Student accommodation group targets further growth after £500m finance deal

One of the largest providers of student accommodation in Birmingham has secured new £500m debt facility.

Unite Group said the new five-year provision, along with an investment grade credit rating, would deliver reduced financing costs, a greater level of flexibility and an ability to diversify sources of funds to support ongoing growth.

The new debt facility offers additional financing headroom for the company’s development pipeline and greater financial flexibility. The new facilities will increase the debt maturity by 12 months, and with an initial margin of 145bp, reduce the average cost of debt, when fully drawn, to 3.9% from the current level of 4.2%.

The investment grade corporate rating of BBB has come from Standard & Poor’s and Baa2 from Moody’s. It said this reflected the strength of Unite’s capital position, cash flows and track record.

The new loan facilities comprise a five-year £350m revolving credit facility and a one-year £150m bridge loan. These replace a £280m secured debt facility.

The group, which bought a 418-bed scheme in Selly Oak in May as part of a £56m deal, intends to replace the bridge loan during the first half of 2018 with longer term unsecured debt to further extend its maturity profile and diversify sources of finance.

The new facility has been provided by a banking syndicate comprising HSBC and Royal Bank of Scotland. Rothschild & Co acted as rating advisor to Unite.

Joe Lister, Chief Financial Officer of Unite Group, said: “I am excited that we have taken this step to a rated, unsecured debt structure. The rating demonstrates the robustness of our business and the new facility will support the delivery of our existing strategy. The reduction in the cost of debt will contribute to the earnings growth trajectory over the next few years.”

Andy Armstrong, Head of Real Estate, UK, Europe and Middle East at HSBC, added: “HSBC is delighted to continue its long term relationship with Unite. The move to a rated unsecured debt structure is a key step for Unite as it delivers on its strategy.”

Paul Coates, managing director, Real Estate Finance for RBS, said: “RBS has supported Unite for more than 20 years and we are pleased to continue backing them with this new debt facility. Unite’s achievement of an investment grade rating is an important development for the group as well as the wider purpose-built student accommodation market as it continues its growth into an established asset class.”

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