Formation reaches settlement over London property venture
FORMATION group has reached a deal over a disastrous property venture in London.
Earlier this year AIM-listed Formation, which is based in Hale Barns near Altrincham, revealed it would take a hit of £11.6m after Heritable Bank, the backer of a development at Aldgate East tube station in London, was placed in administration.
Today, Formation said a settlement has been reached by Julius Properties Limited (JPL) with the administrators of Heritable Bank, and it is now forming a joint venture with JV Finance Limited in order to complete the development.
Under the deal, an £11m settlement has been agreed as a final settlement against the indebtedness of £32.9m to be paid by JPL to Heritable.
Formation and JV Finance will each inject £5.5m into the joint venture – JV Finance Ventures – and this will be paid to JPL in return for any profits generated in respect of the Aldgate development.
£7m was paid by JV Finance Ventures to JPL last Friday and this has been paid by JPL to the administrator. The £4m balance will be paid by JV Finance Ventures to JPL and then paid by JPL to the administrator by end of March next year.
JPL was incorporated in June 2006 as a special purpose vehicle to acquire the land and commence the Aldgate development. It is owned by Impala, however the profits derived from Aldgate were to be split 22.5% to Formation and 77.5% to JPL.
Formation chairman John Lawrence said: “The board has been working hard with JPL who in turn has held numerous meetings with Ernst & Young since Heritable Bank’s administration order in October 2008.
“The culmination of these discussions and negotiations will, we anticipate, generate both development and site construction management profits for Formation whilst at the same time, enabling us to address the commitment made to the development’s loan note holders. The settlement amount of £11m against the indebtedness of almost £33m represents a substantial saving.”
Slimmed-down Formation Group has last week continued its sell-off of non-core assets with the sale of the majority of its wealth management activities.
The company wants to focus on property development, and having sold its sports and showbiz representation divisions for £20m to a private equity firm, is now disposing of the other businesses.
