8th Aug 2005 07:00
Unite Group PLC08 August 2005 Date: 8 August 2005On behalf of: The UNITE Group plc ("UNITE")Embargoed until: 0700hrs The UNITE Group plcUNITE CLOSES SECOND STUDENT VILLAGE JOINT VENTURE The UNITE Group plc ("UNITE"), the UK's leading provider of studentaccommodation, today announces the formation of its second joint venture withLehman Brothers, the global investment bank, for the development and operationof a 968 bed student village in Leeds. UNITE and Lehman Brothers will own 51% and 49% respectively of the equity in thejoint venture, which is for an initial term of five years and will be deadlockedwith each party having equal voting rights and board representation. The jointventure partners have each invested in a special purpose vehicle to acquire,develop and hold the student scheme, with UNITE having satisfied itsconsideration through the transfer of the development land into the vehicle andLehman Brothers having satisfied its consideration with £3.4 million in cash.The development land has been independently valued at £3.7 million and UNITE hastherefore received £0.1 million in cash from the joint venture, resulting in itsnet equity contribution of £3.6 million. UNITE will also be fully reimbursedfor all costs incurred to date on the development and will record neither aprofit nor a loss as a result of the transaction. The student village, which is in Leeds city centre, is ideally located forstudents from both the University of Leeds and Leeds Metropolitan University aswell as Leeds College of Music and it will offer a broad range of accommodationand facilities. UNITE's partner contractor, Carillion, is currently on site andbuilding completion is anticipated in August 2006. The property is expected tobe worth £43.2 million on completion and will be let directly to students,generating an annual rent roll of £3.9 million when fully stabilised which,after deducting expected operating costs, equates to a net yield of 6.9%.Senior debt for the joint venture is being provided by Fortis Bank. In addition to its investment in the joint venture, UNITE will also retainresponsibility and receive a fee for the development and subsequent managementof the property. It will also receive a 'promote fee' if, on termination of thejoint venture, the actual returns achieved exceed targeted returns. The jointventure agreement contains customary exit provisions, which in the case of UNITEmay be subject to shareholder approval at the time of exit where relevant. The joint venture enables UNITE to further its strategy of growing its portfolioof owned and managed beds in target locations, whilst making the most efficientuse of its capital. UNITE expects to maximise the return on its equity investedthrough the receipt of development, management and promote fees as describedabove in addition to the anticipated development gains. Commenting on the transaction, Mark Allan, Group Finance Director for UNITE,said: "This joint venture builds on our first transaction with Lehman Brothers, closedlast year, and illustrates the continued investor demand in our sector. Itdemonstrates the strength of our relationship with Lehman Brothers and thesuccesses of our first joint development in Sheffield, which will open inSeptember this year. Leeds is an important market for UNITE and developing afurther 968 beds in the city underlines our confidence in the strength of thelocal market and our long term commitment to the Universities and Colleges inLeeds." ENDS Enquiries: The UNITE Group plcMark Allan, Group Finance Director Tel: 020 7902 5055Redleaf Communications Ltd Tel: 020 7955 1410Emma Kane Mob: 07876 338339Wendy Timmons Notes to Editors: • In April 2004, UNITE secured the first student village joint venture with Lehman Brothers, worth £45 million on completion. The 1,162-bed student village in Sheffield, known as The Forge, will be opened for the start of the 2005 academic year. • UNITE currently has three student residences in Leeds and on opening the new student village, UNITE will operate a total of 2,219 beds in the city. • Full-time student numbers in Leeds have grown by some 24% over the past three years. (Full-time Student numbers in Leeds 03 / 04: 47,066). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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