Interim Management Statement

RNS Number : 5281J

Quintain Estates & Development PLC

08 August 2012

 



8 August 2012                                                                             

Quintain Estates and Development PLC

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

Q1 Interim Management Statement

BUILDING MOMENTUM: COMPLETION OF TRANSFORMATIONAL DEAL AT GREENWICH, DELIVERY OF THREE KEY LONDON ASSETS AND FURTHER STRENGTHENING OF THE BALANCE SHEET

HIGHLIGHTS

·      Completion of transformational joint venture deal with Knight Dragon at Greenwich, including £300m of ongoing development funding

·      Completion of 620,000 sq ft of development, with the Hilton Hotel and student accommodation at Wembley and iQ Shoreditch delivered on time and within budget

·      Balance sheet strengthening further, with £90m of capital received since 1^st April and a further £54m to be received this month following the completion of iQ Shoreditch

LONDON

Greenwich

Following shareholder approval for the joint venture with Knight Dragon, the agreement has now been completed and £28.8 million received by Quintain as an initial payment. The transaction secures up to £300m of development capital from Knight Dragon, which is available on an ongoing basis and subordinated to any senior debt obtained, to fund the development of the remaining 12.6 million sq ft of the Greenwich Peninsula scheme, removing the requirement for any further capital investment from Quintain. In addition to an ongoing interest of 40% in future development profits from the scheme, the agreement provides new income streams from development management for the Company and will see the investment to date in infrastructure and land realised over the course of development.

We are now working closely with our new partner on the immediate development plans, with a detailed planning application to be submitted later this calendar year.

Wembley

Another important milestone has been reached at Wembley during the first quarter, with the opening of the new 361-bedroom Hilton Hotel and, ready for the new academic year, the completion of the 660-bedroom student accommodation block.

Elsewhere on site, construction activity is progressing well.  The first stage of the public realm landscaping was completed in time to welcome the one million visitors attending Olympic events at Wembley Stadium and Wembley Arena. The construction of the London Designer Outlet ("LDO"), the core of our commercial offer at Wembley, remains on schedule to open in just over a year's time.  Our leasing team continues to experience strong levels of interest in the LDO which, on opening, will become London's only designer outlet centre. Once completed, it will provide an exciting new retail destination for local residents, tourists and employees.

 ASSET MANAGEMENT

Our specialist property Asset Management business, which is focused on student accommodation, healthcare and West End property, had a good start to the financial year.

iQ

The iQ Fund, a 50-50 joint venture with the Wellcome Trust, saw the completion of the 673-bedroom iQ Shoreditch student accommodation scheme, which increases the capacity of the fund by 15%. Rental levels across the portfolio for the 2012/3 academic year are an average of 5.5% higher than last year and, at 88%, like for like lettings are in line with the same stage of the marketing cycle in 2011/2.

WELPUT

WELPUT, our West End of London property fund, sold Stratton House for £166 million in April, reflecting an initial yield of 4.2% and crystallising significant valuation uplift. Of the proceeds, £96.9m has subsequently been reinvested in Buchanan House, SW1 and 143-157 Farringdon Road, EC1, both of which offer asset management opportunities, with £48.9m used to reduce debt levels in the Fund. Last month the Fund was also named by IPD as winner of the European Property Investment Specialist Fund Award, which recognises WELPUT's delivery of a 15.7% total return per annum for the three years to 31 December 2011 and relative outperformance of 6.4% per annum.

Quercus

While the healthcare sector remains under pressure, this is focused on weaker-performing assets. In Quercus, the team actively monitors the performance of every asset, enabling emerging issues to be identified and managed out effectively. From an income perspective, this means that returns have improved marginally over the last quarter as a result of the recommencement of rental payments from homes formerly let to Southern Cross.

BALANCE SHEET

Management has further strengthened the balance sheet, reducing leverage with the receipt of £90 million of cash since 1^st April 2012. This figure includes the proceeds received on completion of the Greenwich transaction with Knight Dragon, the disposal of the Plaza Hotel and the disposal to Keystone & Partners Real Estate SA of the Wembley student accommodation building. In addition, Quintain will this month receive £54 million following the completion of the iQ Shoreditch student scheme, of which £24.5 million will be used to meet final development costs. After receiving the net proceeds from iQ Shoreditch, on a pro-forma basis gearing (for banking covenant purposes) will reduce from 87% at the year end to approximately 75%.

Max James, Chief Executive of Quintain, said:

"I am delighted that, as a new management team at Quintain, we have had such a productive first quarter delivering real momentum to both our large London regeneration schemes at Greenwich and Wembley.

"The completion last month of our new joint venture with Knight Dragon at Greenwich, with the ongoing provision of up to £300 million of funding, guarantees the long-term financing for the 14 million sq ft development while securing significant additional income streams for Quintain.

"The emergence of Wembley as a major London leisure, retail and residential destination is now well underway with the openings of the new 4-star Hilton Hotel and the 660-room student accommodation block, and the ongoing development of the London Designer Outlet.

"In addition, we have made good progress in reducing gearing, with the receipt of more than £90 million of cash from disposals since the year end and a further £54 million due later this month. This increases further the financial strength and flexibility of the Company as we seek to benefit from our extensive exposure to the resilient London market."

Enquiries:

Quintain Estates and Development PLC                                                   

Maxwell James, Chief Executive / Richard Stearn, Finance Director                                                

Tel: [phone]                                                                         

RLM Finsbury Group

Jenny Davey / Edward Lane Fox

Tel: [phone]

 

END

 

 

IMSLFFILTIIDIIF