Urban Splash publishes first results since change to in-house construction activity

Manchester-based regeneration company Urban Splash, has published its first set of results for the year ending December 31, 2023, under a new senior team which, it said, show the resilience of its leasing model across a range of real estate sectors.

Turnover for the group was £13m for the year (15 months ended December 31, 2022: £40.1m). The reduction reflects the decision in the prior period to minimise in-house construction activity, which reduced from £23.9m to £0.4m in 2023.

On an operating level and excluding a revaluation and share of joint venture profits (both non-cash items), adjusted profit before interest and tax would be £0.1m (2022: £1.8m).

Loss before interest and tax was £6.2m (15 months ended December 31, 2022: £0.2m profit) which largely reflects the downward revaluation of the group’s commercial properties by £7.5m (2022: down £1.6m) and the group’s share in profits from joint ventures has increased by £1.3m in the year.

As a result of the first drawdown on the loan facility with Grosvenor Developments, third party debt increased by £0.8m from £56.5m 2022, to £57.3m and cash balances increased by £1.7m to £7.2m.

The annual report shows high occupancy levels of 92% in commercial property and 97% in residential property.

Despite a challenging market, commercial rents have risen by five per cent. Rents in the group’s residential management business increased by seven per cent.

The group said it made substantial progress in advancing its pipeline, which includes 4,800 homes and 0.6 million sq ft of commercial space. Among its achievements was securing planning for a further 125 new homes at Park Hill in Sheffield, and its start on site at Mansion House at Port Loop in Birmingham.

Both developments are being created in joint venture with Places for People, with whom Urban Splash has a combined pipeline of 1,300 homes and 110,000 sq ft of commercial space.

Urban Splash is working in joint venture with Glenbrook on the delivery of the first phase of a 1,600-home scheme at Campbell Park in Milton Keynes, while work at Royal William Yard in Plymouth, New Islington and Old Mill Street in Manchester, Windermere and Swansea have all progressed. The company also entered into an agreement to redevelop the Cole Brothers building, Sheffield’s former John Lewis department store, this year.

Urban Splash made the first draw down on its £10m, four-year equity loan facility with Grosvenor Developments which provides enabling finance for Early stage projects and land acquisition.

The results report growth in commercial property rental income, with turnover totalling £9.2m (2022: £8.8m pro-rated for a 12-month period) which reflects modest rental uplifts and a full year of income for the 56,169 sq ft of space at Melville, located at Royal William Yard, Plymouth. Occupation across the portfolio was at 92% at the end of the year (2022: 94%).

Despite the improvement in income, the valuation of the investment property portfolio saw a net decrease of £7.5m (2022: down £1.6m) in the period, which was largely due to an outward yield shift across the portfolio.

This reflects the significant uncertainty and risk appetite for certain types of commercial use which have seen large yield shifts. Despite the decrease in valuation, loan-to-value covenants continue to be met with headroom.

The group’s residential management team increased its portfolio of properties under management for third parties, which include the Urban Splash Residential Fund and Places for People, from 852 at the beginning of the year to 956 at year end.

During the year, occupancy averaged 97%, monthly rent collection 98% and rental increases seven per cent, reflecting both the strength of the rental market and the strong operating performance of the team.

Urban Splash CEO, Julian Curnuck, said: “Urban Splash is a pioneer in regeneration that is achieving its aims and leaving a positive mark on the world by using great design to transform undervalued buildings and places.

“Where we retain ownership and responsibility for past developments as a property company, we are sharing in the success and continuing appeal of our developments.”

He added: “Over three decades, we have gained a reputation for turning disused buildings and challenging brownfield sites into resilient and exciting places to live, work and play across towns and cities all over the UK.

“This year sees the first set of financial results under the stewardship of the new senior team and reflects a period of limited on site development activity but investment in progressing our pipeline of development projects and a transformative era of regeneration.

“Developments like Port Loop in Birmingham, Campbell Park in Milton Keynes and our ambitious city-wide plans for Swansea are rapidly becoming a reality.

“I want to extend my thanks to all our colleagues, partners and friends for their dedication and hard work and look forward to the year ahead.”