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Quintain enlists Hong Kong JV partner for Greenwich Peninsula

By Paul Norman - Monday, June 18, 2012 8:39

Quintain shares were up 26.52% to 41.75p per share this morning after it revealed a new joint venture agreement at Greenwich Peninsula with Hong Kong investment vehicle Knight Dragon that will enable Australia's Lend Lease to exit as the new partners press on with the 14m sq ft scheme.

The completion of the deal will see Lend Lease no longer hold any interests in the existing joint venture for Greenwich Peninsula, in which it had held a 50:50 stake with Quintain, in exchange for around £100m. It will retain some interests at Greenwich Peninsula.

The transaction will result in Quintain owning a 40% interest in Greenwich Peninsula Regeneration Limited, the existing joint venture holding company, alongside Knight Dragon, which will own the remaining 60% interest, each with proportionate board representation.

The GPRL Group has development rights granted for 14m sqft of residential-led mixed use development land across more than 150 acres, including 18.6 acres within Peninsula Quays (which is currently owned by the group and will be transferred to GPRL upon Completion).

The first element to be funded is a residential phase of 611 homes on this freehold site owned by Quintain which is placed in a prime position on the site overlooking Canary Wharf.

Rebecca Worthington, deputy chief executive, said the deal would enable Quintain to return around £150m to its balance sheet over the next six years while a £300m new financing facility had secured the build out of Greenwich Peninsula.

“In the end it is really exciting that half a billion of foreign capital has been secured for build out of the regeneration of east London.”

As part of the deal Quintain will receive cash of £78.8m (subject to a post-completion adjustment), of which £28.8m will be paid by Knight Dragon on completion and £50m will be received on deferred terms over a six year period.

With infrastructure repayments, land receipts and fees over the next six years, based on the current business plan, Quintain said it was likely to receive a further potential £80m of cash, which would bring total cash received in the six years to approximately £150m before development profits (equivalent to approximately 29% per share).

The group will also of course receive 40% of all development profits.

Quintain will be appointed as the GPRL Group’s development and project manager for a six year term and will receive an annual fee from GPRL for these services.

Quintain will also provide site wide development management services at Greenwich Peninsula and administration services to the GPRL Group. Total fees for these combined services are expected to be approximately £4m pa once construction achieves momentum.

In addition, Knight Dragon has agreed to provide up to £300m of revolving debt funding to GPRL in relation to viable development at Greenwich Peninsula. This debt funding will attract interest at 5% above the applicable three month LIBOR rate (adjusted on a quarterly basis).

In addition, investment monitoring and advisory services and affordable housing will be provided by Pinnacle Regeneration Group to the GPRL Group.

Knight Dragon is an investment vehicle ultimately owned by Hong Kong investor Dr Henry Cheng Kar-Shun. Cheng is chairman of New World Development, a Hong Kong listed conglomerate with a market capitalisation of approximately £4.6bn which has substantial interests in property and infrastructure in Hong Kong and China.

Cheng, and the wider Cheng family, control Chow Tai Fook Enterprises Limited, which has a substantial interest in New World Development. Chow Tai Fook Enterprises Limited is providing a guarantee of the obligations of Knight Dragon in relation to the Transaction.

Maxwell James, chief executive of Quintain said: “This is a transformational deal for Quintain and is the next step in realising the inherent value in our key London projects by attracting significant third party capital.

"It introduces a highly respected and experienced partner who brings considerable financial strength and a network of global relationships. Together, we are well placed to turn our vision for this landmark project for London into reality, creating thousands of homes and jobs in the process.”

Sammy Lee, (a director of Pinnacle Regeneration Group, who will be a new member of the GPRL board on Completion) said: “Dr. Henry Cheng is delighted to be partnering with Quintain to play a part in such a large-scale mixed-use project. This is an excellent opportunity for a strong financial partner, with specialist social housing knowledge through his recent investment in Pinnacle Regeneration Group, to help regenerate this landmark area in central London and we are looking forward to engaging with all the stakeholders to develop a comprehensive new plan for the area. We are confident that this investment will provide excellent returns over the coming years.”

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