UNITE Group plc · LSE:UTG
UNITE — Merger or Acquisition (September 2012)
16 slides from UNITE's merger presentation, September 2012
Slide 1: Establishment of London Student Accommodation Joint Venture (LSAV)
Establishment of London Student Accommodation Joint Venture (“LSAV”) September 2012
Slide 2: Key features of transaction
Key features of transaction • Extension of existing London-focused UCC joint venture to September 2022 - portfolio repositioning and financing programme • New 50/50 London JV (“LSAV”) established, September 2022 maturity - £330 million development capex planned • Forward sale by UNITE to LSAV of two
Slide 3: Impact and rationale
Impact and rationale • Positive financial impact - substantially accretive to NAV and EPS by 2015 - modestly accretive in near term - improved risk profile and quality of returns - funding future development commitments through forward sales minimises earnings dilution • Clear strategic rationale -
Slide 4: Strategic fit
Strategic fit • Continue to target low double-digit total returns on NAV - more balanced returns profile (income, capital growth, development) - modest associated risk • LSAV closely aligned with stated strategic priorities Strategic Priority • LSAV impact 1. Grow recurring earnings • Longer term gr
Slide 5: London development opportunity remains compelling
London development opportunity remains compelling • Demand/supply imbalance remains FT Students Seeking Accommodation acute Central London RoUK (Total: 220,000 students) 7% - supply ratio of 1:4 purpose built EU (non-UK) 13% beds to full time students seeking 17% accommodation compared to UK 61% 26%
Slide 6: Extension of UCC Joint Venture
Extension of UCC Joint Venture • Extension to September 2022 UCC at 30 June 2012 • Target c.£100million disposals by 2016 Summary Balance Sheet £m - proceeds used to part de-leverage Property portfolio - London 343 - Edinburgh 34 - UNITE to use share to increase stake 377 • UCC promote payable on la
Slide 7: LSAV New 50/50 Joint Venture
LSAV New 50/50 Joint Venture • Primary London development vehicle until 2016 - right of first refusal over UNITE’s London opportunities - £330m target investment over 3 years (3,500-4,000 beds) - portfolio operational by September 2017 - mutual option to extend investment programme by £200m • Acquis
Slide 8: Forward sale of assets
Forward sale of assets • Two assets sold to new JV on forward commitment basis - North Lodge, Tottenham Hale (2012) - Stratford City (2014) • Sale price agreed at £129million - In line with previously disclosed valuations on completion - Subject to 90% of forecast annual NOI being contracted prior t
Slide 9: UNITE UCC option
UNITE UCC option • UNITE option to increase UCC stake to Indicative financials 50% by 2016 £m - Quality portfolio with asset management potential Cost of additional 20% stake 30-35 - Largely self-funding Funded by : • Range of options: UNITE equity share of UCC asset 12-14 disposal proceeds - Share
Slide 10: UNITE's role as manager
UNITE’s role as manager • LSAV fee basis consistent with UCC UCC LSAV Property management 6.2% of rental income 6.2% of rental income (specified on-site services) Asset Management 50bps of GAV 50bps of GAV Development Management 5% of installed cost 5% of installed cost Performance fee 20% over 15%
Slide 11: Indicative impact on UNITE see-through balance sheet
Indicative impact on UNITE see-through balance sheet Jun-12 Build out Sale of forward Future LSAV UCC Pro forma Contracted Pro forma committed commitments pipeline extension² before /planned plus UNITE (50% share)¹ (50% share) disposals disposals disposals development pipeline £m £m £m £m £m £m £m £
Slide 12: Indicative earnings impact
Indicative earnings impact Pro forma including completion of North Lodge and Stratford £m Sale of 50% of North Lodge NOI (1.4) Sale of 50% of Stratford NOI (2.8) Reduced leverage in LSAV 2.5 Increased fee income 1.1 50% share of new development pipeline NOI 14.9 Share of interest on debt to fund dev
Slide 13: Summary
Summary • Significant joint venture with highly credible partner - Increases firepower for development without stretching balance sheet - Extends horizon of UCC joint venture • Positive financial impact - Improved visibility of financing and returns - EPS accretive - NAV accretive • Reinforces UNITE
Slide 14: Appendices
+ ‘ Appendices ‘se : i \. The heart of student living UNITE
Slide 15: North Lodge, Tottenham Hale – 528 beds
North Lodge, Tottenham Hale – 528 beds 14
Slide 16: Stratford, City – 951 beds
Stratford, City – 951 beds 15