IN-DEPTH: Land Securities buys Manchester’s Media City

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London based LandSec has until now concentrated on its central London offices and shopping centres, including the Bluewater and Trinity in Leeds, with a total property portfolio valued at around £11billion.

Incredibly scarce opportunity

CEO of LandSec Mark Allan told the Manchester Evening News that the purchase of Media City was an “incredibly scarce” opportunity bringing the world’s super-rich to Greater Manchester. Manchester, he said “…is very much on the radar”.

Media City is not LandSec’s only target, in a separate move the firm has bought U+I, the developer behind the Mayfield regeneration project around Manchester’s Piccadilly station, the termination point of HS2. It’s a project that will create the first city centre green space park for 100 years.

The brownfield developer U+I is Land Securities’ first major acquisition in 20 years after striking the £190 million deal as part of its diversification strategy into urban regeneration.

Work has already started on the large Manchester Mayfield Piccadilly scheme, where it will ultimately provide 2m sq ft of office, retail and leisure space and 1,500 new homes set around the 6.5 acre public park.

Docks transformation

It is now ten years since the first phase of MediaCityUK was completed, what was a huge 200-acre wasteland that was once Manchester’s docks at the end of the Victorian built Manchester Ship Canal. Over that time the docks were transformed into a tech and media hub, with glass towered high rise apartments, offices and hotels.

The BBC was moved in as the anchor tenant along with the Lowry Theatre and shopping centre. ITV soon followed, along with the University of Salford, the whole complex now accounting for around 7,000 workers.

Originally developed by Peel Holdings and Legal&General, MediaCity, says LandSec, will move to a new era after the £425million deal by Britain’s biggest commercial property company. LandSec will own a 75 per cent stake while Peel L&P, and Legal&General will retain the other 25pc and will continue as asset manager.

Strategy review

CEO Mark Allan only joined LandSec 18 months ago and has undertaken a “full review” of the business and its strategy, following which he has taken the decision that the firm needed to take on new opportunities for growth.

Allan believes growth opportunities in the real estate industry right now are most likely to come from what the industry calls “mixed use development”.

“The idea being that in the past five to ten years, the notion that people live in one place, travel to work somewhere else, travel to shop somewhere else, travel to go out with their friends somewhere else… those lines are becoming much more blurred,” he told the MEN.

“And I think the pandemic only increased the focus on that, with people wanting to be able to live, work, shop, play within the close vicinity of where they are, rather than having to do lots of travelling on public transport.

“So we wanted to invest in big mixed use projects. A mixture of residential, offices, retail, leisure etc.

“And we wanted to do it quite quickly. So we started looking about a year ago and two of the most exciting projects, and the most progressive projects, were in Manchester, in MediaCity and Mayfield.

“They’re both fantastic projects, MediaCity much more progressed, you’ll know better than I do just how fantastic that has been for Salford for the waterfront area around there, you’ve now got the BBC, ITV around there, Salford Uni, huge studios, a big tech and media hub on what was effectively redundant brownfield land 15 years ago.

“The chance to get involved with something like that, and with another phase of development to come, a mixture of offices and residential, was really exciting.

“And Mayfield is 30 acres, next to a massive railway station in the centre of one of the largest, and certainly the fastest growing, regional economy in the UK.

“Opportunities like both of these are incredibly scarce, so hence why we’re so excited to have the opportunity to come in, alongside the existing partners in all cases, and hopefully add something, including hopefully, some of our capital, our cash.”

Doubling in size

MediaCity has outline planning consent that could essentially double its size in the future. LandSec intends to invest to build more office space targeted at the fast growing tech and media sector, and quickly.

“It [MediaCiry] has such a great reputation as an ecosystem that’s built up around the studios, the BBC, ITV etc, 250 small and fast-growing businesses in the tech and media space,” Allan says.

“But there isn’t really any office space left for them to occupy in MediaCity because it’s effectively full.

“So building some more offices is probably the first step and that could happen as early as 2023, in terms of starting on site.”

Looking into the future Allan thinks LandSec will be guided by what Peel and local residents say they want, whether that be apartment blocks or leisure and retail facilities.

Northern growth and levelling-up

Manchester is growing at 3.8pc, compared to London’s 2.3, that’s why LandSec sees Manchester as a fantastic growth opportunity along with the other significant investors that have bought up assets in the city and region in recent years.

Another of Peel’s mega projects, the Trafford Centre, was recently acquired by Canadian pension fund CPPIB while earlier this year, Miami-based Starwood Capital Group bought the Renaissance hotel site on Deansgate in a joint venture with Property Alliance Group.

Manchester City Council has joint ventures with Hong Kong-based Far East Consortium (FEC) and, Manchester City Football Club’s owners, The Abu Dhabi United Group.

Mr Allan told MEN that international capital now sees Manchester as “one of the ‘hottest tickets in town.’ If you look at the economic growth that Manchester saw in the five years up to the pandemic, Manchester was the strongest growing economy in the country, by quite a way,” he says.

“What we like about Manchester is it had that momentum coming into the pandemic, it seems to be recovering it really strongly as we come out of the pandemic, and success stories have a habit of really building momentum and keeping going for a long time.”

