The Unite Group plc, the UK's largest developer and manager of student accommodation, and GIC Real Estate ("GIC RE"), the real estate arm of the Government of Singapore Investment Corporation, have announced the extension of their existing joint venture (Unite Capital Cities, "UCC") and the creation of a new partnership through which Unite will undertake its next phase of London development activity (the London Student Accommodation Joint Venture, "LSAV").
The transaction, which is expected to be earnings enhancing and boost net asset value aims to reduce the Group's leverage. The deal includes the following components:-
From a strategic perspective the transaction allows Unite to accelerate its investment in London development activity at a time when it believes potential returns are particularly compelling and the scale of opportunity is greater than Unite could fund alone. Furthermore, the forward commitment sale of two properties to LSAV will allow the Group to realise meaningful development profit and reinvest capital into development activity without diluting earnings.
Unite and GIC can agree to extend the development programme by a further £200 million once the existing capital has been committed.
Mark Allan, Chief Executive of Unite, said, "This transaction is a further important step for Unite and is consistent with our objectives of growing recurring earnings, undertaking accretive development activity without stretching the Group's balance sheet and reducing leverage over time. It also gives us increased firepower in the London market at a compelling time, allowing us to increase our presence and investment in London, our key target market, where we now expect to have over 13,000 bedrooms within five years”.
“Successfully extending and expanding our joint venture relationship with such a high calibre partner as GIC is testament to the track record that Unite has built and further demonstrates the continued appeal of the UK student accommodation sector to investors around the world."
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