Cabot Square Capital, the UK-based private equity and principal finance firm, has exited its investment in Unilodge through a trade sale to The Unite Group plc.
Unilodge was sold for GBP108.8 million, including the assumption of debt, and realised Cabot Square Capital an annualised IRR since 1998 of around 80 per cent.
Cabot Square Capital backed the management of Unilodge in 1998 in a strategy that saw
the company build up a portfolio of University accommodation.
This was done by buying existing University accommodation, buying new property to be turned into University accommodation and building properties.
The properties in the portfolio are, says Lindsey McMurray, partner at Cabot Square Capital, primarily located in Scotland and the north of England, but that Unilodge was looking to move southwards. Whereas The Unite Group has its business primarily located in the south of England and was looking to expand its portfolio of University properties northwards, hence the fit between the two players. McMurray notes that Unilodge and Unite are the only two large-scale providers of University accommodation in the UK in what is otherwise a highly fragmented market; thereby Unite presented an obvious exit route for Unilodge.
In addition to a wider geographic focus Unilodge gives Unite a slightly different mix to its property portfolio and therefore its risk profile. This is because Unilodge is relatively more focused on direct letting to students as opposed to direct letting to Universities that then sublet, which is where Unite’s focus lays.
McMurray said: “Higher Education institutions were under increasing pressure to deleverage their balance sheets and were unable to invest in deteriorating accommodation stock.”
Unilodge has 2,524 rooms currently open and 1,590 rooms awaiting completion. Development plans for the company included add on ancillary services and selling products such as laundry, vending and Internet access to captive tenants. UBS Warburg and Herbert Smith advised Cabot Square Capital.