The UK government’s commitment to increasing home ownership in the recent Spending Review will have been music to the ears of Urban & Civic.
The company’s stated intention is to use residential development as the base of a long-term income stream.
The government’s promotion of home ownership helped preserve a vital line of credit for the company’s future plans to develop out-of-town housing in the East and South East of the UK.
It is a model well known to Nigel Hugill, who founded the business in 2009. Hugill has a peerless reputation in the regeneration arena, following his time as chief executive of Chelsfield and executive chairman of Lend Lease Europe.
When Urban & Civic floated in May 2014 following a reverse takeover of Terrace Hill, it raised £165m from an investor base including Investec and Morgan Stanley, which had backed Hugill at Chelsfield.
From the off, Hugill made it clear what investors were going to get. “We are very purposely positioning ourselves as different from other people by saying we were going to have half the balance sheet in strategic land,” he says.
He adds that unlike many land companies, Urban & Civic entered into the market well capitalised and with a team experienced in large-scale development.
A year and a half later, that experience has helped overcome planning hurdles and struggles with income streams and delivered on its promise across a number of different schemes.
The company’s biggest project, the £147m site at former RAF station Alconbury, Huntingdon, was kick-started through building infrastructure ahead of any house builders joining the project.
It was a bold decision, says Hugill, and one he suggests is “not usual and not the way that people would look to do things”.
But he believes that in taking that step the company was able to make house builders more comfortable in joining its projects. He also claims the strategy attracts an element of government funding, which eliminates some of the planning risk inherent in the business.
So far the Homes & Communities Agency has loaned £50m to Urban & Civic, of which it has drawn £11.2m for a 2,600-home scheme in Newark-on-Trent, Nottinghamshire.
Urban & Civic obtained the scheme as part of its acquisition of strategic land company Catesby in February this year for £34m. Hugill says the business added “an old fashioned land promotion business” to Urban & Civic’s strategic land offering.
A focus on strategic land has seen the company increase its NAV to 272.1p at the end of September this year, a 9% increase on 2014.
The company expects a total of £84m of its schemes to compete in spring 2016, on time and on budget. With further projects due to receive planning consent in the same period, the future looks good for the strategic land business.
Indeed, JP Morgan Cazenove said the annual results were “a good update” and Urban & Civic had “much to look forward to in 2016”.
The Spending Review looks to have been a very welcome early Christmas present. Some of 2016 will possibly see interest by Urban & Civic in the sale of Ministry of Defence and other government land.
“It’s more of the same in that regard,” says Hugill. “We will take on some further big schemes.
“We are in the kitchen cooking away on a few at the moment, but there’s nothing that is coming to come as a starter before Christmas.”
Urban & Civic
Executive chairman: Nigel Hugill
NAV: £389.9m
Shareholder return in year to 30 September: 15.8%
Market cap: £401.8m
Debt: £73.2m
