Brownfield site preparation play Property Recycling, backed by Growth Company Investor at 57p, has announced a key relationship with Swedish retail giant IKEA.

Planning approval for the development of a 114,900 square metre distribution centre has been granted for Property Recycling’s Stanton site at Bury St.Edmunds. When acquired the 93-acre site, a former World War 2 airfield, was made up of disused runways and derelict buildings.

Today, the site is subject to an option with IKEA, which will now look to develop a distribution centre and ancillary offices there, as well as infrastructure including a new roundabout and access from the A143.

Chairman Paul Rackham, the veteran entrepreneur who delivered substantial shareholder value at Waste Recycling, says the approval represents a major milestone for Property Recycling, which he brought to AIM over a year ago at 50p. ‘We have worked hard with IKEA over the past five years to prepare this site’, he revealed, ‘and we look forward to continuing that relationship going forward. IKEA (which has already spent a small fortune on the site) has an option to buy that expires in December 2007. Meanwhile, they are paying a 'useful option fee per annum', commented the canny Rackham.

Property Recycling acquires and improves brownfield sites for sale to developers or other end-users – only sites where value can be significantly increased through remedial works and improved planning are selected.

Rackham sees growth being driven by the ever-increasing national shortage of residential and commercial development land, pressure felt even more acutely in the South East and East of England. He argues the development of brownfield (mainly redundant industrial) sites is more likely to gain local acceptance than that of green field sites. Financials for the year to December revealed an operating profit of £2.2m, with turnover including the £3.5m sale of a freehold site at Kings Lynn as well as the sale of 2.7 hectares of the group’s Fornham Park site. A 1p dividend was declared, with year-end net funds reported at £6.9 million.

Property Recycling, which presently possesses a portfolio of five freehold sites totalling 198.8 hectares, should deliver lucrative returns and special dividends could also feature. Buy.