London-focused regeneration specialist Quintain Estates and Development is hooking up with a Hong Kong investment group which has agreed to pump money into the development of the Greenwich peninsula in south London.
The group is forming a joint venture with Knight Dragon, an investment vehicle controlled by Dr Henry Cheng Kar-Shun, the Chairman of New World Development, a conglomerate listed in Hong Kong.
Knight Dragon will become the senior partner in Greenwich Peninsula Regeneration Limited (GPRL), taking a 60% stake, with Quintain owning the rest. GPRL has been granted development rights for some 14m square feet of mainly residential mixed-use development land across 150 acres at Greenwich Peninsula.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Knight Dragon has agreed to stump up to £300m of revolving debt funding to GPRL at five percentage points above the applicable three-month London Interbank Offer Rate (LIBOR). Quintain, meanwhile, is under no obligation to chuck more money into the development pot, and the infrastructure it has thus far provided to the joint venture will be repaid to Quintain before any new infrastructure funding.
Quintain will receive cash of £78.8m (subject to a post-completion adjustment), of which £28.8m will be paid by Knight Dragon on completion and £50m will be received on deferred terms over a six year period. With infrastructure repayments, land receipts and fees over the next six years, based on the current business plan, Quintain anticipates receiving a further potential £80m of cash, which would bring total cash received in the six years to around £150m before development profits (equivalent to around 29 pence per share), although the actual amount of cash receipts will depend upon market conditions and the pace of development activity.
Quintain will be appointed as GPRL's development and project manager for a six-year term, for which it will receive an annual fee from GRPL. On top of that, Quintain will provide site-wide development management services at Greenwich peninsula and administration services to GPRL. In total, Quintain expected to receive around £4m in fees a year for these services.
"This is a transformational deal for Quintain and is the next step in realising the inherent value in our key London projects by attracting significant third party capital," Quintain's Chief Executive, Maxwell James claimed.
JH
