REG - Unite Group PLC - Full Year Results <Origin Href="QuoteRef">UTG.L</Origin> - Part 3
23/02/2016 07:21
- Part 3: For the preceding part double click ID:nRSW8154Pb
venture debt exit costs 3.3b - (0.1)
Share of joint venture swap cancellation costs 3.3b (0.3) -
Deferred tax relating to interest rate swap movement (0.2) (0.2)
Deferred tax relating to properties (30.9) (2.7)
Minority interest share of reconciling items** (3.2) (1.1)
Profit attributable to owners of the parent company 351.9 102.6
* Within IFRS reported profit, there is a £0.6 million loss (2014: £1.3 million loss) relating to movements in the mark
to market of ineffective interest rate swaps, this full loss can be seen in note 4.3. Part of this movement, £1.2 million
(2014: £1.2 million) relates to actual interest payments made on these swaps and is considered to be a true operating cost
of the Operations Segment. It is therefore already included within Net Financing Costs in the Operating Segment result in
note 2.2a.
** The minority interest share, or non-controlling interest, arises as a result of the Company not owning 100% of the
share capital of one of its subsidiaries, USAF (Feeder) Guernsey Ltd. More detail is provided in note 3.3.
c) Earnings per share
The EPS calculation is based on the earnings attributable to the equity shareholders of The Unite Group plc and the
weighted average number of shares which have been in issue during the year. Basic EPS is adjusted in line with EPRA
guidelines in order to more accurately show the business performance of the Group in a consistent manner and to reflect how
the business is managed and measured on a day to day basis. EPRA EPS and EPRA EPS pre yield related USAF performance fee
are calculated using EPRA earnings.
The calculations of basic and EPRA EPS for the year ended 31 December 2015 is as follows:
Note 2015 2014
£m £m
Earnings
Basic (and diluted) 351.9 102.6
EPRA 2.2a 61.3 33.3
EPRA pre yield related USAF performance fee 2.2a 49.5 33.3
Weighted average number of shares (thousands)
Basic 214,304 193,319
Dilutive potential ordinary shares (share options) 19,877 2,966
Diluted 234,181 196,285
Earnings per share (pence)
Basic 164.2p 53.1p
Diluted 150.3p 52.3p
EPRA EPS 28.6p 17.2p
EPRA EPS pre yield related USAF performance fee 23.1p 17.2p
Movements in the weighted average number of shares have resulted from the placing in April 2015 and the issue of shares
arising from the employee share based payment schemes.
The placing comprised 20,137,000 shares and gave rise to proceeds of £114.8 million, £112.3 million net of issue costs.
Excluded from the potential dilutive shares (share options), in 2015, are 191,000 (2014: 1,174,000) options which do not
affect the diluted weighted average number of shares.
2.3 Net assets
The Group's Property business undertakes the acquisition and development of properties. The Property segment's revenue
comprises revenue from development management fees earned from joint ventures. EPRA NAV, reported on the basis recommended
for real estate companies by EPRA is the key indicator used by the Board to manage the Property business.
a) EPRA net assets
2015 2014
Wholly owned Share of JVs Total Wholly owned Share of JVs Total
£m £m £m £m £m £m
Investment properties 1,024.4 810.8 1,835.2 850.5 558.4 1,408.9
Completed properties* - - - 101.3 - 101.3
Total income producing properties 1,024.4 810.8 1,835.2 951.8 558.4 1,510.2
Investment properties under development 149.8 80.2 230.0 49.2 65.1 114.3
Total property portfolio 1,174.2 891.0 2,065.2 1,001.0 623.5 1,624.5
Debt on properties (475.1) (304.6) (779.7) (489.8) (270.7) (760.5)
Cash 27.0 22.0 49.0 41.4 21.8 63.2
Net debt (448.1) (282.6) (730.7) (448.4) (248.9) (697.3)
Other assets/(liabilities) (4.9) (18.3) (23.2) (38.0) (8.1) (46.1)
EPRA net assets (pre convertible) 721.2 590.1 1,311.3 514.6 366.5 881.1
Convertible bond** 83.1 - 83.1 - - -
EPRA net assets 804.3 590.1 1,394.4 514.6 366.5 881.1
Loan to value 38% 32% 35% 45% 40% 43%
* At market value.
