Interim Management Statement

RNS Number : 0648M

Quintain Estates & Development PLC

10 August 2011

 



10 August 2011

Quintain Estates and Development plc

("Quintain" / "Company" / "Group")

Q1 INTERIM MANAGEMENT STATEMENT

Quintain's first quarter IMS sets out the progress it has made to date towards the achievement of the 12 operational milestones that it set earlier this year in its Annual Report.

Urban Regeneration

Wembley City

In support of our objective to recycle £100m of capital at Wembley, on 10 June 2011, the Company announced that it had agreed a forward land sale and development contracts with Keystone Partners SA for the 660-bedroom student accommodation building at Wembley City. Under the terms of the agreements, Keystone Partners will make payments to the Group totalling £53m. Including the separate sale of five apartments at Wembley for £1.5m, the total proceeds of £54.5m represent a surplus of £3.5m over 31 March 2011 valuation and a surplus of £5.2m over budgeted cost. Of the total proceeds, £50m will be paid on practical completion of the building in July 2012.

At the London Designer Outlet, letting activity and negotiations in respect of a joint venture continue. We have already secured leases for over 17% of the base rent and have a further 23% in negotiation. Our intention is to start construction of this scheme towards the end of this year, with a projected opening date of late 2013.

Having gained recommendation to grant approval for the North West lands' planning application, we await endorsement from the Mayor's Office. In the meantime, we are working towards finalising the Section 106 negotiations with the London Borough of Brent, which have been agreed in principle.

In order to reconfigure and revitalise Wembley Retail Park in line with our overall retail strategy for Wembley City, we have secured a change of use consent from bulky goods to open A1 for 73,300 sq ft of this 212,000 sq ft scheme. We are awaiting a decision on two further planning applications in respect of this asset, covering the change of use of an additional 35,000 sq ft to open A1, and the reconfiguration and major refurbishment of the original third on which open A1 was granted. Over the longer term, we anticipate that this will enable us to bring additional vibrancy to the retail offer and capitalise on the ongoing demand from high street retailers looking to gain greater representation on retail parks.  

Greenwich Peninsula

We are advancing our plans to develop the first two residential plots at Peninsula Quays. Enabling works are planned to start soon which will include the rebuilding of the river wall as well as further infrastructure and ground works.  We continue to progress with the commercial district at Greenwich Peninsula where, together with our partners Lend Lease Europe, we have agreed heads of terms with a serviced office provider for 10,500 sq ft at Mitre Passage. 

Fund Management

Healthcare

We firmly believe that over time, good operators in the healthcare sector will prosper and demographic trends strongly support this view. However, parts of this sector are currently experiencing the impact of the Government Spending Review ('GSR') and the subsequent impact on Local Authority budgets. 

As property managers of the Quercus Healthcare Fund, we have been very active, remaining close to our operators across the portfolio, monitoring their performance and working with them to mitigate the effects of the GSR and other operational issues. Where operators do go into administration, as in the very high-profile case of Southern Cross, we are swift to minimise the impact on the homes and their occupants. In respect of the eight homes leased to Southern Cross, we have already identified new operators for these and are in the process of transferring the homes to their management. 

Student Accommodation

We have made good progress with two student accommodation developments within the iQ Fund.  iQ City N1 (formerly Corsham Street) topped out recently and will be operational for the 2012/2013 academic year and iQ Hoxton will open at the end of August, 2011. On completion these assets will provide 673 and 257 beds respectively meaning that iQ will have in excess of 5,000 beds in operation. 

We continue to see good demand for our accommodation from students across the portfolio for the 2011/2012 academic year. Many buildings are already fully let and leasing levels across the 4,510 bed operational portfolio are above 90%, with some 300 rooms to let across the portfolio to achieve 97% occupancy, which we believe is achievable before the start of the academic year.

