Terrace Hill Plans to Buy British Developer Urban & Civic

Terrace Hill Group Plc plans to acquire Urban & Civic Plc in an all-share deal that values the regional developer at 95.3 million pounds ($160 million) as home values rise outside the U.K. capital.

Terrace Hill, based in Glasgow, also plans to raise 170 million pounds in a share placement to fund development at the merged company, which will be called Urban & Civic, it said today in a statement.

U.K. home prices increased in April for the 15th straight month, driven by record-low Bank of England interest rates and a strengthening economy. The merged companies will retain some commercial properties, rental homes and affordable housing to generate regular income and they will target property returns of 20 percent a year, Terrace Hill said

“As local economies and real wages outside central London begin to recover, the new business has good momentum,” Robert Adair, executive chairman of Terrace Hill, said in the statement. “Our shareholders should also benefit from the greater visibility and improved liquidity” of being a larger company.

Urban & Civic owns more than 1,430 acres (580 hectares) of development land near Huntingdon in Cambridgeshire, England, which the joint company said will be developed over the next 20 years, according to the statement.

Land Owners

Planning approval has been given for 5,000 homes and more than 3.1 million square feet (290,000 square meters) of commercial property at the project, Terrace Hill said. The site has a gross development value of more than 1.3 billion pounds at current prices, according to Urban & Civic. Construction work is expected to start in the third quarter of this year.

Urban & Civic also has a 50 percent stake in a site in Rugby, in the English Midlands, with planning approval for 6,200 homes.

The merged company plans to acquire plots of land for homes within one hour’s commute of London and then sell them off in bundles to homebuilders, Urban & Civic founder Nigel Hugill said in an interview. The company is on a shortlist of bidders for a site near Cambridge owned by the Ministry of Defence, said Hugill, who will be executive chairman of the enlarged group.

Home prices in the south east of England excluding London will rise almost 32 percent in the next five years, compared with a 24.4 percent gain in central London, broker Savills Plc forecast in November.

The merged company also plans to develop cinemas, hotels and restaurants around the U.K., Hugill said.

Before it's here, it's on the Bloomberg Terminal.