21st Nov

UNITE Retail Bond Confirmed

As predicted by Retail Bond Expert on 17th November UNITE Group has become the latest property company to seek to diversify its funding structure by launching a retail bond on ORB. The UK’s largest developer and manager of student accommodation is aiming to raise £50m-£75m from private investors, who will receive an annual coupon of 6.125%, payable twice yearly. 

The offer period begins on November 21st and is scheduled to close on December 5th with the bonds maturing in June 2020. Mark Allan, CEO of Unite Group, said: "We are delighted to announce the launch of Unite's debut retail bond. This is an exciting market at the moment, as demonstrated by the significant private investor appetite for bonds issued by well established companies with strong track records of cash generation and positive market fundamentals." 

Since the property crash Unite has been working to transition itself from being primarily a developer to being a more traditional property company and the higher than average coupon on offer reflects the company’s position towards the upper end of the risk spectrum when compared with its peer group. The Group recently reported that occupancy for the 2012/13 academic year stood at 96%, with rental growth expected to be around 3%. 

Despite the disruption to university admissions caused by various government policy changes, Unite said it remains on track to deliver against its strategic objectives for 2012 and overall the group expects high occupancy, tight cost control, new development completions and rental growth to underpin its prospects. Non-bank lending currently accounts for around 30% of Unite's debt and the Group is seeking to increase that proportion; Allan reports that its loan-to-value ratio will fall to just over 50 per cent by the end of the year. The bond is unsecured, but Unite has committed not to let its net loan-to-value exceed 75%. 

Unite Group shares closed the day down 0.3% at 266p.

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