** Under the terms of the Convertible Bond, early conversion of the debt into equity can be triggered if the share price
trades over 1.3 times the conversion price for a period of time, this threshold was triggered as at 31 December 2015; the
bondholders have the right to exercise until 31 March 2016.
b) Movement in EPRA NAV during the year
Contributions to EPRA NAV by each segment during the year is as follows:
2015 UNITE Share of joint ventures Group on see-through basis
Total USAF LSAV OCB Total Total
£m £m £m £m £m £m
Operations
Operations segment result 22.9 14.2 9.4 - 23.6 46.5
Property
Rental growth 21.6 5.8 22.2 - 28.0 49.6
Yield movement 97.6 37.0 41.1 - 78.1 175.7
Disposals and acquisition costs (17.3) 0.1 0.2 - 0.3 (17.0)
Investment property gains 101.9 42.9 63.5 - 106.4 208.3
Development property gains 45.7 - 36.1 - 36.1 81.8
Pre-contract/other development costs (1.8) - - - - (1.8)
Total property 145.8 42.9 99.6 - 142.5 288.3
Unallocated
Shares issued 112.6 - - - - 112.6
Investment in joint ventures (57.8) 41.6 16.2 - 57.8 -
Convertible bond 83.1 - - - - 83.1
Dividends paid (31.9) - - - - (31.9)
USAF performance fee 19.8 - - - - 19.8
USAF property acquisition fee 1.7 - - - - 1.7
Swap losses and debt exit costs (1.1) (0.3) - - (0.3) (1.4)
Other (5.4) - - - - (5.4)
Total unallocated 121.0 41.3 16.2 - 57.5 178.5
Total EPRA NAV movement in the year 289.7 98.4 125.2 - 223.6 513.3
Total EPRA NAV brought forward 514.6 206.9 159.6 - 366.5 881.1
Total EPRA NAV carried forward 804.3 305.3 284.8 - 590.1 1,394.4
The £5.4 million charge in that comprises the other balance within the unallocated segment includes a tax charge of £1.5
million, fair value of share options charge of £2.9 million and £1.0 million for the UNITE Foundation.
2014 UNITE Share of joint ventures Group on see-through basis
Total USAF LSAV OCB Total Total
£m £m £m £m £m £m
Operations
Operations segment result 21.8 11.3 5.4 0.3 17.0 38.8
Property
Rental growth 13.0 5.9 2.2 - 8.1 21.1
Yield movement 18.6 5.2 6.7 - 11.9 30.5
Disposals and acquisition costs (5.7) - 1.9 (0.3) 1.6 (4.1)
Investment property gains 25.9 11.1 10.8 (0.3) 21.6 47.5
Development property gains 20.3 - 14.7 - 14.7 35.0
Pre-contract/other development costs (3.6) - - - - (3.6)
Total property 42.6 11.1 25.5 (0.3) 36.3 78.9
Unallocated
Shares issued 96.7 - - - - 96.7
Investment in joint ventures (84.0) 59.5 42.5 (18.0) 84.0 -
Dividends paid (10.7) - - - - (10.7)
USAF property acquisition fee 1.2 - - - - 1.2
Swap losses and debt exit costs (3.3) - - (0.1) (0.1) (3.4)
Other (2.4) 0.4 - - 0.4 (2.0)
Total unallocated (2.5) 59.9 42.5 (18.1) 84.3 81.8
Total EPRA NAV movement in the year 61.9 82.3 73.4 (18.1) 137.6 199.5
Total EPRA NAV brought forward 452.7 124.6 86.2 18.1 228.9 681.6
Total EPRA NAV carried forward 514.6 206.9 159.6 - 366.5 881.1
The £2.0 million charge in that comprises the other balance within the unallocated segment includes a tax charge of £1.5
million, £0.9 million for the UNITE Foundation and £0.4 million relating to a share of the monies received from
Landsbanki.
c) Reconciliation to IFRS
EPRA NAV excludes the mark to market valuation of swaps, deferred tax liabilities and recognises all properties at market
value. These are the main differences between EPRA NAV and Net Assets reported under IFRS.
The Group also manages NAV using EPRA NNNAV, which adjusts EPRA NAV to include the fair value of swaps and debt. This is
considered to give stakeholders the most relevant information on the current fair value of all the assets and liabilities
in the Group.
