Property market “improving”

Regeneration specialist St Mowden says it is seeing “signs of improvement” in the property market despite wider annual losses.

The firm, which specialises in town centre regeneration and bringing old industrial sites back into use, posted pre-tax losses of £119.4 million for the year to November 30, up from £73.1m the previous year.

Schemes it is working on in the South West include

But St Mowden added that prices had stabilised after a 20 per cent decline in assets over the year, and predicted a return to profit growth.

Rupert Joseland, South West regional director, St Modwen adds: “During the first quarter of the year, we signed development agreements on two major regeneration schemes, including the £270m Firepool development in Taunton and the £210m project to develop Skypark in Exeter, where site infrastructure works are already underway.

“In Weston-super-Mare, we are progressing with the £400m Locking Parklands scheme and also acquired Westlands Distribution Park. We purchased a site in Clevedon which will be transformed into a business park and secured an agreement to develop our first phase of housing at the £100m Langford Mead scheme in Taunton.” Shares in the Birmingham-based firm rose after it grew rental income with asset sell-offs and tenant failures more than offset by new lettings and income from newly completed developments. Most of the firm’s losses were taken in the first half when the recession was at its worst, but the performance of the business has “significantly improved” since then.

Cutting  costs

The group raised £101.6m to cut debts and has scaled back development activity to weather the downturn, as well as cutting costs through a pay freeze and closing its final salary pension scheme.

St Modwen also had an “excellent year” for acquisitions, taking advantage of depressed prices to spend £13m on 705 acres of developable land for its land bank. Numis analyst Chris Millington said: “Whilst the group is yet to benefit from the uplift in commercial property values seen elsewhere, with yields on its portfolio approaching 10 per cent and the rent roll increasing in last year, we feel it’s a matter of time.”

“When this potential is considered alongside the around 20,000 plots of residential land we feel that St Modwen offers the investor a unique mix of residential and commercial exposure.”

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Looking forward: Artist’s impression of the new £270 million Firepool scheme in Taunton