The Unite Group has exchanged contracts to acquire a student accommodation development project in Newcastle city centre, subject to achieving planning consent.
The 200,000 square foot scheme will have a total development cost of GBP31m and is expected to deliver a 9.5 to 10 per cent yield on cost, in line with Unite’s target returns.
The prime city centre site will be transformed into a home for approximately 600 students, close to the city’s two universities and is targeted to open in 2016.
The wholly owned scheme will be the first project to be funded from the proceeds of the group’s June 2013 share placing and accounts for approximately 25 per cent of the capital raised. Unite is also in exclusive negotiations to acquire three further projects in similarly strong regional locations and which are expected to exchange later in the first quarter of 2014. When contractually secure, these three further projects will account for the remainder of the June 2013 share placing proceeds and are supportive of the group’s target returns.
Richard Simpson, managing director of property for Unite, says: “This acquisition marks good progress with Unite’s selective regional development programme and is a prime example of how we are investing the proceeds from our 2013 share placing; it is in an excellent central location, well positioned for both Newcastle’s universities and in a market we expect to experience continued growth.
“The fundamentals of the student accommodation market remain strong and will potentially be bolstered further by the government’s plans to remove the student number cap in 2015, which could itself lead to an increase in enrolments of up to 12 per cent. Unite is well positioned for continued growth both through its existing, strong portfolio and new regional developments.”
The new property will expand Unite’s existing presence in Newcastle, where the group has four properties comprising over 1,000 beds. The property will include communal space designed to enhance students’ living and learning experience, Unite’s latest specification en-suite cluster rooms, WiFi internet throughout the property and environmental features, such as LED lighting.