Reports of a private equity buyer for Miller Homes this week means three of the four companies that emerged from the break-up of Miller Group have now been sold on.
As private equity group Bridgepoint is reported to be in advanced discussions to buy the housebuilder arm for more than £600m, attention will now turn to Miller Developments.
Many have speculated it is being wound down but sources close to the developer have pointed out capital is still being put back into the business, which is also now an entirely separate company from Miller Group.
With key developments at Arena Central in Birmingham, Omega Park in Warrington and D2 in Aberdeen progressing, alongside a strategic land arm, the company continues to present an interesting picture.
History
Privately owned developer Miller Group racked up debts of up to £600m in the financial crisis, before agreeing a restructuring of its debt and secured facilities at the beginning of 2012.
Under the arrangement it swapped £264.5m of debt into equity and received £160m of new equity, which made Blackstone’s GSO the largest shareholder with 54%, and gave it new debt facilities of £238m.
At the time, there were essentially four arms to the business – Miller Housing, Miller Construction, Miller Developments and Miller Mining, a joint venture with Argent for a mine in South Wales.
The housing group was the most profitable and Miller Group proceeded to dispose of the other three, with Miller Construction the first side of the business to go in 2014. The mining interest was sold in January 2016.
In February 2016, according to its accounts, Miller Developments was separated out from the rest of the group by way of a capital reduction demerger, which transferred ownership of the business directly to shareholders. Blackstone was, and still is, the largest shareholder.
In 2015, its last results available, it delivered an operating profit of £7m, alongside a turnover of £23.9m.
It said: “The business had an active year securing planning consents and progressing occupier demand on its key longer-term development sites at Omega near Warrington, Arena Central in Birmingham and in Aberdeen.”
It also said it was focusing on investment in land with potential for a change of use – essentially strategic land acquisition.
And now?
According to a source close to the company, the task remains realising the value of some of the assets in the portfolio, which does not rule out a sale but also does require it.
The business is essentially split into four arms: Arena Central, Omega, schemes in Aberdeen and elsewhere, and the strategic land-buying business.
At Arena Central, HSBC has bought the office building it will occupy, while it has been reported that the phase to be occupied by HMRC is to receive funding from L&G. There are still three other main phases left, which Miller is continuing to work through.
In Warrington, where more than half has been sold or forward-funded, there are apparently another 10 deals spinning with many units still to be built out. Schemes in Aberdeen are progressing at a slower pace, particularly in light of the oil slowdown.
Finally, there are a number of strategic land sites in the pipeline, and capital has apparently been put back into this side of the business.
The source pointed out there was a considerable amount of work still to be done across the schemes.
So while the developer could present an interesting sales opportunity, this has not yet been confirmed and, for the moment, does not appear to be on the cards. What could emerge, though, is a strategic land business with potential for sale after the other main assets have been sorted through.
Either way, with Blackstone’s private equity background pushing it to exit assets after five years, an exit would most likely be on the cards sooner rather than later.
Key sites:
Omega Warrington
- The largest mixed-use development in the North-West
- GDV of £1.1bn, with 6.6m sq ft of space available
- 575 acres in total, split across Omega North and Omega South
- As of August 2016, there was 4.2m sq ft occupied and under construction, with a variety of sources of capital buying units and forward funding units. Omega North is fully occupied.
- The scheme includes partnerships with the HCA and Warrington council
- Omega South included 1,100 homes, of which Miller Homes bought 200 homes from phase 1
Arena Central
- A 2.3m sq ft scheme in Birmingham city centre, bought in 2001
- Miller still controls 1.2m sq ft on the 9.2-acre site after selling the 200,000 sq ft Alpha Tower, a residential plot, to Dandara and a Holiday Inn site
- The reworked master plan includes building Arena phases 1, 2, 3, 4 and 5
- The 210,000 sq ft phase 2 has been forward sold to HSBC
- It has been reported that the 240,000 sq ft phase 3 is under offer to HMRC, with L&G providing the funding
- The 142,000 sq ft phase 1 has planning, leaving Phases 4 and 5
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