Harworth Estates manages a substantial portfolio, comprising in excess of 45,500 acres of land and 250 commercial and residential properties. The Company has identified more than 77 potential development sites through its initiative Project Worth, and has committed to reporting on the progress of this project at half yearly intervals with both formal revaluations of the estate and revisions to its management estimates of worth.
The current development sites identified cover approximately 3,700 acres of principally brownfield regeneration land located from Northumberland to the East Midlands, principally down the A1/M1 corridor with additionally a large site at Bolton on the Manchester orbital motorway.
The identified development sites have the potential, with planning consent, to deliver in excess of 25,000 new homes and 30 million sq ft of business space.
The majority of the rest of the portfolio is currently either operational land or agricultural land held for income, asset appreciation and future potential for surface mining in accordance with world leading environmental best practice.
1. Project Worth
This project is at the heart of the business of Harworth Estates and it creates the development pipeline for the long term sustainable business of the property division of UK COAL. The Company works with some of the UK’s leading planning advisors and other leading consultancies to ensure that every opportunity is taken to add value to the estate by gaining planning consents for an optimum mix of uses on each particular site.
The development pipeline currently identifies short and medium term opportunities for adding value through to 2012, by which time the Company estimates that with planning consent, the portfolio can grow from the current asset value as reported in the Company’s Report and Accounts of £394 million, to in excess of £935 million by 2012, and in excess of £1 billion by 2013. The Company is looking to both increase the development opportunities deliverable within this programme period, from the currently estimated 3,700 acres and in addition, is seeking to identify long term development opportunities from the balance of the estate.
2. The Development Phase of Project Worth
The Company’s estimate of a portfolio worth in excess of £900 million by 2012, takes account only of the increase in asset value arising out of the obtaining of optimum planning consents. Beyond the gaining of the consents the Company will participate, as appropriate, in the development phase of its schemes, either by Joint Venture with industry sector specialists or through direct development. In principal, the Company will maximise income from its residential land opportunities by obtaining planning consents, installing principal infrastructure and then selling oven ready development sites to, as appropriate, national, regional and local housebuilders. The Company expects in addition to capital receipts on disposal, to also benefit from open book partnering with housebuilders and to obtain overage from out performance in the sector and the success of the individual schemes.
Commercial employment use developments will be undertaken either through direct development by the Company or, as in the case of large and specialist developments in the distribution and other specialist sectors, by Joint Venturing with national and international experts. Three large distribution schemes in Joint Venture with Gazeley, Prologis and Graftongate (along with funding partners, Legal & General) typify current projects.
Existing and Future Mixed Use Business Parks
Harworth Estates currently operates three business parks on former colliery sites with a current value of approximately £50 million. Two further sites have recently received planning consent on appeal, and other business park opportunities are going through the planning process.
At the end of 2007 net rental income stood at £6 million, principally by way of income from these business parks and the agricultural estate. These business parks tend to be targeted towards local and regional occupiers who need well connected and cost effective business space for their SME businesses.
As the success of Project Worth kicks in, further new large scale business parks targeting large regional, national and international occupiers will be developed, either direct or in Joint Venture. A number of these new generation business parks will follow on from the Company’s surface mining activities on major well connected sites throughout the Midlands and North of England. One particular site at Bolton in Greater Manchester is set to create a major new business park of regional and national importance on completion of the current surface mining scheme and the end of 2010.
3. Optimising Cash Generation
The Company will always seek to add maximum value to its property assets before considering disposal and often this will lead to the Joint Venture opportunities referred to in Project Worth.
However, there will be occasions where cash can be realised from sites for re-application into more appropriate parts of the development portfolio.
Examples of where sale without future development will be considered include:-
• Where following substantial review and appraisal, the Company sees little or no future potential to add value to the site.
• Where the property development would involve an unacceptable level of risk.
• Where the nature of the development is outside our core expertise and is of insufficient scale to justify joint development, e.g. small housing sites.
• Where a special purchaser situation occurs, i.e. where a property may have special attributes in its form or location that makes it especially attractive to a special purchaser and a premium price can be obtained above the market norm.
• Where properties in the agricultural estate have been worked for surface mining operations and there is no realistic long term development potential.