BoS takes partners to tune of £1 billion

Published on Tuesday 28 August 2001 01:00

Bank of Scotland expects to announce more than £1 billion worth of joint venture business in the next year, and also plans to invest more than £100 million in major PPP projects in the next 18 months.

Peter Cummings, its managing director of corporate banking, told the Evening News today that deals completed recently with major Scottish hotels groups RF and Macdonald will be typical of the kind of project now being finalised.

Mr Cummings named major Scottish housebuilder Cala as one of the firms likely to be backed with significant BoS funding, along with a raft of other firms in the booming homes market and in the wider property investment sector.

He added that its JV business has been given practically an open cheque book by the bank’s board, as long as the target is "right and appropriate".

"Over the next 12 months you can expect a number of major corporate partnership deals involving Bank of Scotland," he said. "In terms of work in progress, it is worth around 1bn.

"These are likely to be long-term partnerships. This will be the shape of things to come and will form the framework for our expansion programme.

"There isn’t a fund, or pool of money, but the board of directors is willing to back us. The amount is not an issue if the deal is right and appropriate and the targets are well-funded and structured."

In June, BoS and Sir Rocco Forte signed a 290m joint venture deal to expand the hotelier’s RF Hotels, which bought the Balmoral in Edinburgh out of receivership from the bank five years ago. The cash will be used to add a Glasgow location and a resort elsewhere in Scotland to its list of five-star properties.

The newly-formed joint venture company, which is split equally, will have initial equity of 70m and will raise debts of around 200m to either build or acquire around nine luxury hotels in five years.

BoS also became a joint venture partner with Bathgate’s Macdonald Hotels in May for its purchase of its 47-property, four-star UK Heritage Portfolio from Compass for 235m. "This is an example of the bank’s commitment to partnership with the funding structure geared towards growth," he explained today.

Under the terms of that JV, both Macdonald and BoS invested 31.25m, while the bank also provided funding facilities of 210m.

Mr Cummings said the deals he is working on now will mirror that funding principle. He said that if Macdonald had looked to raise that kind of cash on its own then it would have required a rights issue, leaving it with too much debt.

Cala and BoS also already have a long-term relationship. The company, which this year announced a profit of 16.7m in its first full year following a management buyout, is looking to expand here and south of the Border.

Other housebuilding names to surface from Mr Cummings are Manor Kingdom, the Scottish company, Octagon, the London builder, Fairway, a joint venture between BoS and 3i, and Linden Homes.

As well as housebuilding, Mr Cummings hinted at other major property investment similar to the 34m Citymark offices/executive flats scheme at Fountainbridge - in a JV with commercial property developer AB Hamilton - and the 500m Glasgow Harbour Project devised by the bank and Clydeport.

Mr Cummings added today that when the bank merges with Halifax to form HBOS next month, the new organisation will become the "largest player in the UK" in the PPP sector.

BoS is already aligned with a number of major PPP contractors, including Bovis, Alfred McAlpine and Amec. "PPP will become a cornerstone of corporate banking at BoS," he added.