Science Parks

We remain on schedule to open the Spark One Building at the Bristol and Bath Science Park, on budget, in early September and have already secured three occupiers for the Innovation Space. We expect this building which has been designed specifically for start-up businesses and as the social hub for the Park, to achieve good levels of interest when it opens, having been encouraged with the levels of lettings and other enquiries for the Innovation Space received to date.

Finance

In terms of the two financial milestones, we continue with our efforts to move towards a position of cash flow neutrality and extending the debt maturity profile of the Group. The Company is working towards reducing voids across the business, and has successfully concluded a number of small lettings as well as rigorously controlling overheads. With regard to our target of extending debt maturities, Barclays has agreed to extend their loan facility of £35m to April 2016. At the same time it has increased the quantum to £50m with immediate effect, and with the prospect of an additional uplift next year to £60m. We have now achieved extended maturities on £355m of our £400m target commitment for April 2016 (either outright or through option arrangements).

At the year end, we announced that we expected net debt and gearing to rise this year as we complete a number of development schemes before these reduce again as the cash from sales is received on practical completion. However, we are in active negotiations on a number of fronts to bring in third party investors. This is especially true at Wembley, where we announced the forward sale to Keystone SA in respect to the Student Accommodation and continue negotiations in respect of a joint venture at the London Designer Outlet.

Board Appointment and Changes to Director's Particulars

On 6 July, 2011, it was announced that Max James had been appointed to the Board as an executive director with responsibility for the Group's activities at Wembley City and for securing third party funding for the Company's Urban Regeneration and Fund Management activities.

At the Annual General Meeting, Chris Bell will be taking over as Chair of the Remuneration Committee from Martin Meech. Simon Laffin, non-executive director was appointed to the Board of Assura Group Limited on 8 August 2011 as a non-executive director and Chairman designate.

Advisers

Barclays Capital has been appointed joint stockbroker to the Company alongside our existing brokers J.P. Morgan Cazenove. Lazard and J.P. Morgan Cazenove remain the Group's joint financial advisers.

Commenting, Adrian Wyatt, Chief Executive said "The financial year has started well. In May 2011, we set out some ambitious milestones and, although it is still early days, the progress towards achieving these is encouraging. Wembley is continuing to advance with demonstrable progress towards one of our milestones with the sale of the student accommodation in excess of valuation. We are bringing a fresh impetus at Greenwich, with our plans at Peninsula Quays. Fund Management is also making good progress, with the first phase of its science park and more student accommodation developments approaching completion.

"Over the past few days we have seen social unrest in London and turmoil in the financial markets. Of course in the short term this adversely impacts on sentiment; however, I firmly believe over the long-term London prospects remain robust."

For further information please contact:

Quintain Estates and Development plc

Rebecca Worthington / Emma Villiers (before 8.30am 07799 133387)

Tel:         [phone]

Financial Dynamics

Dido Laurimore / Laurence Jones

Tel:         [phone]

Quintain 2011/2012 Operational Milestones

Wembley City ·      Recycle £100m of capital ·      Finalise planning at the north west lands ·      Fund and start building the London Designer Outlet ·      Increase income and profit contribution	Greenwich Peninsula ·      Accelerate residential development ·      Secure inward investment ·      Attract new office and retail occupiers ·      Build Greenwich Peninsula's sense of place
Fund Management ·      Grow funds under management to at least £1.5bn this year ·      Support growth by securing £40-50m of third party investment ·      Increase income and profit contribution ·      Create a new fund and/or secure partners for the residential elements at Greenwich and Wembley

Forward looking statements

This document may contain certain forward looking statements. By their nature forward looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes of results expressed or implied by such forward looking statements.

Any forward looking statements made by or on behalf of Quintain speak only as at the date they are made and no representation or warranty is given in relation to them, including as to their completeness for accuracy or the basis on which they were prepared. Quintain does not undertake to update forward looking statements to reflect any changes in Quintain's expectations with regard thereto or any changes in events, conditions or circumstance on which any such statement is based.

Information contained in this document relating to the Company should not be relied upon as an indicator of future performance.

 

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