Bruntwood hails resilience and investment plans despite interest rates and market turmoil forcing it into the red

Property group Bruntwood says it’s on track to help the UK become “a global science and technology superpower” despite falling into the red in what its boss called one of the most difficult years for real estate in recent memory.

Bruntwood said gross profits for the year to October 2 stood at £74.3m, up 18% on 2022, thanks to “improved occupancy levels and rental growth across its UK-wide portfolio”. Operating profits rose 57% to £48.9m

The developer and investor said the value of its property portfolios fell thanks to “a number of external factors” including rising interest rates and the bond market turmoil following the Liz Truss premiership. Its Bruntwood portfolio valuation fell 17% while its Bruntwood SciTech portfolio valuation fell 12%.That led in turn to a pre-tax loss of £224.3m.

But chief executive Chris Oglesby said the businesses had performed strongly in attracting and retaining customers despite the market turbulence while the group said valuations across its portfolio “compared favourably… with those seen in some of the UK’s most prime markets”.

Two weeks after the financial year ended, Manchester-based Bruntwood announced that it had secured a £500m funding deal to support the rapid expansion of its Bruntwood SciTech arm focusing on the life science and technology sectors. The agreement saw Greater Manchester Pension Fund become a third shareholder partner and inject £150m, with a “significant increase” in investment from existing shareholders Legal & General and Bruntwood through cash and asset transfers.

Bruntwood SciTech now has £1.5bn in assets across nine campus locations and 31 city centre innovation hubs, with 4.8m sq ft of world-class workspace for 1,100 firms.

Bruntwood SciTech’s 2023 milestones included the formation of a new joint venture with Aston University and Birmingham City Council for the 49-acre Birmingham Innovation Quarter and the approval of the strategic regeneration framework for the £1.7bn ID Manchester in partnership with The University of Manchester.

The company is now focusing on its 3.6m sq ft development pipeline. This year will see the completion of the first phase of the Birmingham Health Innovation Campus, the redevelopment of West Village in Leeds, and the topping out of No.3 Circle Square and Citylabs 4.0 in Manchester.

Bruntwood SciTech will also start work on schemes including the third phase of Manchester Science Park’s 1m sq ft masterplan, the redevelopment of the iconic Met Tower in Glasgow into a tech hub and a refurbishment of city centre innovation hub Pall Mall in Manchester.

The rest of the Bruntwood group looks after a £260m portfolio of workspaces, primarily located in suburban town centres, alongside a £100m portfolio of town centre regeneration projects with Trafford and Bury Councils

Over the year, Bruntwood continued to invest in its portfolio, spending £19.1m on refurbishment and capital improvement projects and pumping another £11.5m alongside Legal & General into Bruntwood SciTech. The SciTech arm itself invested £18.2m in refurbishment and capital improvements and £62.1m in new developments.

After the £500m Bruntwood SciTech deal, the group was able to repay £170m of debt and create headroom in its banking facilities to be able to refinance its £91m 6% retail bond, which falls due in February 2025.

Bruntwood and Bruntwood SciTech chief executive Chris Oglesby said: “These numbers represent our historic business structure prior to the major changes to the size and shape of our respective portfolios created by the £500m investment and welcoming of a new shareholder and are a snapshot of UK real estate during one of its most difficult years in recent memory.

“But despite us seeing a paper loss created by some sizable valuation shifts, the performance of our portfolio didn’t waver, with our gross profit performance pointing to the continuing appeal of our modern, world-class workspace, retail space and specialist facilities for tech, life science and innovation-led companies of all sizes.

“As a long-term, patient capital operator, we have never judged the success of our business on the mark-to-market valuation shift over a 12-month accounting period but instead the impact of our investments into communities over many years. On that measure, we are pleased to have met a number of significant milestones in 2023.

“We’re now a quarter of the way into our current financial year following the investment deal and with GMPF as our new JV partner in Bruntwood SciTech.

“While being prudent about what we deliver and when, as both the real estate market and wider UK economy remains fragile, we continue to have confidence in the strength of our products, the sectors we are invested in supporting, the opportunities within our growth pipeline and will continue to build and invest in our towns and cities into 2024 and beyond.”

BusinessLive – West Midlands | News