Quintain has established a 50:50 Joint Venture with Keystone Developers S.A. (“Keystone”), a subsidiary of Keystone Group Holding AG, a Swiss real estate and private equity family office, to deliver the next 306,000 ft² (approx. 28,428 m²) phase of residential development at Wembley Park.
The Joint Venture will pay Quintain £22.7 million (approx. €27.43 million) for the unserviced 2.5 acre plot (“NW01”) and a further £9.5 million (approx. €11.48 million) for future associated infrastructure: a total of £32.2 million (approx. €39 million) In its respective roles as a 50 per cent. partner and the land vendor, Quintain will therefore own 50 per cent. of the equity in the Joint Venture and receive cash proceeds of £13.6 million, paid around completion of the transaction, with a further £2.5 million to be paid on completion of the first phase, anticipated in 2016.
Seven buildings containing 475 homes will be built on the plot, arranged around an acre of private gardens. Two of the buildings, covering 93,000 ft² (approx. 8,639 m²) and containing 143 homes, will be constructed for Quintain, for which the Company will pay the Joint Venture £37.1 million. Of this amount, £5.6 million will be paid in May 2014 with the balance paid from existing Company resources on practical completion, expected in 2016. These homes will be retained by Quintain and professionally managed as high quality private rental sector (“PRS”) accommodation. This builds on the Company’s existing lettings platform, established in 2008, which already successfully manages 150 properties on behalf of individual landlords and achieves average occupancy rates of 97 per cent.
Quintain expects a new, strong income stream to be generated for the Group from this PRS business. In addition, Quintain’s appointment as development and project manager for NW01 will generate fee income of approximately £3.3 million over the next three years, further enhancing the Group’s earnings.
As well as accelerating the delivery of homes at Wembley Park in a sustainable manner, this transaction will enable the Company to invest capital more quickly in its growing London Portfolio.
As at 30 September 2013, the remaining development land at Wembley Park was valued at £312.0 million (approx. €376 million). Consent is held to develop 5,000 new homes (3.2 million ft² on a net internal area basis) on this land, alongside 1.9 million ft² of office, leisure, retail and student development. The £312.0 million included £73.0 million spent on infrastructure across the wider site.
Maxwell James, Chief Executive of Quintain, said: “This Joint Venture unlocks value for shareholders from our largest London asset, paving the way for the delivery of more new homes at Wembley into a supply-constrained London housing market. Strategically, this deal enables us to establish a sustainable development programme for Wembley Park whilst recycling capital into our growing London investment portfolio, with the objective of creating superior returns for our shareholders. “We are pleased to be undertaking this development with Keystone, a partner with whom we have previously worked at Wembley Park with great success.”