In today`s Evening News Its on the front page with a photo of the site
Article below -
Published Date: 10 February 2009
SERIOUS doubts were growing today over the future of the Caltongate development as the company behind the massive project faces a battle for survival.
New accounts posted by the London-based developer Mountgrange showed that it recorded a £24.3 million loss in the year to the end of March 2008.
It is also weighed down by heavy debts and is trying to secure bank support to allow it to survive.
Its auditor has admitted that there is a "material uncertainty that casts doubts about the company's ability to continue as a going concern".
The new figures cast doubt over the £300m Caltongate scheme, which was given planning consent after lengthy delays last summer.
The scheme would see a new five-star hotel and conference centre created, as well as scores of shops, offices and homes, but Mountgrange said it has had to write down the value of its Caltongate land by £17.7 million due to the effects of the recession.
It emerged today the commercial parts of the scheme are effectively on hold until Mountgrange attracts occupiers to pre-let space in the development.
Property experts, however, say pre-lets are unlikely in the current market.
The company – whose current bankers are Bank of Scotland, now part of the part-nationalised Lloyds Banking Group – owes £51m to creditors.
This includes £20m in bank loans and overdrafts that are due within one year.
A spokesman for Mountgrange today insisted the project was still on track, but he added: "Together with many other property companies in the current difficult financial climate, we are affected by the sharp downturn in the market.
"Our operating position reflects this and as such we have had to write down asset values. Our accounts from last year reflect these re-valuations and the reduction in our operating position.
"However, Mountgrange continues to actively pursue its plans for Caltongate and believes strongly that this site is a key opportunity for Edinburgh. We hope to be able to provide an update on Caltongate shortly."
Analysts say that it is "critical" that the company and its subsidiaries secure funding if they are to continue trading.
But banks are currently cautious about lending to speculative development, and only last week council-backed Buredi had to put a subsidiary responsible for the redevelopment of part of the former Fountain Brewery into administration after it failed to secure fresh funding from the Royal Bank of Scotland, its only creditor.
In a statement with the latest accounts of Mountgrange filed at Companies House, the firm's auditor, London accounting firm Brett Adams, included an "emphasis of matter", which is a paragraph defining "material uncertainties" that cast significant doubt on the company's ability to continue as a going concern.
However, the auditor added that Mountgrange's directors have "a reasonable expectation" that the company has adequate resources to continue in operational existence "for the foreseeable future".
It said that, as well as banks, it is looking to "equity partners" who could provide funding for future work.
Analysts say that the latest set of results indicate that there are serious concerns about the future of the company.
Bryan Johnston, a director with investment manager Bell Lawrie, said: "The whole tone of the statement makes it very difficult to assess if the company is viable.
"It is clearly critical for it to secure funding and if it can achieve that it will continue. If it were to stop trading today there is clearly some doubt about whether it could pay its debts."
He said that even in the hard-hit housing and construction sectors, it remains "unusual" for an auditor to include an "emphasis of matter" statement in a company's accounts.
"I am not suggesting that it will go bust but clearly a statement like that suggests some serious financing is needed," he said.
In separate accounts posted by Mountgrange (Caltongate), the subsidiary responsible for the development, the firm said it had needed to write down the value of its land by £17.7m.
Aside from Caltongate, Mountgrange's only other developments are the proposed Phoenix Park development in Glasgow, an office building in London, a mixed-use site in Maidstone and a series of properties under the Jeeves Portfolio banner.
Within the Mountgrange (Caltongate) results, the firm said it is looking to attract companies that will pre-let commercial space before it is built in order to make it more likely to be able to source funding.
It already has a hotel occupier signed up but property experts have doubts about whether other commercial operators will sign up to pre-lets.
Stewart Taylor, a director in the Edinburgh office of property firm CB Richard Ellis, said: "While it is common for hotel developers to pre-commit, it is uncommon for an office occupier to commit before a scheme has come out of the ground.
"Every developer is struggling to secure funding for any speculative development. Largely, banks are not funding speculative sites and that makes it difficult to get them off the ground.
