Over the past six months St Modwen has continued to focus on delivering against its four strategic objectives: portfolio focus and capital discipline, accelerate commercial development activity, grow residential and housebuilding business, and cement and grow its regeneration reputation, the company has said.
Despite continued uncertainties in the external environment and challenges in parts of the UK property market the outlook for our two key sectors, industrial/logistics and regional housebuilding, remains positive.
The company stated: “Given our extensive land bank and the opportunity to recycle capital out of our existing assets, we are well placed to accelerate the delivery of our substantial pipeline using our own resources in the years ahead.”
Mark Allan, Chief Executive of St Modwen, said: “We have had a good start to 2018 and our expectations for full year performance are unchanged. Our operational performance remains solid and we have made considerable progress in executing our new, more focused strategy that we launched a year ago. Drawing on the significant potential within our existing pipeline, this successful execution is starting to pave the way towards delivering a meaningful improvement in earnings and return on capital in the years ahead.”
The company has continued to shift its portfolio towards assets with the strongest structural growth prospects. In May it announced it had exchanged contracts to sell Longbridge Shopping Park and Wembley Central, which together represented the disposal of 27% of its retail portfolio on average 4% below book value.
The £54m sale of Longbridge has completed since then, with completion of the Wembley disposal expected in the near future. These disposals followed the sale of the first phase of student housing at Swansea Bay Campus in February for £139m, which released £87m of capital net of an associated finance lease.
The two retail disposals at Longbridge and Wembley plus a small retail disposal in Liverpool mean St Modwen already achieved c.95% of the lower end of its target to sell £100-150m of retail and small assets during 2018. Since announcing the new strategy twelve months ago, it has now sold over £600m of assets (excluding newly built homes and land transferred to St. Modwen Homes), representing 38% of the portfolio a year ago. On average, these disposals were in line with book value.
RPA Perspective St Modwen is currently marketing a portfolio of small assets and has some further small retail disposals under offer, so it said it is confident it will reach its disposal target for the full year.
The company said: “We have continued to prepare our future pipeline in line with our objective to grow our industrial/logistics development activity by up to 25% per year by 2020. During the half year we secured outline planning consent for our 1.0m sq ft scheme at Chippenham Gateway, adjacent to junction 17 of the M4, and cleared planning conditions and finalised consents for a 0.2m sq ft scheme at Gatwick, adjacent to junction 10 of the M23. With a potential ERV of over £8m, these sites are expected to become an important part of our income portfolio in the medium term, alongside our other key strategic sites.
“With a yield on incremental capex of circa 9%, recycling capital into these and other industrial/logistics projects in our existing pipeline provides a material pick-up in income compared to the yield on the retail and smaller assets we sell, whilst at the same time we build up a higher quality, more efficient portfolio.”