Unite plans fundraising to exploit rare market opportunity

13th Jun 2013 08:27

Student accommodation developer Unite has set out plans to exploit the abnormally high yields available for certain regional development projects. Unite has proposed to raise £50m, the equivalent of almost 10% of its existing share capital, to take advantage of the historically low land and building costs being coupled with a "significant demand/supply imbalance".The FTSE 250 group said it expects the investment to enhance net asset values (NAV) from 2014 onwards and enhance earnings per share from 2015 onwards.Unite explained that two of its existing developments in Bristol and Huddersfield were examples of the 10% forecast yield on cost that it could expect to earn from employing the funds on similar schemes, compared to current investment yields of approximately 6.5% to 7% and its anticipated marginal cost of debt of approximately 4% to 4.5%.The proceeds of the institutional fundraising would begin to be deployed this year to fund its "highly targeted" series of regional developments amounting to around 2,500 beds, with funds fully allocated by the end of 2014 and fully invested by the end of 2016.Unite has identified a number of of cities where "compelling development opportunities" exist due to both strong student accommodation demand and lack of existing supply.The total total development cost has been estimated at close to £125m, which the group expected fund from the proceeds of the placing and senior debt, though it stressed that it would do this without increasing its debt leverage. News of the dilutive placing sent the shares in Unite down 7.8% to 320.4p at 09:00 on Thursday. OH