Barratt looks to sell off land
Oct 20 2008 by Andrew Mernin, The Journal
STRUGGLING housebuilder Barratt Developments has reportedly hired Credit Suisse to look at ways of selling off 10,900 acres of its land portfolio to raise cash.
According to City sources Newcastle-based Barratt wants to gauge interest from potential buyers and see how much they would be prepared to pay before committing itself to disposing of the land.
Reports yesterday claimed the process was still at a very preliminary stage and no firm decision had been taken to sell the land. Analysts believe that Barratt would want to raise between £100m and £200m to go ahead with a deal.
The portfolio represents all of Barratt’s so-called “strategic” land, which does not yet have planning permission to build new homes.
Last month Barratt unveiled a 68% fall in annual profits, wrote down the value of its portfolio of land by £208.4m and cancelled its final dividend. It was recently forced to renegotiate lending terms with banks on its £1.65bn debt after its ill-fated top-of-the-market purchase of rival Wilson Bowden.
Texas Pacific, the private-equity group, is thought to be among the parties to express early interest in Barratt’s land portfolio.
Barratt declined to comment. Builders Crest Nicholson and Taylor Wimpey have also been trying to sell chunks of their long-term land holdings. Taylor Wimpey is seeking to renegotiate its £1.7bn net debt, but the process is being stymied because the builder is still in the process of identifying the holders of its publicly traded bonds who own about a quarter of its debt.
Meanwhile, Crest has admitted that it is in danger of breaching its banking covenants.
The virtual shutdown in the mortgage and credit markets has brought the housebuilding sector to its knees over the past few months.
Alastair Stewart, analyst at Dresdner Kleinwort, said in a note published on September 29 after a tour of property markets in the Midlands and north England that the impression, especially in new-build apartments, was one of “carnage beyond even our most bearish expectations”. “Prices of urban apartments appear to have fallen in many cases by 40%-50%, volumes have dried up to virtually zero, many developers have gone bust and land in many cases appears to be worthless,” he said.