Note 2015 2014
£m £m
Net asset value reported under IFRS 1,275.1 842.5
Recognise valuation gain on property held at cost 3.1 - 31.2
Mark to market interest rate swaps 4.3 4.8
Deferred tax 31.9 2.6
EPRA NAV (pre convertible) 2.3a 1,311.3 881.1
Convertible bond 83.1 -
EPRA NAV 1,394.4 881.1
Mark to market of fixed rate debt (28.0) (3.0)
Mark to market interest rate swaps (4.3) (4.8)
Deferred tax (31.9) (2.6)
EPRA NNNAV 1,330.2 870.7
d) NAV per share
NAV is based on the net assets attributable to the equity shareholders of The Unite Group plc and the number of shares in
issue at the end of the year. The Board uses EPRA NAV and EPRA NNNAV to monitor the performance of the Property segment on
a day to day basis.
Note 2015 2014£m
£m
Net assets
Basic 2.3c 1,275.1 842.5
EPRA 2.3a 1,394.4 881.1
EPRA diluted 1,396.7 882.3
EPRA NNNAV (diluted) 1,332.5 871.9
Number of shares (thousands)
Basic 222,051 202,362
Convertible bond 18,124 -
Outstanding share options 1,027 873
Diluted 241,202 203,235
Net asset value per share (pence)
Basic 574p 416p
EPRA 581p 435p
EPRA (diluted) 579p 434p
EPRA NNNAV (diluted) 552p 429p
2.4. Revenue and costs
The Group earns revenue from the following activities:
Note 2015 2014
£m £m
Rental income Operations segment 2.2a 93.0 89.4
Management fees Operations segment 15.2 12.0
Development fees Property segment 1.9 2.7
Property sales Unallocated 77.0 4.6
USAF performance fee Unallocated 22.4 -
209.5 108.7
Impact of minority interest on management fees (0.7) (0.2)
Total revenue 208.8 108.5
The cost of sales included in the consolidated income statement includes property operating expenses of £28.9 million
(2014: £25.9 million), operating lease rentals of £14.5 million (2014: £14.4 million), costs associated with development
fees of £1.9 million (2014: £2.7 million) and the carrying value of property sales of £69.6 million (2014: £7.0 million).
2.5 Tax
The Group has not paid any corporation tax in the recent past due to the availability of capital allowances, indexation and
brought forward losses. However, it does pay UK income tax on rental income that arises from investments held by offshore
subsidiaries.
a) Tax - income statement
The total taxation charge / (credit) in the income statement is analysed as follows:
2015 2014
£m £m
Income tax on UK rental income arising in non-UK companies 1.6 1.2
Current tax charge 1.6 1.2
Movement on the revaluation of investment properties 19.2 0.5
Movement on the revaluation of joint venture investments 11.7 3.4
Other temporary timing differences (0.1) (0.9)
Prior year adjustments 0.3 (0.6)
Deferred tax charge/(credit) 31.1 2.4
Total tax charge/(credit) in income statement 32.7 3.6
In the income statement, a tax charge of £32.7 million arises on a profit before tax of £388.4 million, the taxation charge
that would arise at the standard rate of UK corporation tax is reconciled to the actual tax charge as follows:
2015 2014
£m £m
Profit before tax 388.4 108.4
Income tax using the UK corporation tax rate of 20.25% (2014: 21.5%) 78.7 23.3
Effect of indexation on investment and development property (3.4) (1.9)
Non-taxable items (31.3) (11.5)
Movement on unprovided deferred tax asset (0.6) (4.3)
Profits chargeable at lower rate - (0.1)
Effect of property disposals - (1.1)
Rate difference on deferred tax (4.1) (0.1)
Recognition of previously un-recognised deferred tax asset (7.4) -
Effect of tax deduction transferred to equity on share schemes 1.1 -
Prior years adjustments (0.3) (0.7)
Total tax charge in income statement 32.7 3.6
Included within non-taxable items of £31.3 million are adjustments for property revaluations that are not subject to tax.
Other
items include tax only adjustments, and expenditure not ordinarily allowable for tax purposes such as aborted deal costs.
b) Tax - other comprehensive income
Within other comprehensive income a tax charge totalling £1.7 million (2014: £1.2 million) has been recognised representing
deferred tax. An analysis of this is included below in the deferred tax movement table (note 2.5c).
