Unite Group buying Liberty Living – Student accommodation business, Unite Group, is to buy rival, Liberty Living in a £1.4bn deal ( £0.8bn in cash and £0.6bn in shares). The vendor is Liberty Living Holdings Inc., a wholly owned subsidiary of Canada Pension Plan Investment Board. The Liberty Living portfolio comprises 24,021 beds and was independently valued at GBP2.2 billion as at 31 May 2019. The Canadians will retain a 20% stake in the business (72.6m shares valued at 827p each on an EPRA NAV basis). Unite proposes to place 26,353,664 new ordinary shares, raising £240m to help fund the deal..
82% of the Liberty Living portfolio is aligned to high and mid-ranked universities; 51% is let for the 2018/19 academic year with a 6 year WAULT. The portfolio also gives Unite exposure to new Russell Group universities in Southampton and Cardiff.
Debt reduced over time
LTV for the enlarged group immediately following completion is expected to be approximately 40% with a target of 35% following planned disposals. They plan to sell GBP150-200 million of property a year, over the next three years. They want to ensure that the group has the capacity to maintain c.2,000 bed annual development run-rate. Unite plans to maintain its 85% dividend payout ratio.
Richard Smith, chief executive officer of Unite, commented: “This is a transformative acquisition which brings together the best of two companies with a wealth of expertise and experience in delivering for students and university partners. By combining two highly complementary portfolios, the enlarged group will be well positioned to meet the growing need for affordable, high quality student accommodation in university towns and cities where demand is strong. This, combined with our best-in-class operating platform, will mean more choice for universities and an enhanced service and welfare offer for students. Backed by a conservative capital structure, this acquisition accelerates and extends our earnings growth and provides opportunities to further enhance total shareholder returns.”
UTG : Unite Group buying Liberty Living