Thg Regulatory News (THG)

4 February 2013

TERRACE HILL GROUP PLC

("Terrace Hill" or the "Group")

COMPLETION OF FORWARD FUNDING AND PRE-SALE OF £91 MILLION STUDENT ACCOMMODATION DEVELOPMENT TO LEGAL & GENERAL PROPERTY

Terrace Hill (AIM: THG), a leading UK property development and investment group, announces that it has completed a site sale and forward funding agreement with Legal & General Property ("LGP") for its 1,104 unit student accommodation scheme in Southampton city centre. The development will have a completed value of approximately £91.0 million and follows the conditional exchange of contracts with LGP in October last year. The scheme has been pre-let in its entirety to the University of Southampton on a 38 year lease without breaks and with RPI linked rental uplifts. Construction has already started on site with handover to the university programmed for August 2014.

Terrace Hill is developing the project in joint venture with Osborne Group, which is also the building contractor. Once complete the development will comprise three towers ranging in height from 8 to 16 storeys positioned around a central piazza. In addition to the student accommodation, the scheme includes a shop, gym and learning centre at ground floor level.

Terrace Hill received a net £15.5 million on completion which it has used to reduce debt and will reinvest in acquiring new development projects, particularly in the foodstore sector and in central London opportunities. As a consequence of this receipt, on a pro-forma basis the Group's net debt will reduce from £47.2 million at 30 September 2012 to £31.7 million and the net gearing will reduce from 78.2% to 52.6%.

Philip Leech, Chief Executive of Terrace Hill, commented: "The completion of this substantial and prestigious sale and forward funding agreement with Legal & General Property represents significant progress for Terrace Hill and for this project. We have used part of the proceeds of the sale to immediately reduce the debt secured against a number of our development sites, and the balance will be earmarked for investment in new developments in the foodstore and Central London sectors, where we continue to see low risk and high margin opportunities. The completion of this transaction allows us to substantially reduce our gearing and puts us in a very strong position to exploit our core development strengths in some extremely attractive areas."

Gordon Aitchison, Director of Investment and Development at Legal & General Property, comments: "This represents one of four significant student accommodation fundings, backed by major universities, that have been undertaken by LGP in the last 18 months, with similar deals secured with the University of Arts London, Imperial College and the University of Greenwich. We continue to believe that this sector offers our funds an attractive opportunity to invest in index-linked income on very long leases to strong covenants, whilst also providing relatively higher yields than the traditional real estate sectors. As illustrated by Southampton and the three London deals, our focus remains on funding high quality developments that are backed by premium universities and located in first class locations."

-Ends-

For further information, please visit www.terracehill.co.uk or contact:

Terrace Hill Tel: 020 7631 1666Philip Leech

FTI Consulting Tel: 020 7831 3113Richard Sunderland/Will Henderson /Faye Walters

terracehill@fticonsulting.com 

Oriel Securities (Nominated Adviser) Tel: 020 7710 7600

Gareth Price

Mark Young

Notes to editors:

Terrace Hill Group

Terrace Hill Group PLC is a regionally based UK property development and investment group quoted on AIM.

Formed in 1986, the Company has five offices located in London, Glasgow, Teesside, Bristol and Manchester.