c) Tax - balance sheet
The table below outlines the deferred tax liabilities/(assets) that are recognised in the balance sheet, together with
their movements in the year:
2015
At 31 December Transfers (Credited) Charged At 31 December
2014 £m in income in equity 2015
£m £m £m £m
Investment property 17.3 - 16.7 - 34.0
Property, plant and machinery (0.6) - 0.3 - (0.3)
Investments in joint ventures 10.7 - 11.1 - 21.8
Share options (1.5) - (0.2) 0.1 (1.6)
Interest rate swaps (0.3) - 0.2 (1.0) (1.1)
Interest rate swaps relating to joint ventures (0.6) - - 0.1 (0.5)
Tax value of carried forward losses recognised (24.4) - 3.0 (0.9) (22.3)
Net tax (assets)/liabilities 0.6 - 31.1 (1.7) 30.0
2014
At 31 December Transfers (Credited) Charged At 31 December
2013 £m in income in equity 2014
£m £m £m £m
Investment property 16.9 - 0.4 - 17.3
Property, plant and machinery (0.8) - 0.2 - (0.6)
Investments in joint ventures 6.6 - 4.1 - 10.7
Share options - - (0.5) (1.0) (1.5)
Interest rate swaps (0.8) - 0.2 0.3 (0.3)
Interest rate swaps relating to joint ventures (0.1) - - (0.5) (0.6)
Tax value of carried forward losses recognised (22.4) - (2.0) - (24.4)
Net tax (assets)/liabilities (0.6) - 2.4 (1.2) 0.6
A deferred tax asset of £1.7 million (2014: £8.9 million) in respect of losses of £8.5 million (2014: £44.7 million) has
not been recognised. Complexities in the Group structure mean these losses may be inaccessible and the Group is intending
to convert to REIT status in early 2017. Accordingly, the recognised deferred tax asset has been restricted to those losses
which are likely be utilised in the next financial year.
A reduction in the UK corporation tax rate from 20% to 19% (effective 1 April 2017) and from 19% to 18% (effective 1 April
2020) was substantively enacted on 26 October 2015. This will reduce the Group's future current tax charge accordingly.
Deferred tax at 31 December 2015 has been calculated based on the rate at which it is expected to reverse.
Section 3: Asset management
3.1 Wholly owned property assets
The Group's wholly owned property portfolio is held in four groups on the balance sheet at the carrying values detailed
below. In the Group's EPRA NAV, all these groups are shown at market value.
i) Investment property (fixed assets)
These are assets that the Group intends to hold for a long period to earn rental income or capital appreciation. The assets
are held at fair value in the balance sheet with changes in fair value taken to the income statement.
ii) Investment property under development (fixed assets)
These are assets which are currently in the course of construction and which will be transferred to 'Investment property'
on completion. The assets are held at fair value in the balance sheet with changes in fair value taken to the income
statement.
iii) Completed properties (current assets)
These are assets acquired by the Group with the intention to hold the assets for a short period prior to disposal to a
joint venture or third parties. The Group continues to earn rental income and capital appreciation on these assets which
are held at cost in the balance sheet.
iv) Properties under development (current assets)
These are assets which are currently in the course of construction and which will be transferred to 'Completed properties'
on completion. These assets are held at cost in the balance sheet.
Valuation process
The valuations of the properties are performed twice a year on the basis of valuation reports prepared by external,
independent valuers, having an appropriate recognised professional qualification. The fair values are based on market
values as defined in the RICS Appraisal and Valuation Manual, issued by the Royal Institution of Chartered Surveyors. CB
Richard Ellis Ltd, Jones Lang LaSalle Ltd and Messrs Knight Frank, Chartered Surveyors were the valuers in the years ending
31 December 2015 and 2014.
The valuations are based on both:
· Information provided by the Group such as current rents, occupancy, operating costs, terms and conditions of leases and
nomination agreements, capital expenditure, etc. This information is derived from the Group's financial systems and is
subject to the Group's overall control environment.
· Assumptions and valuation models used by the valuers - the assumptions are typically market related, such as yield and
discount rates. These are based on their professional judgement and market observation.
The information provided to the valuers - and the assumptions and the valuation models used by the valuers - are reviewed
by the Property Board and the CFO. This includes a review of the fair value movements over the year.
The movements in the carrying value of the Group's wholly owned property portfolio during the year ended 31 December 2015
are shown in the table below. Whilst completed property and property under development are held at cost on the balance
sheet, the Group manages the assets based on their market value (fair value). These properties are included in EPRA NAV at
their fair value, valued on the same basis as for investment property and investment property under development, by
external valuers. The fair value of the Group's wholly owned properties at the year ended 31 December 2015 are also shown
below.
