Legal & General Property has completed the £91m forward-funding purchase of a 1,100-bed student flats scheme in Southampton from Terrace Hill.
The scheme has been prelet in its entirety to the University of Southampton on a 38-year lease without breaks and with RPI linked rental uplifts.
Construction has already started on site, with handover to the university planned for August 2014.
Terrace Hill is developing the project in joint venture with Osborne Group, which is also the building contractor.
Once completed, the development will comprise three towers ranging in height from eight to 16 storeys positioned around a central piazza.
In addition to the student accommodation, the scheme includes a shop, gym and learning centre at ground floor level.
L&G director of investment and development Gordon Aitchison said: “This represents one of four significant student accommodation fundings, backed by major universities, that have been undertaken by LGP in the last 18 months, with similar deals secured with the University of Arts London, Imperial College and the University of Greenwich.
“As illustrated by Southampton and the three London deals, our focus remains on funding high-quality developments that are backed by premium universities and located in first-class locations.”
On completion of the deal, Terrace Hill has reduced its net debt from £47.2m at 30 September 2012 to £31.7m and the net gearing will reduce from 78.2% to 52.6%.
Chief executive Philip Leech said: “The completion of this substantial and prestigious sale and forward funding agreement with Legal & General Property represents significant progress for Terrace Hill and for this project.
“We have used part of the proceeds of the sale to immediately reduce the debt secured against a number of our development sites, and the balance will be earmarked for investment in new developments in the foodstore and central London sectors, where we continue to see low risk and high margin opportunities.”
DTZ and Strutt & Parker advised Terrace Hill and Osborne; Knight Frank acted for L&G.
nick.whitten@estatesgazette.com
