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Morgan Sindall increases investment in ISIS Waterside Regeneration

Morgan Sindall Group plc announces that its Urban Regeneration division, Muse Developments Limited (‘Muse’), has increased its effective participation in the ISIS Waterside Regeneration Limited Partnership (‘ISIS’) to 50% from 25%. ISIS undertakes regeneration of waterside sites in the UK and this announcement demonstrates Muse’s ongoing commitment to the regeneration of waterside locations in the UK’s main cities, and the Group’s continuing focus on growing its regeneration business.

ISIS is a joint venture between the Canal & River Trust and the investment vehicle Warp 4 Limited Partnership (‘Warp 4’). Muse has acquired the remaining 50% interest in Warp 4 from Igloo Regeneration Property Unit Trust (“Igloo”), part of the Igloo Regeneration Fund group, an Aviva Investors Fund, with the result that Warp 4 is now wholly-owned by Muse.

The consideration for Igloo’s interest in Warp 4 is £20.5m payable in cash by Muse in installments over the period July 2013 to July 2017. Seventy per cent of the consideration is not payable until 2016/17. In addition in July 2017 Igloo may receive a share of the profit in Warp 4 arising from the development of one of the ISIS sites. Igloo is entitled to a twenty percent share of net profit in Warp 4 from the development of the site in excess of £17.5m subject to a cap on any such payment of £20m. Muse does not expect the profit to exceed current projections by such an amount as to trigger this profit share payment to Igloo.

At 31 December 2011, Warp 4 had net assets of £35m and incurred a loss of £2m in that financial year from its investment in ISIS. The losses generated are expected to reduce significantly in 2012 and 2013 and Warp 4 is forecast to generate profit from 2014 onwards as the ISIS investment in new development projects begins to generate returns. The deferred payment terms agreed for the acquisition are expected, when balanced against anticipated distributions receivable from ISIS, to result in a broadly cash neutral position for the Group in the short term, with more significant medium-term benefits as its investment in new development projects begins to generate returns.

John Morgan, Chief Executive, commented “We are pleased to have acquired Igloo’s 50% interest in Warp 4. This acquisition demonstrates our commitment to the regeneration of waterside locations in the UK’s main cities, and underlines the Group’s continuing focus on growing the regeneration business.”