuance under the existing 3.921% bond due June 2025.

It is being raised at a premium generating total proceeds to USAF of £137m, reflecting an implied yield of 2.744%.

Unite said the proceeds will be used to repay secured debt that is due to mature in the next year, and to fund further growth in USAD.

The bonds are expected to be rated A by S&P Global Ratings and Asf by Fitch Ratings, the company claimed, in line with USAF’s existing bonds issued in 2013, at a loan-to-value of 47%.

"The launch and pricing of the new bond builds on USAF's robust financing platform at attractive pricing levels,” said Unite Group chief financial officer Joe Lister.

“Maintaining a strong investment grade rating provides continued benefits in giving access to longer term finance, at competitive rates from a range of capital sources,” he added.

The funds raised will extend USAF’s financing platform, increasing its weighted average debt maturity from seven years at the start of the year to eight years, whilst also resulting in an overall reduction in its total cost of interest from 3.5% at the beginning of the year to 3.4%.

Unite’s share of the new debt represents around 4% of its total net debt on a see-through basis as at 31 December, the company said.