UK-based purpose-built student accommodation developer and manager Unite Students has extended its joint venture with Singapore’s sovereign wealth fund GIC by ten years to September 2032.
The company also announced an agreement to settle its performance fee from the London Student Accommodation Joint Venture (LSAV) in cash during Q4 2021.
LSAV was established in September 2012 with a ten-year term maturing in September 2022.
”Unite and GIC have agreed the ten-year extension following a successful partnership that has delivered strong development returns and growth in rental income,” said the company in a statement.
Both Unite Students and GIC will retain a 50% equity stake in LSAV, which had net assets of £814 million as at 31 December 2020 (Unite share: £407 million).
Unite’s performance fee will be paid in cash in Q4 2021, based on valuations and cashflows to 30 September 2021. Unite’s share of the performance fee is expected to be approximately £30-40 million, of which £9.2 million had already been recognised in Unite’s balance sheet as at 31 December 2020. Unite’s remaining share of the performance fee is expected to be approximately £20-30 million (5-8 pence per share), to be recognised in 2021. The performance fee will be a capital receipt and is not included in the Group’s EPRA EPS guidance of 27-30 pence for 2021. The performance fee will reduce LTV by just under one percentage point on a pro forma basis.
Unite will be entitled to receive a performance fee from LSAV equivalent to 12.5% of returns in excess of 8% per annum in the period from 2021 to 2032. In addition, the Aston Student Village part of the joint venture with GIC will be merged with LSAV, further simplifying the Group’s funding structure. Unite will continue to act as property and asset manager for the duration of the new joint venture on existing terms and fee levels.
As part of the extended relationship, Unite and GIC will explore opportunities to expand LSAV, through potential acquisitions of investment assets.
“I am delighted to agree a long-term extension of our LSAV joint venture with GIC. The transaction provides a strong endorsement of our sector-leading operating platform from GIC, a high calibre investment partner with whom Unite has enjoyed a successful relationship since 2005. The realisation of the LSAV performance fee in 2021 reflects a combination of strong development returns and rental growth by LSAV’s London portfolio since 2012,” said Richard Smith, Unite Students Chief Executive.