Student accommodation developer and manager Unite has exchanged contracts to sell and lease back Unite House in Bristol to the M&G Secured Property Fund for £21.5m.
It has agreed the sale at a yield of 6.07% - which equates to a 55 basis point improvement on its June valuation of 6.62%.
Unite will take a 25-year lease and will continue to operate the 395 student bed property – providing M&G with £1.38m annual rent.
Noble analyst Michael Burt said the yield shift had “significant implications” for the valuation of the rest of Unite’s portfolio in the second half of the year, and predicted that the net initial yield would fall from the 6.8% June valuation.
However, he warned: “Despite today’s evidence we would be loathe to suggest that a yield contraction of the magnitude of 55bps will be witnessed across the entire portfolio in the second half of the year.”
Unite said that the proceeds from the sale, which is due to complete on Monday, would be used to repay borrowings and reinvest into development activities.
The deal will bring total sales this year to £154.3m including £88.2m of development assets sold into the joint venture between Unite and Oasis Capital Bank in August.
Mark Allan, chief executive of Unite, said: “This disposal further demonstrates the strong demand in the investment market for high quality student accommodation.
“The sale will enable us to repay the debt associated with the asset, further reducing our gearing, with the remaining cash becoming available to reinvest in development activities.”