Three results and a collapse
Amid the rash of property company results this week, Property Week has today reported the collapse of Parkridge Holdings – John Cutts’ property company, which is being described as the largest casualty in the property industry since Lehman Brothers went into administration. PW says the decline in property values during the post-Lehman downturn meant Parkridge Holdings breached loan to value covenants on its debt in 2008: its plans to repay debt by selling developments once they had been completed were derailed by the credit crunch.
PW says Parkridge had spent two years attempting to refinance its debt but had to call in adminstrators PwC this week to Parkridge Holdings, the main holding company, and Parkridge Gate Developments. Subsidiaries of these companies are not in administration and are unaffected, PW reports.
Cutts has been developing mixed-use and retail schemes in the UK, and logistics and retail properties in Europe, since its most recent business sale in 2007, PW says. Parkridge Holdings had debt of £345m including shareholder loans in its accounts for the year to December 2008 – and £234m of this was either repayable on demand or due to be repaid by the end of 2011, it adds. Lenders to the company include Royal Bank of Scotland, Lloyds Banking Group and Anglo Irish Bank.
The news will come as a shock to the industry, which has seen a series of largely upbeat results this week from property companies Among these was Segro, which on Tuesday reported a sharp drop in H1 pre-tax profits to £64.6m from £148.9m a year earlier, as forecast or slightly above some expectations, and said its vacancy rate had fallen to 11.4% at end-June from 12% at the end of December 2011 and 14% in June 2010.
“There continues to be strong demand for multi-let industrial product in particular for prime assets in London and the South East of the country. Demand is led by institutions who are looking for prime stock but supply of these types of assets is limited. This supply/demand imbalance has led to an improvement in prices for Greater London and South East prime and good quality product. There is also interest in the market for more secondary product from more specialist buyers but here pricing remains softer,” Segro noted. Click here for a list of Segro properties available on novaloca.com.
Retail specialist Capital and Regional also reported upbeat H1 results this week with net assets per share up 12% from the end of 2010 and occupancy levels up 0.8% year-on-year to 94.9% across its three funds. “Market conditions will continue to drive the pace of letting activity in the second half of 2011, which may slow if the current challenging conditions persist for our retailers, but there remains an encouraging pipeline of new letting opportunities for all three of the UK funds,” it noted.
Today, Development Securities also reported half-year results, for what it called its busiest and most intensive acquisition period in 15 years. The group reported a loss of £1.3m for the six months to end-June after a £0.8m profit a year earlier, and said its net assets had declined 1% after dividends to 269p per share from 272p at the end of December 2010.
“In our view, property remains fairly priced as against the main competing asset classes of equities and bonds. Property rental values have also drifted sideways in the six months under review, with the exception of certain Central London sub-markets which have performed well due mainly to supply constraints. The lack of any meaningful economic growth will continue to restrict the ability of landlords to achieve rental growth in the wider market,” the company noted.
Capital & Regional warned that in some cases the weight of money seeking to enter the market had driven land values “to a level where we are rarely able to justify the rental tone and exit yields that would be required for an economic, risk adjusted return”. However, it noted that some of its schemes – where it transforms secondary assets into higher-quality properties – “are accelerating at a faster rate than we had initially envisaged and in those instances, we anticipate an earlier and profitable conclusion to our endeavours”.
