Student housing developer Unite has been successful in the race for a prime Newcastle city centre site which could accommodate up to 600 learners.
The 200,000sq ft project will have a total development cost of £31m and expects to deliver a 9.5-10% yield on cost, in line with the developer’s target returns.
Located close to the city’s two universities, the development will expand the Bristol-based company’s presence in Newcastle, where it already has four properties which cater for 1,000 students.
Its Manor Bank site is in Pandon Bank, close to Northumbria University, while Magnet Court is close to Eldon Square shopping centre, China Town and the Gate cinema complex.
The new building, which still requires planning permission, could open as early as two years’ time if it gets the green light.
Communal space has been designed to enhance students’ living and learning experience, which will include cluster rooms, WiFi internet and LED lighting.
Richard Simpson, managing director of Property for Unite, said: “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%.
“Unite is well-positioned for continued growth both through its existing, strong portfolio and new regional developments.”
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 about 25% of the capital raised.
The company is also in negotiations to acquire three more projects in other regional locations and which are expected to exchange later in the first quarter of 2014.
These three projects will account for the remainder of the June 2013 share placing proceeds and are supportive of the group’s target returns.
As reported in June 2013 at the time of the share placing, Unite expects shareholders to benefit from NAV accretion from 2014 onwards as capital is deployed into regional developments and from earnings per share accretion from 2015 onwards as projects are completed and let, thereby supporting the company’s key strategic objective of increasing recurring earnings.