2015
Investment property Investment property under development Completed property Property under development Total
£m £m £m £m £m
At 1 January 2015 850.5 49.2 70.1 - 969.8
Cost capitalised 8.6 97.4 - - 106.0
Interest capitalised - 2.7 - - 2.7
Transfer from investment property under development 41.2 (41.2) - - -
Transfer from work in progress - 1.0 - - 1.0
Disposals - - (70.1) - (70.1)
Valuation gains 126.4 41.0 - - 167.4
Valuation losses (2.3) (0.3) - - (2.6)
Net valuation gains 124.1 40.7 - - 164.8
Carrying value at 31 December 2015 1,024.4 149.8 - - 1,174.2
Valuation gains not recognised under IFRS but included in EPRA NAV
Brought forward - - 31.2 - 31.2
Disposals - - (31.2) - (31.2)
- - - - -
Market value at 31 December 2015 1,024.4 149.8 - - 1,174.2
The movements in the carrying value of the Group's wholly owned property portfolio during the year ended 31 December 2014
and the fair value of the Group's wholly owned property portfolio at the year ended 31 December 2014 is as follows:
2014
Investment property Investment property under development Completed property Property under development Total
£m £m £m £m £m
At 1 January 2014 767.6 95.5 - 61.5 924.6
Cost capitalised 6.4 46.8 - 11.9 65.1
Interest capitalised - 4.0 - 4.0 8.0
Transfer from property under development - - 70.1 (70.1) -
Transfer from investment property under development 85.1 (85.1) - - -
Disposals (44.4) (19.5) - (7.3) (71.2)
Valuation gains 40.7 7.5 - - 48.2
Valuation losses (4.9) - - - (4.9)
Net valuation gains 35.8 7.5 - - 43.3
Carrying value at 31 December 2014 850.5 49.2 70.1 - 969.8
Valuation gains not recognised under IFRS but included in EPRA NAV
Brought forward - - - 22.8 22.8
Transfer from property under development - - 25.1 (25.1) -
Valuation gain in year - - 6.1 2.3 8.4
- - 31.2 - 31.2
Market value at 31 December 2014 850.5 49.2 101.3 - 1,001.0
Included within investment properties at 31 December 2015 are £41.6 million (2014: £31.4 million) of assets held under a
long leasehold and £10.5 million (2014: £10.4 million) of assets held under short leasehold.
Total interest capitalised in investment and development properties at 31 December 2015 was £35.4 million (2014: £40.3
million)
on a cumulative basis. Total internal costs relating to construction and development costs of Group properties amount to
£49.6 million at 31 December 2015 (2014: £47.4 million) on a cumulative basis.
Recurring fair value measurement
All investment and development properties are classified as Level 3 in the fair value hierarchy. Whilst completed property
and property under development are held at cost in the balance sheet, the Group discloses the fair value of these assets
and includes them at fair value in EPRA NAV. Completed property and property under development fair value measurements are
categorised as Level 3 in the fair value hierarchy and their fair value is measured using the same techniques as for
investment properties and investment properties under development.
Class of asset 2015 2014
£m £m
London - Rental properties 409.4 438.1
Major provincial - Rental properties 431.1 346.1
Other provincial - Rental properties 183.9 167.6
Major provincial - Development properties 94.2 42.3
Other provincial - Development properties 55.6 6.9
Market value 1,174.2 1,001.0
The valuation technique for investment properties is a discounted cash flow using the following inputs: net rental income,
estimated future costs, occupancy and property management costs.
Where the asset is leased to a university, the valuations also reflect the length of the lease, the allocation of
maintenance and insurance responsibilities between the Group and the lessee, and the market's general perception of the
lessee's credit worthiness.
The resulting valuations are cross-checked against the initial yields and the capital value per bed derived from actual
market transactions.
For development properties, the fair value is usually calculated by estimating the fair value of the completed property
(using the discounted cash flow method) less estimated costs to completion.
