Quartermile development ‘sold to London group in £65m deal’

By Erikka Askeland
Published on Friday 27 January 2012 00:00

GLADEDALE Capital is selling its landmark Quartermile development in Edinburgh to a London-based property group for an estimated £65 million.

Exemplar Properties has beaten rival bids from Moorfield and Axa Real Estate Investment Managers.

The firm is understood to be in talks with several funders to form a joint venture to complete the development. According to industry magazine Property Week, the US-based Area Property Partners is the frontrunner.

The unfinished development on the site of the former Edinburgh Royal Infirmary was officially put up for sale in September, although an asking price was not disclosed by the agents, CBRE. The site’s developers have long claimed that the site will be worth £450m to £500m once it is complete.

But according to the most recent annual report of Gladedale Ventures, the vehicle behind Quartermile, the value of its work in progress was estimated by CBRE to be worth £47.4m, while the aparthotel, leased to Marriott last year, was estimated to be worth £12.6m.

The site was sold by the Lothian University Hospitals Trust in 2001 to a joint venture between Bank of Scotland, Taylor Woodrow and Kilmartin Property Group, for about £35m.

A Scottish property insider said: “The pricing reflects the lack of demand for development opportunities. Residential sales rates have, however, held up very well at Quartermile and this deal could prove to be an astute one”.

The proceeds from the sale are likely to be used to pay back some of the £475m of debt owed by the Gladedale Group to its lenders, Lloyds Banking Group. In 2009 Lloyds completed a debt-for-equity swap that gave it preference shares in Gladedale in exchange for writing off about £500m of its £1 billion debt.

Exemplar is expected to buy Gladedale Ventures outright and finish developing the 900 flats, 395,000sq ft of offices and 70,000sq ft of shops and leisure space. Development had largely ground to a halt during the property crash in 2008-9.

The only work in progress is the block of 174 flats that Gladedale is building for Hillcrest Housing Association, which the social landlord confirmed was on schedule to complete this year.

Gladedale was also successful in selling its first office building, Quartermile One, to Morley Fund Management on behalf of Norwich Property Trust for £60m in October 2007, while Swiss property investment fund AFIAA purchased the Quartermile Two building in August 2010 for £23m.

Exemplar, owned by partners Daniel Van Gelder and Clive Bush, is working on developing a similar former hospital into a mixed-use development in London. Exemplar snapped up the Middlesex Hospital in London’s Fitzrovia from the resolution committee of Iceland’s failed Kaupthing Bank in 2010.

In addition to its debt pile with Lloyds, Gladedale also has to pay £20m to a local authority after it lost out in a court ruling a few weeks ago. A judge ruled that one of Gladedale’s subsidiaries, Bett Homes, would have to pay East Dunbartonshire Council the money over an alleged breach of contract involving payments for the land vacated when Bearsden Academy moved several years ago.

A Gladedale spokesman said: “We do not comment on speculation.” Lloyds declined to comment while Exemplar was unavailable for comment.

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bassrock

Friday, January 27, 2012 at 04:17 PM

Lots of nice money money floating around here. Rest assured, the only folk that will be out of pocket at the end of the day will be the clowns who gave the site away for £35m in 2001.

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