Student housing developer Unite launches £125m bonds

UK student accommodation developer and manager The Unite Group has launched and priced £125 million of bonds issued by the Unite UK Student Accommodation Fund (USAF).

The bonds have been launched under USAF’s existing debt funding platform, which was established in June 2013.

The £125 million is a further issuance under the 3.921 percent bond due June 2025. The new issue is being raised at a premium, generating total proceeds to USAF of £137 million and reflecting an implied yield of 2.744 percent, Unite said. The yield represents a spread of 1.45 percent over the reference gilt yield.

The proceeds will be used to repay secured debt that is due to mature in the next year, as well as to fund USAF. The bonds are expected to be rated A (sf) by Standard & Poor’s Global Ratings and Asf by Fitch Ratings, in line with USAF’s existing bonds issued in 2013, at a loan-to-value of 47 percent.

Unite said that the funds raised increase USAF’s weighted average debt maturity from seven years at the start of 2016 to eight years and result in an overall reduction in its total cost of interest from 3.5 percent to 3.4 percent since the start of the year.

USAF has a portfolio of 78 UK properties, valued at more than £2.1 billion. The properties are located in 24 university towns and cities across the UK. Unite is the largest investor in USAF, with a 23 percent holding.

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