"That said, it is a prime location and in a reasonable market it would find occupiers but even in a reasonable market it would be difficult to get occupiers off plan."
It is also weighed down by heavy debts and is trying to secure bank support to allow it to survive.
Its auditor has admitted that there is a "material uncertainty that casts doubts about the company's ability to continue as a going concern".
The new figures cast doubt over the £300m Caltongate scheme, which was given planning consent after lengthy delays last summer.
The scheme would see a new five-star hotel and conference centre created, as well as scores of shops, offices and homes, but Mountgrange said it has had to write down the value of its Caltongate land by £17.7 million due to the effects of the recession.
It emerged today the commercial parts of the scheme are effectively on hold until Mountgrange attracts occupiers to pre-let space in the development.
Property experts, however, say pre-lets are unlikely in the current market.
The company – whose current bankers are Bank of Scotland, now part of the part-nationalised Lloyds Banking Group – owes £51m to creditors.
This includes £20m in bank loans and overdrafts that are due within one year.
A spokesman for Mountgrange today insisted the project was still on track, but he added: "Together with many other property companies in the current difficult financial climate, we are affected by the sharp downturn in the market.
"Our operating position reflects this and as such we have had to write down asset values. Our accounts from last year reflect these re-valuations and the reduction in our operating position.
"However, Mountgrange continues to actively pursue its plans for Caltongate and believes strongly that this site is a key opportunity for Edinburgh. We hope to be able to provide an update on Caltongate shortly."
Analysts say that it is "critical" that the company and its subsidiaries secure funding if they are to continue trading.
But banks are currently cautious about lending to speculative development, and only last week council-backed Buredi had to put a subsidiary responsible for the redevelopment of part of the former Fountain Brewery into administration after it failed to secure fresh funding from the Royal Bank of Scotland, its only creditor.
In a statement with the latest accounts of Mountgrange filed at Companies House, the firm's auditor, London accounting firm Brett Adams, included an "emphasis of matter", which is a paragraph defining "material uncertainties" that cast significant doubt on the company's ability to continue as a going concern.
However, the auditor added that Mountgrange's directors have "a reasonable expectation" that the company has adequate resources to continue in operational existence "for the foreseeable future".
It said that, as well as banks, it is looking to "equity partners" who could provide funding for future work.
Analysts say that the latest set of results indicate that there are serious concerns about the future of the company.
Bryan Johnston, a director with investment manager Bell Lawrie, said: "The whole tone of the statement makes it very difficult to assess if the company is viable.
"It is clearly critical for it to secure funding and if it can achieve that it will continue. If it were to stop trading today there is clearly some doubt about whether it could pay its debts."
He said that even in the hard-hit housing and construction sectors, it remains "unusual" for an auditor to include an "emphasis of matter" statement in a company's accounts.
"I am not suggesting that it will go bust but clearly a statement like that suggests some serious financing is needed," he said.
In separate accounts posted by Mountgrange (Caltongate), the subsidiary responsible for the development, the firm said it had needed to write down the value of its land by £17.7m.
Aside from Caltongate, Mountgrange's only other developments are the proposed Phoenix Park development in Glasgow, an office building in London, a mixed-use site in Maidstone and a series of properties under the Jeeves Portfolio banner.
Within the Mountgrange (Caltongate) results, the firm said it is looking to attract companies that will pre-let commercial space before it is built in order to make it more likely to be able to source funding.
It already has a hotel occupier signed up but property experts have doubts about whether other commercial operators will sign up to pre-lets.
Stewart Taylor, a director in the Edinburgh office of property firm CB Richard Ellis, said: "While it is common for hotel developers to pre-commit, it is uncommon for an office occupier to commit before a scheme has come out of the ground.
"Every developer is struggling to secure funding for any speculative development. Largely, banks are not funding speculative sites and that makes it difficult to get them off the ground.
"That said, it is a prime location and in a reasonable market it would find occupiers but even in a reasonable market it would be difficult to get occupiers off plan."
