Rising damp

The Kitchen

Overcooked?

Mancunian regeneration developer Urban Splash was founded in 1993 by Tom Bloxham and Jonathan Falkingham. Specialising in stylish city apartments, the company capitalised on the boom-time trend in “loft-style living”.

The company expanded rapidly throughout north-west England, gaining a reputation for innovation through celebrated schemes such as Fort Dunlop in Birmingham and Britannia Mills in Manchester.

In the financial year ending March 31 2007, which are the last results available, Urban Splash posted a profit of £2.7m on a turnover of £56.9m. This was a slight increase from the previous year – profit of £2.2m and turnover of £53.1m.

However, the developer’s glory days may be fading in the wake of the credit crunch. In a statement on 16 September, it reported that sales during the first and second quarter of this financial year had been “disappointing”. This has forced the company to follow the example of other developers such as Persimmon and Ask Developments in cutting jobs.

The cupboard

Anything to declare?

Urban Splash is now undergoing a redundancy consultation and a business review. The results were to be announced this week after this article went to press, which meant senior company figures were unwilling to give Building details about the business. Rumours suggest up to 30% of its 280 staff could lose their jobs and one office could be closed. A spokesperson denied there would be office closures, and said: “We are going through a redundancy consultation, but no projects have been cancelled.”

But, as Gaynor Asquith, director of regeneration consultant Arc4, says, “the question is not whether projects could go back to the drawing board, but if they will get mothballed”. Urban Splash, which says it has £1bn worth of projects in the pipeline, admits it can not say when any of these schemes will start. For example the 740 flat Tribeca development and the 276-home Littlewoods headquarters in Liverpool have been postponed indefinitely.

The market’s lack of liquidity means cash flow will continue to be a problem for developers and a City source said the pressure was intense: He said: “There is a danger that some mid-sized developers of urban schemes could go to the wall.”

The balcony

A long way down

Urban Splash could be more exposed to harsh economic conditions than most developers, owing to its focus on city flats. It declined to comment on how much of last year’s sales went to the buy-to-let market, but Arc4’s Asquith, says: “Any company that specialises in apartments is going to have to tread carefully.”

Urban Splash had also focused on developments in the north of England, and a City source says this could also hurt it. “It developed urban apartments aggressively in the north and now the area is covered with them,” he says. “There has been a collapse in demand and a virtual moratorium on lending for new-build apartments.”

The company, however, denies it is tied to the north, citing the development of Royal William Yard in Plymouth as an example of regional expansion. A spokesperson says: “We are not confined to any particular location. The focus when the business began was on Liverpool and Manchester but that has been diluted.” Nevertheless, the company was unable to confirm any specific plans for the development of other future schemes outside the north of England.

The fire escape

The survival plan

Urban Splash plans to tackle its situation by starting to build more family homes while continuing to develop the city centre apartments. Although its portfolio for family homes is minimal, it is planning to boost its profile in the sector by building family-friendly houses in New Islington, Manchester, and North Shore in Stockton-on-Tees. The company has launched a competition for architects to design homes for the latter scheme.

However, it will not change its browfield focus. “The ethos of the business is regeneration,” says the spokesperson. “The driver is to create mixed-use communities on brownfields.”

Asquith says the firm should look at alternatives to commercial 100% mortgage deals, such as rent-to-purchase. The firm was, however, unable to confirm whether they would do this.

The firm can at least fall back on its reputation for regeneration in the public sector. Paul Spooner, regional director of English Partnerships for north-west England and the West Midlands, has worked with Urban Splash on a number of schemes and is sure it will weather the storm. He says: “While there are challenges in the short term, we are confident we will see more of its developments succeed in the long term.”

Ultimately, the big question for developers is how to rejuvenate the mortgage market. Asquith says: “The problem is we don’t know enough to be able to even guess. Everybody is looking for a way to do this and any organisation that can find the answer to this question will probably be okay.”