UPDATE 1-Student landlord Unite safely within loan covenants

* Defers final dividend to save cash

* Posts 21 pct fall in adjusted, diluted NAV

* Shares rise 20 pct

(Adds details, shares)

LONDON, March 9 (Reuters) - Shares in student accommodation provider Unite Group (UTG.L) rose by a fifth on Monday after it said it had slashed net debts by 330 million pounds since November 2006 and loan-to-value covenant limits remained intact.

Shares rocketed 20.5 percent to 47 pence by 0913 GMT in response to the news, offsetting the board's decision to defer a full-year dividend in a bid to conserve cash.

Unite, Britain's biggest student landlord with more than 39,000 tenants, said it had squeezed its net debts to 531 million pounds ($755.3 million) from a peak of 862 million pounds and it had sold 154 million pounds of non-core assets during 2008, smashing an original 100 million pound target.

"Demand for good quality, well-located student accommodation investment assets remained robust through the majority of 2008," Unite CEO Mark Allan said in a statement.

"Taking this evidence into account, we believe that yield expansion in student accommodation investments will continue to be less pronounced than across the broader property market, with rental growth prospects also providing an effective buffer."

Unite posted a 21 percent fall in adjusted, fully diluted net asset value per share to 325 pence in the year to end-December, broadly in line with analyst expectations.

Its net assets, excluding minority interests, fell to 320 million pounds from 450 million pounds a year earlier, principally as a result of the spiralling decline in UK property values.

However, robust rental growth prospects helped to peg the decline in the value of its investment portfolio valuation to 5 percent, compared with an industry average fall of 27 percent.

Underlining the recession-proof characteristics of student property investment, Unite said it achieved a record occupancy of 99 percent during the academic year 2008/09, compared with 92 percent occupancy in 2007/08.

It said 65 percent of its portfolio had already been reserved for the forthcoming academic year at March 6, up from 62 percent at an equivalent date last year, and indicating rental growth in the range of 7-10 percent. (Reporting by Sinead Cruise; Editing by Jon Loades-Carter) (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)