The movie of the same name – and subtitled ‘the Far Side of the World’ – is a 2003-made epic which is set in the Napoleonic Wars and stars Russell Crowe. It received wide critical acclaim on release and, at the 76th Academy Awards, was nominated for 10 Oscars including Best Picture. It went on to win only two – which were also at the workmanlike end of the Academy’s spectrum – because The Lord of the Rings: the Return of the King swept the board. Financially, though, Master and Commander generated a 30% gross margin.
The plot revolves around Captain Jack Aubrey (Crowe) and his ship, HMS Surprise (yes, really) with which he successfully pursues and seizes the much larger and heavier French privateer Acheron, in the waters off the west coast of South America (hence the ‘Far Side’ reference). He achieves this with a mix of courage, guile, nimbleness and verve.
Urban & Civic plc is a Master; and real estate veteran Nigel Hugill its Commander. It operates on ‘the Far Side of London’ – rather than the World – and its financials are burgeoning. But it is not yet famous (like Tolkien). The Group (UANC) was created through Terrace Hill acquiring the unlisted but seaworthy Urban & Civic Sàrl which, in essence, was a reverse takeover. But the newly configured management had the good sense to put the technical acquiree’s name above the gangplank.
Terrace Hill brought a long track record of commercial development with a spinnaker in food stores, where it was a marine leader. At the same time, Urban & Civic – founded in 2009 – owned two large strategic residential sites in Cambridgeshire and Warwickshire (with an estimated Gross Development Value or GDV of £2.7 billion).
UANC is as a Master Developer of strategic real estate sites in the UK. It identifies and assembles these opportunities, wins all relevant permissions (i.e. the hard yards) and then project manages the subsequent developments before selling them on. It operates in the commercial building sector, leisure, residential – its trade wind – and even education; and, at the end of fiscal 2016, it owned or controlled more than 4000 landlocked acres.
Primarily, it operates north of London, with five massive sites in Cambridgeshire and Warwickshire; for example Alconbury Weald and Waterbeach Barracks (replete with sailing lake). Plus it is in Manchester, too, and embryonically Wolverhampton. And the increasingly capital-light housebuilders love UANC – because they can buy oven-ready land which means the sole timetable constraint is putting a brick on a brick. For its part, the Group, under its licence model, provides serviced plots ready to be built on and then receives a third of the sales value when the houses are sold. Nor is UANC prone to household inflation – it simply needs absorption. Typically, too, it will invite two or three housebuilders on to a particular site but also builds a few units of its own so as to see which way the wind is blowing.
Commander Nigel Hugill (59) co-founded Urban & Civic in 2009 (with Robin Butler, who remains MD). Both worked at Chelsfield plc where Nigel was first MD and then CEO from 1992 to 2005, when the Company was acquired and taken private. Thereafter, he was Executive Chairman of Lendlease Europe until 2008 (having joined the company through the acquisition of the residential developer Crosby from The Berkeley Group). In his early career, Nigel worked in corporate finance at Morgan Grenfell and has been involved in developing several of the largest and most successful retail and mixed-use community projects in the UK. He also served as a Special Policy Adviser to Sir Bob Kerslake when the latter was incumbent at the Homes and Communities Agency (HCA). In addition, Nigel is Chairman of the Royal Shakespeare Company and the urban think tank Centre for Cities as well as chairing the Estates Strategy Committee of the London School of Economics.
In terms of valuation, it is not appropriate to judge UANC on a PER or Price Earnings Ratio basis. Instead, its modus operandi and value determination runs off a specialised per share EPRA NAV which, since UANC’s listing in May 2014 has risen 27.0% to 293 pence per share (as at the latest half year balance sheet date of 31 March 2017). The Group’s share price, however, remains at an 8% discount to what is widely regarded as conservative valuation. For the record, the European Public Real Estate Association (EPRA) is a non-profit association representing Europe’s publicly listed property companies; and, at a financial reporting level, the EPRA’s aim is to establish consistent reporting across the real estate sector.
Master Urban & Civic’s ship has come in – in terms of market appetite, especially from the housebuilders’ fleet. The man at the helm is also exceptional and suitably weathered. The Commander now needs to work on visibility – and recognition will follow.
“For England, for home and for the prize” – Captain Jack Aubrey
Film still (c) Universal Pictures
