The Birmingham regeneration specialist behind the £750 million Longbridge development scheme has warned its results would continue to be disappointing until the property market bottoms out.
But Quinton-based St Modwen (SMP) said it was taking a long-term view of the Longbridge scheme which will see the former MG Rover works transformed into an eco-friendly suburb housing Bournville College’s proposed new £84 million building.
St Modwen senior development manager Mark Murray yesterday said: “The whole economic situation affects everything but from our point of view, projects like Longbridge run over 15 to 20 years so we would expect to go through at least two economic cycles in that time.”
Mr Murray added the Innovation Centre in Longbridge Technology Park, which opened last year continued, to attract lettings to what the developer hopes will be the Midland’s leading centre for technology and innovation.
However, in a statement issued to the London Stock Exchange yesterday, St Modwen said the outlook for the property market continued to deteriorate.
“Since we reported our interim results in July, prices in the commercial property investment market have continued to decline and we are now seeing signs that occupational demand is also weakening,” it said.
“We are therefore expecting that the further rise in yields predicted in our interim result announcement will be greater than anticipated and that this will not be able to be matched by our added value initiatives.”
It added: “Results will continue to be disappointing until the property markets bottom and downwards revaluations cease.”
But the company stressed it continued to operate profitably at pre-tax level, excluding revaluations.
St Modwen, which specialises in the regeneration of town centres and underdeveloped areas across the UK, said it had modified its business in line with challenging market conditions and had taken steps to preserve cash and cut costs in a bid to remain within banking covenants.
Investors reacted badly to the announced and the company’s shares dipped almost 10 per cent yesterday, eventually closing at 262p.
During the period from June 1 to September 30, the firm said it had exchanged and completed more than 20 transactions including a 119-bed Premier Inn hotel in Staffordshire and a 40,000 sq ft bulky goods retail park in Runcorn.
The firm also pointed to the unconditional prelet of an 80,000 sq ft call centre for Vodafone in Stoke on Trent.
It said it had struck 84 new lettings and lease renewals generating additional annual rent of £1.6 million, which more than offset 66 vacations representing annual rent of £1.4 million.
The Longbridge project, the largest regeneration project in the Midlands, is a cooperation between St Modwen and joint landowners Advantage West Midlands, the regional development agency.
Four separate planning applications have been submitted to Birmingham City Council and Bromsgrove District Council for the regeneration of the 468-acre former MG Rover works.
The applications comprise 1.8 million sq ft of employment space, together with 1,980 new homes, a new town centre and extensive community facilities, and hopes to create 10,000 new jobs.
In addition, there will be a new learning quarter anchored by the £84 million Bournville College relocation.
Work producing a new version of the MG TF sports cars resumed at the car plant in August and the first of the roadsters has recently gone on sale.
Nanjing Automobile, which owns the plant, has said it intends developing new models at the plant over the next three years.