Moody's comments on the performance of the EMEA CMBS Notes issued by UNITE (USAF) plc

London, 06 November 2012 -- Following a review of UNITE (USAF) Plc, Moody's Investors Service concluded that the pool's performance is in line with expectations. Based on Moody's updated performance assessment, the loss expectation for the single loan remains small and unchanged since last review. Compared to Moody's last annual review in October 2011, the reported loan to value ratio (LTV) has slightly decreased mainly due to a property revaluation of GBP 569.2 million as of March 2012 compared to GBP 549.5 million at the same date last year. As a result, the current reported LTV is 49.1% compared to 50.9% in the previous year.

Additionally, the portfolio's cash flow performance remains strong, with the reported interest coverage ratio (ICR) at 2.76x at the September 2012 and an average occupancy rate of 99% as of September 2012 IPD. These reflect favourable improvement from 2.31x and 98% respectively from a year ago. Additionally, the loan benefits from the sponsor's market position and management expertise in the student accommodation sector.

TRANSACTION OVERVIEW

UNITE (USAF) plc closed in December 2006 and represent the securitisation of currently 26 properties (31 at closing) located in 12 cities and towns across the UK. The properties consist of buildings and adjacent land which have been built or redeveloped for the purpose of providing student accommodations. The pool is relatively diversified, as the single largest asset account for 11.2% of the reported market value, the five largest assets account for 40.6% and the largest ten assets account for 62.7%. There are 11.121 tenancies in place for the academic year 2012/2013 and around 34% of the income is guaranteed by nomination agreements with the universities.

In accordance with parameters stated in the Facility Agreement, the Borrower has certain substitutions rights which have been exercised twice since closing and always in compliance with the property substitution criteria. The most recent occurred at the beginning of 2012, as three properties located in Manchester, totalling GBP 19.4 million based on reported market value, were replaced by two properties located in Huddersfield with a total reported value of GBP 24.3 million.

MOODY'S PORTFOLIO ANALYSIS

In its review of the transaction, Moody's attributed a value of GBP 506.5 million (an 11% haircut to the current reported value) to the property portfolio which results in a Moody's LTV at refinancing of 55%. In this analysis, the agency took into account the following factors: i) good quality of the underlying assets including proximity to high quality universities and student mix; ii) historic portfolio performance reflecting stable income growth and an average occupancy rate never falling below 95%; iii) management experience of UNITE, the UK's leading purpose-built student accommodation provider, which acts as property and asset manager (and co-investor) for all the properties in USAF and iv) the generally favourable demand/supply dynamics of the UK student accommodation sector as well as the recent government reform of the English higher education system.

RATING METHODOLOGY

The methodology used in this rating was Moody's Approach to Real Estate Analysis for CMBS in EMEA: Portfolio Analysis (MoRE Portfolio) published in April 2006. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Other factors used in this rating are described in European CMBS: 2012 Central Scenarios published in February 2012.

The updated assessment is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's prior assessment is summarised in a press release dated 08 May 2007. The last Performance Overview for this transaction was published on the 08 October 2012.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

Mirco Iacobucci Analyst Structured Finance Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Andrea M. Daniels Senior Vice President Structured Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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