Unite Group has launched a new joint venture to build student blocks in London with GIC Real Estate, the Singapore sovereign wealth fund. The 50:50 venture will last a decade and will initially invest £330m - not counting two of Unite's existing London development projects that will now be sold into the fund.
The deal is good news for Unite, which operates in the strong student lettings market but without the scale or balance-sheet strength to take full advantage. It paves the way for earnings growth, and should also improve the company's previously dismal return on capital by boosting capital-light fee income. The projects will typically be in peripheral London areas with good transport links but below-average rents. After a spate of inner-London developments for posher students, Unite thinks this market is least well served.
Confusingly, the company already has a joint venture with GIC Real Estate; this will be extended to 2022, recentred on London and may eventually be merged with the newer vehicle if Unite exercises a right to raise its stake from 30 to 50 per cent.
