Berkeley expands Saudi venture

BERKELEY Group, the highly regarded housebuilder, intends to invest a second pounds 100m in commercial property in alliance with its Saudi Arabian partner, Saad Investments Company, writes Paul Durman.

Berkeley will commit a further pounds 25m to Berkeley Eastoak, its joint venture with Saad. The pounds 63m so far invested is earning a yield of 10.7 per cent compared with the present base rate of 7 per cent.

Berkeley Eastoak is buying new buildings with blue chip tenants such as British Telecom and Comet on long leases. It has already agreed to acquire a further pounds 22.4m of properties.

Tony Pidgley, Berkeley's chief executive, said this was the first business he had been involved in where he did not need to worry about when to sell. He said: 'If yields do come back to 8 per cent, we've got 40 per cent capital growth (in property values) without any rental growth we may get. I personally believe that it's better than investing in gilts.'

Shareholders' approval will be required for the investment because of Saad's 10.4 per cent holding in Berkeley.

Berkeley's interim results released yesterday show a 27 per cent rise in pre-tax profits to pounds 6.9m on sales up 47 per cent at pounds 75.8m. The company sold 468 houses and flats, a 39 per cent improvement on the same period last year. The results benefit from the full inclusion of St George, the subsidiary previously jointly owned with Speyhawk.

Mr Pidgley believes the housing market may be coming back to life. 'There's such good value now, we are just beginning to see confidence creep into the market,' he said.

Berkeley is increasing its interim share by 10 per cent to 1.65p a share.