Unite plans to raise 100m pounds to speed regional plans

6th Mar 2014 14:48

Student accommodation group Unite has set out plans to raise a gross 100m pounds in a discounted placing and open offer to accelerate its regional development programme.The FTSE 250 company has set a price of 410p for the placing, which is a 9.3% discount to the 452p closing price on Wednesday and a 2.3% discount to its volume-weighted average share price over the last three months. A firm placing of £31m, underwritten by brokers JP Morgan Cazenove, Numis and Jefferies, has been agreed with certain institutional investors and will be followed by a placing and open offer to existing shareholders to drum up the remaining £69m.The company raised £50.2m in June placing last year, but has already committed roughly 70% of this to three new projects, in Newcastle, Edinburgh and Aberdeen, and is in negotiations to invest the rest. Unite said it believed the new fundraising would be "accretive to both earnings per share and net asset value (NAV) per share within two years and significantly accretive within three to four years without near term dilution". Perhaps more importantly, it added that spending the proceeds "will increase the group's recurring profits further as a result of accretive income returns and the group's operational gearing".As background, United pointed to the rate of growth in the supply of new student accommodation having fallen sharply in recent years, particularly outside London. Although there were 1.7m full time students registered with UK universities in the 2013/14 academic year, Unite said there were only around 500,000 purpose-built student bed spaces across the country, leaving a significant shortfall. Unite said it would put half the net proceeds in its own "highly targeted" developments in "select key university towns and cities" during the remainder of 2014 and with an expected completion in 2017. The other half will be used to acquire further units in USAF, a £1.35bn fund set up by Unite in December 2006 to invest in student accommodation assets around the UK.It plans to buy new units in USAF at a 0.7% discount to its net asset value at 31 December 2013 to increase Unite's stake from 16.4% to 22.0%, which would reduce USAF's leverage and should qualify the asset for Unite for REIT purposes.OH