Fair value using unobservable inputs (Level 3)
2015 2014
£m £m
Opening fair value 1,001.0 947.4
Gains and losses recognised in income statement 164.8 43.3
Gains and losses not recognised on properties under development - 8.4
Acquisitions - -
Capital Expenditure 109.7 53.6
Disposals (101.3) (51.7)
Closing fair value 1,174.2 1,001.0
Quantitative information about fair value measurements using unobservable inputs (Level 3)
2015 Fair value£m Valuation technique Unobservable inputs Range Weighted average
London Discounted Net rental income (£ per week) £190 - £326 £244
cash flows
- rental properties 409.4 Estimated future rent (%) 2% - 4% 3%
Discount rate (yield) (%) 4.6% - 5.2% 4.8%
Major provincial Discounted Net rental income (£ per week) £95 - £146 £120
cash flows
- rental properties 431.1 Estimated future rent (%) 1% - 6% 4%
Discount rate (yield) (%) 5.2% - 7.0% 5.8%
Other provincial Discounted Net rental income (£ per week) £77 - £135 £117
cash flows
- rental properties 183.9 Estimated future rent (%) 2% - 6% 4%
Discount rate (yield) (%) 5.8% - 9.4% 6.3%
Major provincial Discounted Estimated cost to complete (£m) £9.4m - 47.6m £31.6m
cash flows
- development properties 94.2 Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 5.2% - 5.8% 5.6%
Other provincial Discounted Estimated cost to complete (£m) £8.9m - £10.5m £10.1m
cash flows
- development properties 55.6 Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 5.8% - 5.9% 5.9%
Fair value at 31 December 2015 1,174.2
2014 Fair value£m Valuation technique Unobservable inputs Range Weighted average
London Discounted Net rental income (£ per week) £161 - £297 £202
cash flows
- rental properties 438.1 Estimated future rent (%) 1% - 3% 3%
Discount rate (yield) (%) 5.5% - 6.0% 5.7%
Major provincial Discounted Net rental income (£ per week) £88 - £141 £113
cash flows
- rental properties 346.1 Estimated future rent (%) 2% - 4% 3%
Discount rate (yield) (%) 6.1% - 6.9% 6.5%
Other provincial Discounted Net rental income (£ per week) £80 - £121 £107
cash flows
- rental properties 167.6 Estimated future rent (%) 2% - 3% 3%
Discount rate (yield) (%) 6.3% - 8.6% 6.8%
Major provincial Discounted Estimated cost to complete (£m) £9.1m - £38.7m £25.9m
cash flows
- development properties 42.3 Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 6.4% - 6.5% 6.5%
Other provincial Discounted Estimated cost to complete (£m) £36.5m £36.5m
cash flows
- development properties 6.9 Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 7.0% 7.0%
Fair value at 31 December 2014 1,001.0
A decrease in net rental income, estimated future rents or occupancy will result in a decrease in the fair value, whereas a
decrease in the discount rate (yield) or the estimated costs to complete will result in an increase in fair value. There
are interrelationships between these rates as they are partially determined by market rate conditions.
3.2 Inventories
2015 2014
£m £m
Interests in land 0.9 1.5
Other stocks 2.7 2.4
Inventories 3.6 3.9
The movement in other stock is caused by an increase in activity during the year relating to costs incurred in connection
with the acquisition of assets for the LSAV joint venture. In addition, the Group only has interests in one piece of land
reduced from three in 2014.
3.3 Investments in joint ventures (Group)
The Group has two joint ventures:
Joint venture Group's share of Objective Partner Legal entity in which
assets/results 2015 (2014) Group has interest
The UNITE UK Student Accommodation Fund (USAF) 23.0%* (24.0%) Invest and operate Consortium of investors UNITE Student Accommodation Fund,
student accommodation throughout the UK a Jersey Unit Trust
London Student Accommodation Venture (LSAV) 50% (50%) Develop and operate student accommodation in London GIC Real Estate Pte, LtdReal estate LSAV Unit Trust, a Jersey Unit Trust and LSAV (Holdings) Ltd, incorporated in Jersey
investment vehicle
of the Government
of Singapore
* Part of the Group's interest is held through a subsidiary, USAF (Feeder) Guernsey Ltd, in which there is an external
investor. A minority interest therefore occurs on consolidation of the Group's results representing the external investor's
share of profits and assets relating to its investment in USAF. The ordinary shareholders of The UNITE Group plc are
beneficially interested in 21.4% (2014: 22.0%) of USAF.
