Unite has secured £226m of new debt for its Capital Cities joint venture with GIC and plans to up its stake in the partnership.
The student accommodation developer and manager has agreed two separate facilities from Legal & General – from which Unite already has a £121m loan – and the Royal Bank of Scotland.
Funding was completed on 19 December.
L&G’s Commercial Lending business has provided the £385m joint venture with the Singapore sovereign wealth fund with a £149m, nine-year loan at a 55% loan to value ratio and a fixed rate of 4.3% per annum.
It follows the insurance giant’s debut UK lending deal in May 2012 when it provided the group with a new £121m, 10-year facility at 60% LTV with a fixed rate of 5.05%.
L&G Commercial Lending arranged the loan and acted as facility agent.
The five-year RBS facility for £77m is at an initial LTV of 68% and an average cost of 3.3% per annum. Both Unite and GIC are existing RBS clients.
The debt is understood to replace an existing facility from a syndicate of banks led by HSH Nordbank that was due to mature in this year.
The transaction reduces UCC’s cost of finance from 5.5% to 4%, generating annual savings for the 14-strong jv of around £3.5m. These savings will offset swap break costs of £7.1m, of which £2.1m is Unite’s share.
Following the transaction Unite’s see-through cost of debt falls by 13 basis points to 4.7%. The firm also has a weighted average loan maturity of six years with two-thirds of the debt provided by non-bank sources.
Unite currently owns a 30% stake in the £385m jv, which has assets in London and Edinburgh.
It will increase this holding to around 34% as part of the strategy to consolidate Unite’s two joint ventures with GIC by reinvesting a circa £7m performance fee received from UCC for completing this deal.
The £7m performance related fee represents the net receivable by Unite that will be recognised as a one-off item in adjusted earnings in the group’s 2013 results. It excludes Unite’s share of the swap break cost.
Unite chief financial officer Joe Lister said: “The completion of these new £226m facilities concludes a year in which we have made real progress extending debt maturities, reducing the cost of financing and securing high-quality, long-term funding partners.”
Steve Boyle, real estate lending manager at Legal & General, said: “Representing a further sizeable loan to the student accommodation market and allowing UNITE and ourselves to build on our already strong relationship, our familiarity with the sector enabled us to provide keenly priced finance within a tight timeline, we believe.
“Forming part of our annuity portfolio, this investment provides long-term liability matching qualities and will be used to pay customers’ pension annuities.
“It is further evidence of L&G’s desire to make a difference in the wider world of accommodation and is merely one of a number of residence-based projects across different sectors that we have under consideration.”
Andy Lancaster, regional managing director for real estate finance at RBS, said: “While both UNITE and GIC are existing clients of RBS, this is our first transaction with UCC which combines the two entities.
“The transaction demonstrates our continued appetite for the corporate real estate sector generally, and for the purpose-built student accommodation subsector in particular.”
bridget.oconnell@estatesgazette.com
