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After Brexit vote, St. Modwen backs away from retail property
July 4, 2017 / 11:57 AM / 4 months ago

After Brexit vote, St. Modwen backs away from retail property

(Reuters) - British property developer St. Modwen will not embark on any major retail projects as brick-and-mortar retailers are squeezed by lower consumer spending and the growing threat from online rivals.

The company would instead focus on building houses in areas with strong demand as well as “sheds and beds” as it looks to capitalise on the growth in demand for warehouse and logistic sheds from e-commerce companies and student accommodation projects, Chief Executive Mark Allan said.“In terms of actually putting projects on hold, the only thing I would point to is that we’re cautious about retail investment and therefore not looking to invest into new retail development at this point,” Allan told Reuters.

The UK retail property market has been struggling as many established businesses have lost ground to discount and online rivals.

The decline in value of the pound after last year’s Brexit vote has inflated the cost of imported goods and increased the pressure on real wages, forcing retail property developers to rethink growth plans.

St. Modwen has spent about 250 million pounds developing property in each of the past five years and about 15 percent of that has gone towards retail, Allan said.

Allan said St. Modwen would speed up plans to deliver new homes on 17,000 approved development plots in south and central England as an acute housing shortage and schemes to help first-time buyers continued to underpin demand.

“Regardless of Brexit, the housing shortage isn’t going anywhere, so being focused residentially on areas where there is clear housing demand is positive.”

To help fund the projects, the firm will also continue to sell smaller and non-core projects and use proceeds from its recent sale of New Covent Garden Market site, a 10 acre residential scheme in London.

The firm had faced some challenges trying to sell the site, amid heightened concerns about London property, where houses have fallen some due to Brexit and tax changes.

However, Allan said all commercial and residential sales over the six-month period had been at or above book value.

The firm on Tuesday reported a 1.7 percent rise in net asset value per share to 468.4 pence for the six months ended May 31, which Peel Hunt said was in line with expectations.

The brokerage has a “buy” rating on the stock, which was trading down 0.6 percent at 358.9 pence at 1130 GMT, valuing the company at around 800 million pounds.

Reporting by Noor Zainab Hussain and Esha Vaish in Bengaluru; Editing by Keith Weir

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