Station Hill developer Sackville expects to announce a joint venture partner within weeks that will help take the multi-million pound development a step nearer reality.

A report in a national newspaper on Monday said the company breached covenants both on a £63 million loan from the Royal Bank of Scotland (RBS) which funds the firm’s investment portfolio, and a £43.6 million loan from HBOS (now Lloyds Banking Group) taken out when Sackville acquired the site in 2005.

Falling property values led to the breach of covenants by increasing the loan-to-value ratio of the land and making the loan a greater risk for the bank.

But Sackville told the Post yesterday the breach was a technicality and insisted not only that the scheme was going to plan but the firm expected to make an announcement soon about a significant deal with a development partner which will help fund it.

The covenant issue, according to Sackville finance director Ian Smith, would not interrupt the scheme.

He said: “All property companies have seen significant drops in underlying property values. That will cause issues with all property investments. It’s like house prices, your house price will have gone down. It is more a technical matter than operational. In terms of going forward it won’t affect things at all.

“People who we are talking to are in the property market and they know and understand it’s a cyclical thing.”

Sackville has been in discussion with potential development partners since gaining planning permission for the scheme in September. Now those discussions are close to a conclusion.

Development director Jon Homan said signing a joint venture agreement would mean a timescale could be agreed which would make the buildings more attractive to potential occupiers who wanted certainty of delivery.

He said: “We hope within three of four weeks we will have singled out who it is we are going to run with. We are in discussion with three or four companies.”

He added: “We are quite positive about it. We are quite positive about the future.”

Sackville chairman Sir John Madejski said the drop in property values had caused the breach of covenant but there was no threat to the scheme.

Sir John told the Post: “It’s the fact that property has gone down in value by 45 per cent and of course you are borrowing for it. Most companies are in breach of covenant.

“Everybody is in the same boat, you just have to do the best you can. We are all about keeping things going and keeping jobs and doing the best we can. We are all suffering from the recession but you just soldier on and put your best foot forward.”

The scheme was due to start in 2011 with the first phase completed by 2014, but the recession has now forced the likely start back to 2012.

Sir John added: “It will take longer than anticipated but I got involved all those years ago with Reading Borough Council and we are going to see this through and deliver a very nice centre of Reading.” 

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