Caledonian Trust enters disposal agreement on Edinburgh's St Margaret's House

The AIM-traded firm said the purchaser was Drum Property Group, which it described as an established Scotland-based property development and investment company.

St Margaret's was the company's largest property development, located in Edinburgh approximately one mile from the Parliament and Princes Street, and adjacent to Meadowbank Stadium.

The existing building is a 92,000 square foot multi-storey building that is currently fully let, with the main tenants being Edinburgh Palette, a registered charity, and the Registrars of Scotland.

Caledonian Trust had planning permission in principle at the property for a 231,000 square foot mixed-use development of residential and student accommodation, a hotel, offices and other commercial space, together with parking for 225 cars.

The consideration which would be payable under the proposed disposal would be “significantly above” the book value of £5m, which was attributed to St Margaret's as at 30 June last year in the last audited accounts published by the company.

For the year to 30 June 2017, the property generated gross rental income of £158,717 and an operating profit of £138,919.

The company also incurred a valuation gain of £0.5m on St Margaret's in the year.

Under the terms of the missives entered into on 2 February by Caledonian Trust and Drum, completion of the proposed disposal remained conditional on the purchaser obtaining detailed planning permission and all other consents “to their entire satisfaction” for a mixed-used development of student and residential accommodation.

It was anticipated that it would take up to 18 months for the conditions of the missives, including detailed planning permission to be obtained and completion of the proposed disposal to take place.

The agreement contained a long stop date for the purchaser obtaining all the necessary consents to their entire satisfaction of 18 months from the conclusion of the missives, which Caledonian Trust said could be extended “in certain specified circumstances”.

Under the terms of the signed agreement, the company also had the potential to receive additional cash consideration should the planning permission process result in the development comprising additional student bedrooms or additional housing units.

Based on the discussions that the board of Caledonian Trust had held to date with the purchaser, it was not envisaged that there would be any material change to the overall gross value of the development or any material change to the housing mix as a result of the planning permission process.

As such, the board said it believed it “unlikely” that any additional consideration would be received over and above the £15m which would be payable on completion of the proposed disposal.

Caledonian Trust said it intended to use the net proceeds from the proposed disposal to provide funding to accelerate its existing property development programme, re-invest into new property developments, repay certain existing debt and provide general working capital.

“We are delighted to enter into this agreement with Drum Property Group, a successful and award-winning property company in Scotland, for the sale of St Margaret's for a cash figure that is significantly in excess of our net book value and the last independent valuation undertaken on the site,” said Caledonian Trust chairman and CEO Douglas Lowe.

“The development is in a prime location in Edinburgh for student accommodation and affordable housing.”

Lowe said that, having owned St Margaret's since 1988, the board was pleased that Drum Property would become the new owners of the site once the proposed disposal was completed.

“The net cash proceeds from the proposed disposal will, when received on completion, significantly strengthen the group's balance sheet and provide funding to enable the company to accelerate the group's existing property development programme.”