Following the successful refinancing of the Company in June, we have been able to transact a steady flow of business. We continue to achieve planning and other successes in marshalling our sites for future development, and to find good acquisition opportunities. Cash management and cost control remain important priorities for the Company. We are beginning to see value in certain acquisition opportunities but we have not yet found compelling reasons to use a material amount of the newly-raised funds.
Despite the general economic background, we remain active across all of our regions:
– We are beginning to see signs of recovery in the residential land market, with bids received, or contracts exchanged at or above current book values, on four disposals totalling 34 acres.
– We have completed the construction and investment sale of an 80,000 sq ft call centre building at Stoke-on-Trent, let to Vodafone. The building has been sold to a private investor for £10.7 million, reflecting a net initial yield of 8.0%.
– Construction has commenced at Deeside District Centre, Connah’s Quay, Flintshire, following agreement for the sale of the 52,000 sq ft Morrisons supermarket which anchors this £15 million scheme, to a local authority pension fund at a yield of 6.65%
– We have sold a significant number of small units at our schemes built during 2008/9 at Fenton, Trentham Lakes, Dursley, Shepcote, Holbrook, Hilton, Queensway, and Henley. These sales, totalling 131,000 sq ft since May, have been achieved at or above book value.
– We have also been very active with our asset management during the period, as we seek to mitigate the impact on our rent roll of current difficult market conditions. Our like-for-like gross rent roll currently stands at some £43m p.a., an increase of £1.3m since 30 November 2008. This reflects our success in achieving £5.5m of new lettings to offset £3.7m of vacations and £0.5m of tenant failures in the period.
– We have also faced our first significant contractor failure in this period, with the receivership of Ashford Construction, main contractor for our £35 million Warwickshire College building at Rugby. Using the skill and knowledge of our in-house construction team, we have assumed direct responsibility for this construction programme thereby not only safeguarding numerous subcontractor jobs but also keeping the project on programme and within the original budget..
The marshalling of the hopper for future development continues to make good progress across our regions this year:
– Confirmation of unconditional funding has been received for the flagship 250,000 sq ft Bournville College at Longbridge, where work is expected to start in October on this two year £66m project which is of great strategic importance to the area.
– Having secured funding from the Homes and Communities Agency, we expect to start the development of 100 residential units in March 2010 at our 200 acre Locking Parklands scheme in Weston-super-Mare. This initial phase of works forms part of the overall £400 million, mixed-use development project on this former RAF site which is expected to take up to 20 years to complete and provide up to 1,600 job opportunities.
– At Coed Darcy, our £1.2 billion urban village in Neath, West Wales, we are on site with the first phase of 63 homes. Off plan, we have already sold nine of these units to a private investor; the remainder will be released to the market in Spring 2010.
– The Government’s final decision on Middle Quinton, the proposed Eco Town for our Long Marston site, will not be made until the Department for Communities and Local Government has fully considered the conclusions contained in the the West Midlands Regional Spatial Strategy Panel report, published on 28 September. In the meantime, we have, after full consultation with the local authority, submitted in parallel to this a separate planning application on this site for a leisure-led mixed use scheme.
– We are currently constructing over 130,000 sq ft of pre-sold buildings at our Langford Mead project in Taunton including a 75,000 sq ft Heritage Centre for Somerset County Council. We are also building a 22,400 sq ft facility for Staffordshire Fire and Rescue Service at our 400 acre Trentham Lakes Business Park development.
– We continue to advance our mixed-use redevelopment schemes, with excellent progress made at both Farnborough Town Centre (with the completion of the Sainsbury’s foodstore and Travelodge Hotel) and Wembley Central (with the completion of the first phase retail and commencement of the fit-out of the first phase of apartments).
We have been concentrating on acquisition opportunities where we are able to control the timing of expenditure to minimise any immediate exposure. We are seeing an increasing number of such opportunities, as competitors and their banks begin reassessing their commitments to development agreements.
As previously indicated, we have continued to add to the hopper by exchanging contracts with BP on the acquisition of a 2,500 acre portfolio of disused sites, and expect to complete this acquisition before year end. The consideration will be nominal, with an undisclosed dowry received from BP in exchange for us taking on the liability for remediation works.
Our South West office has acquired a 22 acre site in Clevedon which will be transformed into a new Business Park, providing over 300,000 sq ft of commercial accommodation.
The Yorkshire and North East office has acquired a brownfield site in Sheffield on which we have since secured planning permission to build a 120,000 sq ft trade park; 75,000 sq ft of which has already been pre-sold to a storage company.
We have reached agreement with Fortis Bank for the extension of a £38m facility until June 2012 which will enable our Sowcrest joint venture to complete its £90 million Wembley Central scheme. The Group now has no re-financing requirements before November 2011.
The occupier market remains challenging with rent levels increasingly under pressure, which may impact further on year end valuations. However, there are more positive signs on the investment front, where liquidity and demand for the right product appear to be improving, and where yields may have found a stable level.
With our solid financial base, the diversified scope of our activities, and a growing hopper, our confidence in the longer term remains undiminished.