Annual Report 2012 - Development Securities PLC

Bannerbrook
Coventry
Braehead
Glasgow
Strategic partnerships
CTP
CTP, our associate company based in Manchester, has
continued to recycle capital into new opportunities. In
addition to progress at Hattersley, Greater Manchester
and Castle House, Sheffi eld (referred to in the matrix of
properties on page 26), the Company also completed the
acquisition of its joint venture partner’s share in three
projects within the Yorkshire region and has already
secured several lettings on vacant elements, adding
value to the projects. CTP also continues to bid for new
business in the Local Authority sponsored town centre
market, an area where it has had signifi cant success and
has been selected by a Local Authority to bring forward
an exciting town centre mixed-use project.
Beyond Green
In the summer, Beyond Green was disappointed to lose
its planning appeal for the project in Tilehurst, West
Berkshire. However, the Inspector’s decision was positive
in many areas and we have begun work with the planning
authority and objectors to examine how a revised smaller
scheme, that better refl ects local environmental
concerns, could be brought forward. In due course we
anticipate submitting a fresh application for a reduced
scheme benefi ting from strong local support.
At the project in Broadland, north of Norwich, we
remain on track to submit a planning application in
summer 2012 for a mixed-use urban extension including
around 3,500 homes. We have been encouraged by the
receptive attitude of the local planning authority to a
comprehensive scheme, positive stakeholder feedback
on the design and sustainability principles adopted, and
confi rmation of Central Government funding for the
Northern Distributor Road.
Barwood
Following the successful completion of two projects,
where planning consent was obtained and the sites
subsequently sold, the Group’s loan of £2.3 million was
repaid, together with a dividend of £0.3 million. The
Group immediately reinvested £2.5 million into a new
associate, Barwood Development Securities Ltd, which
has itself entered into a long-term £15.0 million fund, as
an investor alongside Aberdeen Asset Management, to
secure and promote similar sites. The fund has already
secured four projects and is hopeful of being fully
invested during the course of 2012.
Operating Review
Renewable energy
During 2011, we entered into a joint venture arrangement
with Njord Energy to secure and promote sites for
medium sized wind farms. We view this sector very much
in the same vein as strategic land promotion, being high
risk but with limited capital exposure and high potential
returns. To date £0.5 million has been committed, rising
to a potential of £2.1 million in the event that selected
projects mature. Five sites have been secured under
promotion agreements and initial technical and planning
analyses on all of the sites have been supportive of
making detailed planning applications. These will be
made later in the year and initial determinations should
be forthcoming in 2013, at which point a decision will be
made as to how to progress what will be consented sites
in a marketplace short of such projects and very much
still part of the Government’s green agenda.
Investment portfolio
We have continued with a profi le of investments that
focuses on both core defensive income and asset
initiatives that will create value in the medium-term.
At 29th February 2012, the portfolio comprised
42 assets with a fair value of £237.9 million, increased
from 37 assets with a fair value of £199.2 million at
31st December 2010.
The revaluation of the direct investment portfolio
at 29th February 2012 showed a capital decrease of
£4.7 million or 1.9 per cent. We were disappointed not
to match the IPD Monthly Property Index return for the
twelve months to 31st December 2011, but this was due
in no small part to the strong contribution from Central
London within the IPD Index return. Overall, our total
return for this period was 4.2 per cent as against the IPD
Index return of 8.7 per cent. Whilst our income return was
higher by 0.7 per cent, our capital return was 4.2 per cent
negative as against the Index. In the two months ended
29th February 2012, our total return was a negative 1.6
per cent as compared to positive 0.6 per cent for the
Index. Of the overall decline in values of £4.7 million for
the 14 months to 29th February 2012, £2.3 million alone
derived from the impact of the administration at
Peacocks, which resulted in multiple store closures on
22nd February 2012. This was the fi rst signifi cant tenant
failure within our portfolio in recent years, but has and
will continue to be mitigated by the good location of the
fi ve properties involved. Indeed, at the time of writing,
we estimate that approximately 50.0 per cent of the
Development Securities PLC / Annual Report 2012 29