Quintain Gains on Partner for River Thames Project: London Mover

New World Development Co Chairman Henry Cheng Kar-Shun
Henry Cheng Kar-Shun, chairman of New World Development Co. and chairman of Chow Tai Fook Jewellery Group Ltd. Photographer: Jerome Favre/Bloomberg

Quintain Estates & Development Plc rose the most since December 2010 after a Hong Kong investor agreed to provide 450 million pounds ($706 million) to help the company develop Greenwich Peninsula, close to London’s Canary Wharf financial district.

Quintain climbed as much as 27 percent in London trading. Henry Cheng Kar-Shun’s Knight Dragon investment company agreed to buy a 60 percent stake in the venture to build as many as 10,000 homes as well as shops, hotels and schools, the U.K. developer said in a statement today. Quintain, an urban regeneration specialist, will control 40 percent.

“This is a transformational deal for Quintain and is the next step in realizing the inherent value in our key London projects by attracting significant third-party capital,” Max James, who became chief executive officer on May 25, said in the statement.

Greenwich Peninsula, a site on the River Thames that’s dominated by the O2 concert and sports venue, is Quintain’s second-most valuable asset after its properties in the northwest London neighborhood of Wembley. Asian buyers have increased their bets on London projects after China imposed curbs on the housing market to rein in inflation.

Quintain was up 15 percent at 38 pence at the 4:30 p.m. close, giving the company a market value of about 198 million pounds. The shares have dropped 37 percent in the past 12 months, while the FTSE SmallCap Index has declined by 9.5 percent. At the market’s peak in July 2007, Quintain traded at 454 pence.

Riverside Homes

Cheng is the chairman of New World Development Co. and his family controls Chow Tai Fook Enterprises Ltd., which is providing a guarantee of Knight Dragon’s obligations. Greenwich Peninsula Regeneration Ltd. has the rights to develop 14 million square feet (1.3 million square meters) of residential and mixed-use land along the River Thames in greater London.

The deal will provide 150 million pounds of cash to the venture as well as 300 million pounds of available financing, according to the statement. Quintain will manage the project and receive a fee of about 4 million pounds a year.

“Quintain will receive future development gains, which we believe could reach around 10 million pounds a year for around 20 years” after construction at Greenwich begins, Osmaan Malik, a JPMorgan Chase & Co. analyst, said in a note to investors. Malik raised his rating for the developer’s shares to overweight from neutral on June 1.

Luxury Hotel

Knight Dragon has committed to unconditionally finance the first phase of 235 residential units, according to a presentation on Quintain’s website. It also plans to accelerate development around three key areas of the land, including homes, a four- or five-star hotel, student accommodation, a private school and sales of plots of land to homebuilders.

Members of the Kwok family formed a joint venture with Capital & Counties Properties Plc in December to develop sites in London’s Earls Court neighborhood. On June 7, SP Setia Bhd. and Sime Darby Bhd. of Malaysia agreed to buy Battersea Power Station for 400 million pounds, six months after the London property’s owner failed to pay debts and was put into administration.

As part of the deal announced today, Lend Lease Group sold its 50 percent stake in the Greenwich Peninsula project to Quintain, James said on a conference call today. Lend Lease is Australia’s biggest property developer.

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