Valad Property Group (VPG) announced it has just signed agreements with Bank of Scotland plc necessary to create the Diversified UK and European property joint venture, which has a term of three years. A small number of subsidiary documents remain to be executed and these are expected to be signed shortly. Valad has contributed the majority of its European / UK assets and all associated debt, to the DUKE joint venture. In addition, it has contributed €10 million (A$17 million) and will contribute a further €15 million (A$26 million) in cash to the DUKE joint venture over three years. Valad has also contributed its investment in Crownstone which had a value of €50 million (A$87 million) at December 2008. The DUKE joint venture has assumed the existing debt facilities associated with the above assets, the terms of which have largely remained unchanged, and which also have a term of three years. BoS has provided new undrawn facilities of £66 million (A$135 million) to the joint venture. A fee of £25 million (A$51 million) is payable by DUKE on termination of the DUKE debt facilities.
Valad and BoS each hold a 50% equity ownership in the DUKE joint venture company. Any cash or profits generated by DUKE will be used to retire debt within DUKE. Reflecting an anticipated fall in property values, Valad expects to carry its equity in the DUKE joint venture at nil value, as at 30 June 2009. Valad retains 100% ownership of Valad’s European funds management platform which is held separately from the DUKE joint venture. These agreements represent another significant milestone in the execution of Valad’s restructuring strategy, following the extension of Valad’s Asia Pacific debt facilities in February this year. The next component of Valad’s restructure is to finalise arrangements for the £36 million (A$73 million) Scarborough deferred payment, which is due for payment in September 2009. Having reached this stage of Valad’s restructuring, the Group is now in a position to refocus on growing the business.
Peter Hurley, Valad’s Managing Director said “We are pleased to announce this joint venture with BoS. BoS is an active real estate partner and this transaction represents a significant advancement in the relationship between it and Valad. “In February we outlined a number of milestones to stabilise our balance sheet. This announcement represents the fulfillment of a major element of that strategy. It also allows Valad to continue to hold an interest in a major European pool of assets which is positioned to benefit from any future recovery in market conditions.”
