Development Securities differs from most property
companies in that it seldom owns the major developments that it is working
on, although it may, on some schemes, have a modest financial or even equity
involvement. This low-risk financial structure, known as forward-funding,
is central to the Company’s progress and assists in providing a clear
view of potential earnings and cash flow streams for a number of years ahead.
Such a strategy also provides leveraged returns for your Company’s
expertise and financial commitment.
Your Company has considerable expertise in the creation and management of
major, complex, mixed-use property developments. Such schemes include PaddingtonCentral,
the exciting project on the old goods yard adjoining Paddington Station,
and The Royals Business Park, a 50-acre site with a one mile frontage onto
the Royal Albert Dock, one of the foremost regeneration areas in the UK.
Our team uses its expertise to identify a potential major development,
prepare detailed drawings and financial appraisals and seeks any necessary
variation to planning consents. In parallel with this activity, we present
the scheme to leading financial institutions, inviting them to invest in
the development of the project.
Once the funding and institutional ownership of a new development has been
secured, Development Securities is normally responsible for project managing
the construction process, delivering the building on time and within budget.
As part of its agreement with the project’s investors, Development
Securities also assumes responsibility for letting the completed building,
usually on institutional terms to quality covenants. The Company’s
profit comes from project management fees and a participation in any uplift
arising to the investors in the final investment value of the project when
compared to the total development cost. Forward-funding imposes limited
contractual liability on Development Securities should the completed building
not be let profitably. This is a key benefit and highlights one of the main
differences between forward-funding and conventional financing of property
development. That our strategy is also successful for funding institutions
is illustrated by our list of funding partners.
At this stage in the development cycle substantial sums of money are increasingly
required to secure significant sites. Our risk capital in the development
part of our business will be increasingly allocated to direct interests
in land, rather than in development activity itself. Each subsequent phase
could, if appropriate, be developed together with institutional partners
on a more traditional forward-funded basis. In line with our risk-averse
strategies we will invariably seek joint venture partners to share even
the initial land risk for our large scale projects. Curzon Park in Birmingham,
which we recently joint ventured with Grainger PLC, is a good example.
On small- and medium-sized projects, the Company may assume complete ownership
of assets directly, but will seek wherever possible to secure significant
pre-let arrangements that reduce exposure to the occupier market.
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Our funding partners have
included:
Standard Life Investments
The Prudential Assurance Company
Legal & General Assurance Society
Universities Superannuation Scheme Limited
Morley Fund Management
DEKA Immobilien Investment GmbH
Commerz Grundbesitz Investmentgesellschaft
Deutsche Grundbesitz Investmentgesellschaft
Pillar Property PLC
DIFA Deutsche Immobilien Fonds AG |
Phase II, PaddingtonCentral