UNITE, the UK’s largest developer and manager of student accommodation, has secured a £121m, 10-year debt facility with Legal & General.
With headroom in its other existing facilities, the loan allows the Bristol-based group to pay down its remaining facilities that mature next year, extending its next refinancing event until May 2014. Following the refinancing, the group’s weighted average debt maturity increases to three and a half years.
The all-in cost of the new borrowing, which is at 60% loan-to-value, is fixed at 5.05% for the duration of the loan which will amortise to £109m – 55% loan-to value, by 2022.
The deal represents Legal & General’s first venture into real estate debt financing. It forms part of UNITE’s strategy of introducing new lenders to the group, particularly from non-bank sources, and brings the total amount of new debt raised in 2012 to more than £200m.
Chief financial officer Joe Lister said: “Securing this new, long term facility with a lender of Legal and General’s quality is further testament to the strength of UNITE’s business and marks an important step for the group. We have now arranged over £400m of new debt facilities for UNITE and its funds in the last 12 months.
“Controlling gearing levels and extending debt maturities remains a key priority for UNITE and we will continue to work closely with our financing partners to further strengthen the group’s financial position over the year. Our long track record and recent successes in raising new finance give us continued confidence for the future.”
Ashley Goldblatt, head of commercial lending at Legal & General Investment Management, said: “Having looked at the market in depth over the last year and with an experienced team in place, this first, sizeable, complex transaction answered our objectives in developing this area of our business. UNITE represents a market leader, with a strong track record, operating in a resilient but non-traditional sector of the real estate market.
“Additionally we have proven ourselves capable of taking a more flexible approach to lending, as is seen in the 10-year loan term. Traditionally insurance companies have restricted themselves to long term loans, of 15/20 years or more, that match their long dated liabilities, whereas those banks that are still willing or able to lend are only prepared to do so on short terms. This is a space that we feel comfortable in filling.”
UNITE shares rose 1.5p to 196.75p.
