Bruntwood considers joint ventures
PROPERTY giant Bruntwood is “actively looking” for new properties in Leeds as it looks at potential joint venture schemes with institutional lenders which would see them take on the responsibility for managing sizable portfolios of office properties.
Chief executive Chris Oglesby told TheBusinessDesk.com that it would be willing to abandon its traditional model of taking on sole ownership and management of the buildings in its portfolio if it allowed the company to participate in an upside in transforming a larger stock of distressed properties.
Oglesby said that the although the firm did not have as much equity at its disposal than it had in previous years – largely due to the overall decline in property values – it could still inject capital into schemes and had a track record of actively managing assets.
He argued that such an arrangement would make more sense to lenders than to sell to an investors who will put managing agents into a building and then sit on a property until the market experiences an upturn in capital values.
“The banks could do that themselves,” he said.
Bruntwood announced results for the year to September 30, 2010 on Friday which showed a 3% increase in turnover to £11.2m although pre-tax profits dropped back by 12% to £11.1m. The net worth of its 6m sq ft portfolio also increased by 3% to £310.5m.
“Given where we are in the property cycle we’re pleased with the way the business is performing.”
Oglesby said that the company’s primary focus for the coming year would be to strengthen its portfolio in its core regional city centre markets.
He said that the company was more confident about regional city centre markets than London-based investors and institutions – many of whom have been predicting a “bloodbath” in the markets for secondary space.
“What people in London don’t see as much is that there are a lot of very well-run privately-owned businesses here,” he said, arguing that the emphasis on the impact of public sector contraction on northern cities may have been overplayed.
Its focus for 2011 will be its city centre markets of Birmingham, Leeds and Liverpool.
“In Leeds, we have no stock available and we’re 100% let. In Birmingham, we have a 12-month pipeline but in both cities we’re out and we’re actively looking for more.”
In Liverpool, meanwhile, the firm is continuing to refurbish floors on The Plaza building as they become available and will follow its refurbishment of the former Queen Insurance Building on Queen Street with an upgrade of Cotton House on Old Hall Street.
Oglesby also indicated that Bruntwood will also soon begin to look at refinancing or replacing the long-term debt it obtained via a £440m securitisation deal in 2007.
“We have three years left on it, but we are starting to look at how we might replace that ,” he said.
The securitisation market has since fallen foul of investors stung by a collapse in the value of mortgage-backed securities, but Oglesby believes that in Bruntwood’s case it is merely the pricing of the loans that would need to change rather than the structure.
“We have a transparent structure and a defined market, rather than a basket of opaque properties.”
