Unite’s level and cost of borrowing is monitored on an ongoing basis. The company maintains a disciplined approach to manage leverage and targets a LTV ratio of 35% and net debt to EBITDA of around 7x.
Following completion of the acquisition of Liberty Living in November 2019, Unite’s LTV ratio increased to approximately 39% on a pro forma basis. At 31 December 2019 LTV was 37%, the company expects LTV to reduce over time to a target of 35% through rental growth and planned disposals.
The company has an investment grade corporate rating of BBB from Standard & Poor’s and Baa2 from Moody’s, reflecting the strength of Unite’s capital position, cash flows and track record. As a result of the Acquisition of Liberty Living, Standard & Poor’s and Moody’s have affirmed Unite’s and Liberty Living’s credit ratings and changed the outlook from stable to positive.
The following key principles guide the group looks to structure and manage its debt:
- We will seek to reduce our cost of debt, by taking advantage of the low interest rate environment and our investment grade credit ratings. This would help to improve the company’s interest cover ratio, all else being equal.
- We will manage our maturity profile, ensuring that no more than 20% of our debt matures in any one year and we maintain a weighted average unexpired term of between 5 and 10 years.
- We will diversify our funding sources, to reduce our reliance on any single lender, geography or sub-market. The Group’s sources of debt include a combination of secured and unsecured bank facilities with a range of lenders, as well as unsecured and secured bonds.
- We will maintain flexibility for the business, by moving towards a largely unsecured debt portfolio for the Group. This enables greater flexibility around property sales, acquisitions, development funding and asset management initiatives. This is achieved through a combination of fixed term borrowings together with revolving credit facilities, which are available to draw or repay at short notice.
- We will protect against potential interest rate volatility, by maintaining our fixed/hedged ratio at between 75-95% of total debt.
- Unite Group bonds
- USAF bonds
- Liberty Living Bonds
- Unite Group Revolving Credit Facility
- Unite Group Term Loans
- USAF Term Loans
- LSAV Term Loans
Key debt statistics (Unite share as at 31 December 2019)
Sources of debt funding
Debt maturity profile including Liberty Living (drawn debt as at 31 December 2019)
Debt facilities (drawn debt as at 31 December 2019)