Unite creates £194m joint venture with Oasis Capital Bank

The Unite Group, the UK's leading developer and manager of student accommodation, announced on Wednesday that it has established a five-year joint venture with Bahraini company Oasis Capital Bank (OCB) to develop three student accommodation properties in London.

Unite said the properties have an estimated completion value of £194 mln (EUR 226 mln). OCB has bought a 75% stake in the joint venture, investing £39 mln, with Unite holding the remaining 25%.

Unite's three properties under development, amounting to 1,119 beds and representing its entire 2010 pipeline, will be immediately sold to the joint venture for a consideration of £88.2 mln, reflecting an anticipated development yield on cost of approximately 8%.

As part of the financing for the transaction, Unite's existing banking facilities relating to each property will be reduced by an aggregate of £14 mln and transferred into the joint venture. As a result, the joint venture will have access to total debt facilities of £109 mln, of which £51 mln is currently drawn with the remainder available to fund costs to complete.

The estimated value of the three properties on completion is expected to be £194 mln, and the anticipated costs to complete them are £69 mln. Unite will record a loss on disposal of £400,000 as a result of the transaction, equivalent to 0.2% of estimated final value.

The completion of the joint venture has a significant immediate positive impact on Unite's balance sheet, the company said.