Property investment fund hits milestone
PROPERTY investment fund Develop North Plc has marked a lending milestone of more than £70m in a year which saw a £1.1m distribution to shareholders.
The Newcastle-listed fund, which is managed by Tyneside wealth managers Tier One Capital, has published annual results for the year ending November 30, 2023, in which it reported that, since 2017, it has now loaned £71m to help fund commercial and residential property schemes across the North and Scotland.
It said that since it was established, Develop North’s operations have helped created almost 3,000 jobs and supported 33 developments with a gross development value of over £180m. The fund delivered a net asset value return of 1.4%, down on the previous year’s 2.3%, while earnings per share dropped from 3.7p to 2.5p.
During the year the fund agreed four new loans, including a £2.2m, 30-month facility to fund the construction of a new warehouse in Darlington, a £1.1m, 18-month facility to refurbish a hotel and wedding venue in North Yorkshire, and two residential developments for a combined £2.4m in Aberdeenshire.
Following tough conditions, directors are forecasting an upturn in the property development market in 2024. Develop North saw turnover drop from £1.78m to £1.72m, while pre-tax profit dropped from £514,000 to £261,000. The fund deployment was reduced by £5.7m since last year as the lender saw three loans successfully repaid in the period.
John Newlands, chairman of Develop North, said: “Notwithstanding the prospect of a general election, which always impacts the economy, a degree of market confidence and rising property transaction volumes is expected in 2024 as interest rates ease and affordability improves.
“Inflation is falling and, as the Chancellor indicated in the recent Budget, is expected to reach the Bank of England’s 2% target quicker than originally forecast, which will also fuel positivity.
“The property markets where we lend, while not immune to wider economic trends, have not suffered the turbulence experienced in other parts of the UK, in particular the South East.
“As such, the affordability of home prices has been less stretched and there has consequently been only a modest correction in prices in response to the changing interest rate regime.”
Brendan O’Grady, fund manager at Tier One, the investment adviser to Develop North, said: “We are very proud to have achieved this significant lending milestone supporting developers across the North of England and Scotland, demonstrating Develop North’s role as a viable and effective lender in the property market.
“We are confident that the sustainable approach we have taken to the Develop North fund, the quality and experience of the developer management teams we are working with and the improving economic backdrop will enable us to support a growing number of developments.
“We are currently at various stages of due diligence across a number of projects in the North East of England, which is a strong indication of the confidence that will continue and grow in 2024.”