QuickView: St. Modwen Properties - New Covent Garden Market

St. Modwen provided further details on one of its largest regeneration projects: the New Covent Garden Market in Vauxhall, London. A joint venture company, Vinci St. Modwen (VSM), will develop the site from January 2015, subject to revised planning consent. A new market will be built for the market authority (estimated cost £150-200m) in return for surplus land with an estimated fully developed value of £2bn.

New Covent Garden Market (NCGM) terms agreed in January
St. Modwen hosted a visit to the NCGM site on 7 February, following the signing of the development agreement with the market authority (CGMA) last month. The contract is conditional on securing planning permission for the VSM’s design for a modern 550,000 sq ft market and the redevelopment of 20 acres of surplus land with a high-quality residential-led scheme, with 2,800 homes and 115,000 sq ft of commercial/community space. Phased completion will help to fund the market construction. Alternatively, the site could be developed with partners.

Deal implies a significant discount to land values in the area
The effective cost of acquiring the land is the construction cost of the new market (£150-200m), phased over six-to-seven years. The implied land cost is £7.5-10m per acre compared with recent transactions in the area at £10-40m per acre. Residential schemes launched in the wider Nine Elms area have been selling quickly, even at a large premium to VSM’s assumed price of £900psf. VSM is projecting a development margin of 20-25%, which allows for a 15% affordable housing allocation, an infrastructure levy of £60m and assumes no sales price inflation.

Further details on new Swansea University campus project
St. Modwen also announced details of the first £150m phase of the new Swansea university campus to be built on its 63-acre site in Swansea Bay, which is due to start in April and complete in 2014-15. The development agreement includes 400,000 sq ft of academic buildings and 899 rooms of student accommodation, with 50% of the RPI-linked rental guaranteed for 45 years.

FY12 results showed continued progress to 300p NAV target
St. Modwen reported an 8% increase in FY12 NAV to 251p and a 12% rise in trading profit to £25m. PBT was up 2% to £53m and the dividend was raised 10% to 3.6p. The company thus looks on target to reach its 300p NAV target by 2015.

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