Ailing housebuilder asks King Sturge to raise £100m
Taylor Wimpey is to carry out a sale and leaseback of around 350 of its show homes in a bid to reduce debt and improve cashflow.
The listed housebuilder plans to sell the UK-wide show home portfolio for between £70m and £100m and pay rental income to the buyer for up to three years.
It is thought to have instructed King Sturge and last Wednesday sent details to selected institutional-type investors.
Taylor Wimpey needs working capital and access to the show homes, which have an average value of around £200,000, to market its developments. The buyer would gain a sizeable portfolio and a guaranteed three-year income stream without voids, and eventual ownership of 350 homes at a time when the housing market could be in recovery. It could provide investors with an initial yield of between 6% and 7%.
Packaging the homes up as a portfolio is thought to be an innovative way for Taylor Wimpey, led by chief executive Peter Redfearn, to reduce its £1.9bn debt burden.
In an interim management statement on Tuesday, Taylor Wimpey said it was unlikely to agree a new debt package by January, when its covenants may be tested.
Redfearn said it was also ‘appropriate to keep under review other strategic options which may be available to reduce debt’.
He added: ‘We are making sure that any sensible option that’s available, if it helps with our debt negotiation, will be considered. If we can get sensible value from the UK Land bank that does not damage the underlying strength of the business going forward, we will look at those options.’
Redfearn said Taylor Wimpey was ready to sell parts of its UK land banks or non-core parts of the business if necessary. The sale-and-leaseback plan would be one such option.
Taylor Wimpey is valued at around £142m, down from a high of £4.3bn last year. It has significantly reduced costs with 1,900 job cuts, land sales and a construction slowdown.
Neil Batty, Knight Frank’s new homes investment head, said all housebuilders were looking at ways to extract value.
‘The investment market is beginning to show signs of serious activity, with the larger investors and funds slowly coming back into the market, resulting in some interesting deals,’ he said.
‘What we are also seeing happen as the crisis has worsened is that housebuilders have been amalgamating stock to form bigger portfolios in order to attract better-quality investors, such as institutional funds.’
King Sturge and Taylor Wimpey declined to comment.