REG - Watkin Jones plc - Major PBSA development funded with HGP

Watkin JonesAnnouncement

29/07/2024 07:00

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RNS Number : 1110Y  Watkin Jones plc  29 July 2024

     29 July 2024

 

 

 

Watkin Jones plc

('Watkin Jones' or the 'Group')

 

Major PBSA development funded with HGP

 

Watkin Jones, the UK's leading developer and manager of residential for rent,
is pleased to announce the forward sale of a new 397 bed purpose-built student
accommodation ('PBSA') development together with workspace and commercial
units in Stratford, East London, to the Housing Growth Partnership ('HGP')
(the "Transaction").

 

The Transaction is the Group's first with HGP, a social impact investor and
part of Lloyds Banking Group. It is being delivered via an innovative
structure which is expected to generate receipts for Watkin Jones over the
course of the three year development of approximately £96m, at margins in
line with the Group's stated targets, with the potential to participate
further from future value generated by the scheme.

 

In order to effect this structure, a newly created joint venture, Watkin Jones
(Grove Crescent) Holding Limited (the "JV Entity") has been established, which
is owned as to 75% by HGP and 25% by the Group. Under this arrangement, the
Group will be responsible for the delivery of the scheme through to completion
as well as its ongoing management through Fresh, Watkin Jones' accommodation
management business. Funding of the JV Entity will be provided by HGP as well
as third party debt finance. Completion of the PBSA accommodation is targeted
in time for the start of the 2026/27 academic year.

 

The initial contribution from this transaction is reflected in the Group's
existing guidance for the current financial year, with initial net cash
receipts of approximately £20m. Further income will be phased over the course
of the construction process. It is expected that the scheme will be sold by
the JV Entity following completion and stabilisation (the "Realisation Sale").

 

The Group's ability to participate in additional value upside will be driven
by the returns generated by the JV Entity as a result of the Realisation Sale.
In the event that the Realisation Sale generates returns in excess of agreed
hurdle rates, the Group will be entitled to a further incentive payment in
cash, with the quantum linked to the level of outperformance. The opportunity
to participate in future value creation is a distinguishing factor from the
Group's traditional forward fund model.

 

Given the time required to complete construction, it is not expected that any
future sale of the scheme would occur before Q4 2026 and consequently there
can be no certainty at this stage as to the terms of any potential Realisation
Sale.

 

Alex Pease, Chief Executive Officer of Watkin Jones, said: "We are pleased to
collaborate for the first time with Housing Growth Partnership on this
exciting development. The innovative nature of the transaction underlines
Watkin Jones' ability to find attractive structuring solutions for our
institutional partners.

 

"While we remain encouraged by signs that confidence is returning to our
residential for rent funding markets, this is tempered by continued
uncertainty around the trajectory of interest rate cuts. We, nevertheless,
have a number of schemes in the market which are generating good levels of
interest."

 

 

Related party transaction

 

For operational purposes, the JV Entity will have two statutory directors,
being Simon Jones, the Group's CFO, and George Dyer, Group Investment
Director. Accordingly, the JV Entity will be a related party of Group, and the
entry into the Transaction (including the associated development, financing
and management agreements between the Group and the JV Entity), constitutes a
related party transaction pursuant to Rule 13 of the AIM Rules for Companies.

 

The Independent Directors, being all directors of the Group other than Simon
Jones, having consulted with the Company's nominated adviser, Peel Hunt,
consider the entry into the Transaction is fair and reasonable insofar as the
Company's shareholders are concerned.

 

- Ends -

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No 596/2014 as it forms part of UK Domestic
Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR")

 

For further information:

 Watkin Jones plc
 Alex Pease, Chief Executive Officer   Tel: +44 (0) 20 3617 4453
 Simon Jones, Chief Financial Officer  www.watkinjonesplc.com (http://www.watkinjonesplc.com/)

 Peel Hunt LLP (Nominated Adviser & Joint Corporate Broker)              Tel: +44 (0) 20 7418 8900
 Mike Bell / Ed Allsopp                                                  www.peelhunt.com (http://www.peelhunt.com/)

 Jefferies Hoare Govett (Joint Corporate Broker)                         Tel: +44 (0) 20 7029 8000
 James Umbers / David Sheehan / Paul Bundred                             www.jefferies.com (http://www.jefferies.com/)

 

Media enquiries:

 Burson Buchanan
 Henry Harrison-Topham / Steph Whitmore  Tel: +44 (0) 20 7466 5000
 watkinjones@buchanan.uk.com             www.buchanancomms.co.uk

 

Notes to Editors

 

Watkin Jones is the UK's leading developer and manager of residential for
rent, with a focus on the build to rent, student accommodation and affordable
housing sectors. The Group has strong relationships with institutional
investors, and a reputation for successful, on-time-delivery of high-quality
developments. Since 1999, Watkin Jones has delivered over 49,000 student beds
across 147 schemes, making it a key player and leader in the UK purpose-built
student accommodation market, and is increasingly expanding its operations
into the build to rent sector. In addition, Fresh, the Group's specialist
accommodation management business, manages over 16,800 student beds and build
to rent apartments on behalf of its institutional clients. Watkin Jones has
also been responsible for over 50 residential developments, ranging from
starter homes to executive housing and apartments.

 

The Group's competitive advantage lies in its experienced management team and
capital-light business model, which enables it to offer an end-to-end solution
for investors, delivered entirely in-house with minimal reliance on third
parties, across the entire life cycle of an asset.

 

Watkin Jones was admitted to trading on AIM in March 2016 with the ticker
WJG.L.  For additional information please visit www.watkinjonesplc.com
(http://www.watkinjonesplc.com/)

 

 

About Housing Growth Partnership

 

Housing Growth Partnership ('HGP') is an equity investor and part of Lloyds
Banking Group. HGP invest patient capital with the purpose of delivering
social impact through partnership with selected residential developers and
housebuilders to increase the number of homes being delivered and help its
partners grow. HGP does this through its unique investment approach, which
shares both risk and reward with its partners.

 

Since 2016 HGP has supported over 7,500 new homes on over 100 sites.

 

HGP invest all over the UK into multiple housing tenures, including family
housing, apartments, build to rent, retirement living, student accommodation
and more, with the flexibility to support its partners through a variety of
deal structures across the development lifecycle. To find out more, visit
www.housinggrowth.com (http://www.housinggrowth.com) .

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