Argent in £350m funding deal for developments

News

06 January 1996

Argent has hived off its £350m development programme into a joint-venture consortium funded by Hermes and Citibank, writes Karen Lennox.

“We have always viewed development as high-risk, high-reward business: now we have de-risked the development side by turning a large investment in development land to an investment in an active development programme,” commented Michael Freeman.

The funding deal sees Argent and Hermes each putting in £25m of shares and loan stock, while Citibank is contributing £15m. Richard Ellis Financial Services advised the consortium.

In addition, senior debt of £80m has been provided by HypoBank, DePfa and Helaba at 1.25% over LIBOR, while the United Bank of Kuwait is contributing £15m of mezzanine finance which has a margin of 3% over LIBOR.

The joint-venture partners are funding 92,900m² (1m sq ft) of office developments at Brindley place in Birmingham, West Midlands, Thames Valley Park near Reading, Berkshire, and Governors House in the City. Included in the first phase of new development will be Governors House and two buildings each at Brindleyplace and Thames Valley Park. Work is due to start in mid-1996. Argent will continue to manage the projects, and earn fees of £3m.

“To get development funding for anything over £10m is very difficult: but they were attracted by the three different locations and different buildings,” said Freeman.

Argent is selling the development land to the new consortium for £52.6m, putting in 38% of the new equity, and will have a 49% share in profits from the schemes after each partner has had a 13.25% compound return.

It is an attractive return for the company: “We should be able to make £50m profit for Argent over the next few years,” commented Freeman.

And the £40m net cash that Argent realises from selling part of its interest will provide more spending power than the company had on flotation in 1994. “We could buy up to £100m of further investments,” said Freeman. “There are still some pretty good buying opportunities.”

But exposure to further developments will be limited: “We are not likely to buy more than one.”

Argent has hived off its £350m development programme into a joint-venture consortium funded by Hermes and Citibank, writes Karen Lennox. “We have always viewed development as high-risk, high-reward business: now we have de-risked the development side by turning a large investment in development land to an investment in an active development programme,” commented Michael Freeman. The funding deal sees Argent and Hermes each putting in £25m of shares and loan stock, while Citibank is contributing £15m. Richard Ellis Financial Services advised the consortium. In addition, senior debt of £80m has been provided by HypoBank, DePfa and Helaba at 1.25% over LIBOR, while the United Bank of Kuwait is contributing £15m of mezzanine finance which has a margin of 3% over LIBOR. The joint-venture partners are funding 92,900m2 (1m sq ft) of office developments at Brindley place in Birmingham, West Midlands, Thames Valley Park near Reading, Berkshire, and Governors House in the City. Included in the first phase of new development will be Governors House and two buildings each at Brindleyplace and Thames Valley Park. Work is due to start in mid-1996. Argent will continue to manage the projects, and earn fees of £3m. “To get development funding for anything over £10m is very difficult: but they were attracted by the three different locations and different buildings,” said Freeman. Argent is selling the development land to the new consortium for £52.6m, putting in 38% of the new equity, and will have a 49% share in profits from the schemes after each partner has had a 13.25% compound return. It is an attractive return for the company: “We should be able to make £50m profit for Argent over the next few years,” commented Freeman. And the £40m net cash that Argent realises from selling part of its interest will provide more spending power than the company had on flotation in 1994. “We could buy up to £100m of further investments,” said Freeman. “There are still some pretty good buying opportunities.” But exposure to further developments will be limited: “We are not likely to buy more than one.”