a) Net assets and results of the joint ventures
The summarised balance sheets and results for the period, and the Group's share of these joint ventures are as follows:
2015
USAF LSAV OCB Total
£m £m £m £m
Gross Share Gross Share Gross Share Gross Share
Investment property 2,074.2 477.4 894.4 447.2 - - 2,968.6 924.6
Cash 36.6 8.4 28.4 14.2 - - 65.0 22.6
Debt (638.3) (146.9) (336.0) (168.0) - - (974.3) (314.9)
Swap liabilities - - (3.9) (2.0) - - (3.9) (2.0)
Other current assets 1.9 0.5 1.0 0.5 - - 2.9 1.0
Other current liabilities (66.2) (11.6) (18.2) (9.1) - - (84.4) (20.7)
Net assets 1,408.2 327.8 565.7 282.8 - - 1,973.9 610.6
Profit/(loss) for the year 234.3 63.7 236.1 118.1 - - 470.4 181.8
EPRA net assets 1,408.2 305.3 569.6 284.8 - - 1,977.8 590.1
2014
USAF LSAV OCB Total
£m £m £m £m
Gross Share Gross Share Gross Share Gross Share
Investment property 1,572.8 378.5 556.6 278.3 - - 2,129.4 656.8
Cash 50.2 12.1 21.6 10.8 - - 71.8 22.9
Debt (661.2) (159.1) (251.2) (125.6) - - (912.4) (284.7)
Swap liabilities (2.8) (0.6) (3.9) (1.9) - - (6.7) (2.5)
Other current assets 1.6 0.4 6.5 3.2 - - 8.1 3.6
Other current liabilities (28.1) (5.2) (14.3) (7.1) - - (42.4) (12.3)
Net assets 932.5 226.1 315.3 157.7 - - 1,247.8 383.8
Profit/(loss) for the year 108.5 27.0 59.4 30.0 (0.1) (0.5) 167.8 56.5
EPRA net assets 935.3 206.9 319.2 159.6 - - 1,254.5 366.5
Net assets and profit for the year above include the minority interest, whereas EPRA net assets exclude the minority
interest.
b) Movement in carrying value of the Group's investments in joint ventures
The carrying value of the Group's investment in joint ventures has increased by £226.8 million during the year ended 31
December 2015 (2014: £146.6 million), resulting in an overall carrying value of £610.6 million (2014: £383.8 million). The
following table shows how the increase has been achieved.
2015 2014
Investment in joint venture Joint venture investment loan Total Investment in joint venture Joint venture investment loan Total
£m £m interest £m £m interest
£m £m
Recognised in the income statement:
Operations segment result 23.6 - 23.6 17.0 - 17.0
Minority interest share of Operations segment result 1.2 - 1.2 1.3 - 1.3
Management fee adjustment related to trading with joint venture 4.1 - 4.1 3.0 - 3.0
Net revaluation gains 152.7 - 152.7 35.7 - 35.7
Discount on interest free loans (note 4.3) - - - (0.4) 0.4 -
Debt exit costs - - - (0.1) - (0.1)
Loss on cancellation of interest rate swaps (0.3) - (0.3) - - -
Landsbanki cash received - - - 0.4 - 0.4
Loss on disposal of properties 0.3 - 0.3 (0.6) - (0.6)
Other 0.2 - 0.2 0.2 - 0.2
181.8 - 181.8 56.5 0.4 56.9
Recognised in equity:
Movement in effective hedges 0.6 - 0.6 (2.3) - (2.3)
Other adjustments to the carrying value:
Profit adjustment related to trading with joint venture (11.9) - (11.9) (1.5) 0.1 (1.4)
Repayment of loan to OCB - - - - (10.7) (10.7)
Increase in loan to USAF 30.5 - 30.5 12.8 - 12.8
Additional capital invested in USAF 29.1 - 29.1 57.1 - 57.1
Additional capital invested in UCC - - - 26.5 - 26.5
Additional capital invested in LSAV 23.3 - 23.3 19.7 - 19.7
USAF performance fee (3.7) - (3.7) - - -
Distributions received (22.9) - (22.9) (22.2) - (22.2)
Increase/(decrease) in carrying value 226.8 - 226.8 146.6 (10.2) 136.4
Carrying value at 1 January 383.8 - 383.8 237.2 10.2 247.4
Carrying value at 31 December 610.6 - 610.6 383.8 - 383.8
In addition to its equity shares, the Group has also provided interest free investment loans to some of the joint ventures.
These were primarily provided on the setting up of the joint venture to provide capital to acquire investment properties.
As a result of being provided interest free, the loans were discounted on recognition to reflect the fair value, the
unwinding of the discount is reflected in the Group's finance income.
c) Transactions with joint ventures
The Group acts as asset and property manager for the joint ventures and receives management fees in relation to these
services.
In addition, the Group is entitled to performance fees from USAF and LSAV if the
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