Urban&Civic builds momentum

While a majority of property companies are reporting slowing or declining net asset value (NAV) growth, Urban&Civic clocked up NAV growth of 9 per cent in the year to September 2018. But huge amounts of value locked away in its portfolio has yet to be crystallised. Putting this another way, there were 445 completions in the year to September, compared with guidance of 315 at the start of the year, but the portfolio comprises more than 50,000 residential plots, 40,000 of which have planning consent.

Another measure of the value locked into the portfolio comes from the policy of independent valuers to apply a discount to valuations of large plot parcels (150-plus homes). This valuation discount to open-market prices is equivalent to 145p per Urban&Civic share, an indication of potential future value.

As master developer, Urban&Civic grants a licence for housebuilders to build homes on selected plots. Meanwhile, it completes all the ground work, which reduces risk for housebuilders and helps speed up the planning process. This means builders can start on site with little delay. The model also has backing from Homes England, which is providing a £26m financing facility. Urban&Civic receives a third of the cash when the completed homes are sold and there is an agreement for a minimum annual amount based on assumed fixed-price sales of 35 to 40 homes. The minimum amounts due were reflected in £17.3m of non-current receivables at the year-end, which on the one hand represent expected minimum cash inflow but also give a measure of counterparty risk should any partners get into difficulty.

Last year saw some encouraging progress on individual sites. At Urban&Civic's Wintringham site, work on the infrastructure accelerated and the first home owner should be in place by the end of 2019. The point here is that from submitting the planning application to handing over the keys will have taken just two years, compared with the historical average of 6.75 years.

The quality of the portfolio is impressive, with much based within commuting distance of London, but also including the express highway and new railway line between Oxford and Cambridge. A more recent off market project has been secured with landowners wanting the company to act a master developer on an initial 800-acre site at Calvert in Buckinghamshire, with co-operation arrangements to take the total land interest to nearly 2,500 acres intersected by HS2 and the Varsity railway lines. Adjoining the HS2 maintenance depot, the site could accommodate 10,000 homes.

However, it’s not all plain sailing, as is the case at Waterbeach in Cambridgeshire, where the planning application was submitted nearly two years ago but remained bogged down in bureaucracy. Situated near the Cambridge science and business parks, the site includes 6,500 homes, and such is the demand for quality sites in the area that the company reckons the queue of builders goes round the yet-to-be-constructed block. The problem here is that the local council leadership changed hands, which set things back. And there were further delays in adopting the local plan.

In addition, the wobbly nature of consumer confidence has prompted a 20 per cent reduction in planned output. That said, Urban&Civic is still targeting 2019-20 sales of 950 along with 135 from Europa Way, which is part of its Catesby business that's focused on smaller sites. The average length of forward sales currently stands at 4.5 years. Prospects are supported by the backing from Homes England, with the agency expected to be the principle lender through project-specific funding on consented sites.