North-shoring

A term used by some – north-shoring – to describe the growing trend for businesses to move away from the Capital and the south east to northern cities, not just to cut costs but to tap into employment and other valuable resources, appears to have been playing out here.

There is a question as to whether this trend will now accelerate post-pandemic, when offices are likely to become somewhat less essential, but Mr Allan says he doesn’t think that Manchester’s growth will be reliant on businesses moving in from elsewhere:

“The UK in a global context is quite an unusual country, from an investment point of view anyway,” he says.

“It’s historically been very London-centric, and so there’s been a lot of investors going in and buying offices, shopping centres and residential towers and things in London.

“But we’ve definitely noticed that over the past five plus years Manchester is also very much on the radar for that international capital in a way that I think very few other regional cities at the moment are.

“So I think that’s a big positive because as an investor in property, you want to know there are other investors interested, that tends to help the values, it tends to help the liquidity, the ability to sell if you want to sell a little bit of your holdings for example.

“So Manchester to me seems to have that more than elsewhere.

“Then you look at the economic growth story, it’s a very compelling one.

“After London, Manchester is the largest economy, largest office market, largest build to rent residential market, has the most liquidity in terms of property investment each year, so I think for us it ticks all the boxes in a way other cities don’t quite.

“I think there will be other investors, there already are other investors, looking at Manchester in that way.

“If I look at office utilisation at the moment, the number of people back in offices, generally speaking that’s higher in the regions than it is in London.

“I think one of the reasons for that is there’s probably less reliance on public transport, more people driving, perhaps more affordable accommodation in relative terms close to where people are working.

“I think there are some of those factors that add appeal.

“I’m sure North-shoring is a thing, but to me the economic growth in Manchester is being generated in Manchester and not by jobs moving from elsewhere.

“It’s got its own centre of gravity. I don’t think it’s reliant on drawing people in, or jobs in from other cities, I think it’s creating its own jobs.”

Gathering further momentum

According to the Manchester Evening News, there are more people back in the office in the regions than London. Not only has Greater Manchester shown stronger economic growth than anywhere else in the country, investors clearly think it’s set to continue.

At just one planning committee meeting in 2020, Manchester City Council signed off over £1billion of new investment, plans which include new skyscrapers, student accommodation, offices and a second of the city’s large entertainment arenas, next to the Etihad stadium in east Manchester.

Mr Allan attributes much of Manchester’s success in attracting new inward investment and growth to the City Council’s reputation for a long time as being “pretty progressive” in terms of how its sought to unlock development.

The Universities – Manchester is home to the biggest university campus in Europe – Mr Allan sees as a key element in the region’s success, along with its high graduate (60 per cent) retention rate, finding employment for this key resource after studies are finished.

The City’s two world famous football clubs, with their huge global followings, also have a bearing on how people see the city thinks Mr Allan. Building a strong brand and giving the likes of LandSec and others the confidence to invest for the future is the result.

Image: Media City Footbridge and BBC at night…

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What do changing EPC and heat pump requirements mean for the PRS?

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Hi, my name’s Melissa Lawford, I’m the property correspondent at The Telegraph. I’m writing an article about what changing EPC and heat pump requirements mean for the buy-to-let sector.

I want to hear landlords’ thoughts on what the extra costs of upgrades will mean for them.

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Licensing makes landlord’s personal lives fair game, troubling case shows

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Glasgow councillors are debating whether to grant an HMO licence to a landlord after hearing that he was fined for an unrelated act of intimidation more than four years ago.

Local media report that despite Alan Mackin having been a landlord for 30 years without any reported problems, the licensing and regulatory committee has decided it needs more information about an incident in his private life before issuing a licence for his Edwin Street property.

Scotland has a national registration scheme that requires all private landlords to apply for a licence; next year’s Renters Reform Bill could potentially introduce something similar in England.

Councillors heard that he was fined £750 in 2019 for engaging in a course of conduct causing another person fear and alarm, which took place in 2017.

Eye-watering bill

Mackin, 66, had followed a solicitor and loitered outside his home after getting an “eye watering” legal bill for handling his divorce, police sergeant David Gilmore told councillors.

He said the landlord had been in a dispute with a Glasgow company, repeatedly loitering outside the home address of one of the partners and then running past him in the street “acting in an intimidating manner”.

‘No connection’

Representing Mackin, who lets 10 flats in the city, Archie MacIver said: “This conviction has no connection whatsoever with the letting of any flats or interaction with tenants. They normally stay for many, many years in his properties.”

He added: “The offence occurred back in 2017 so we are four and a half years down the line with no indication of any repeat behaviour.”

However, committee chair councillor Alex Wilson said Mackin had behaved in a manner which was unbecoming of anyone, report the Glasgow Herald.

“We have to make sure this is a one-off situation. Has Mr Mackin learned from this incident? Does he have anger management issues? Is this likely to be repeated?”

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Gove promises to help release more leaseholders from cladding ‘nightmare’

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The new housing secretary Michael Gove has promised to revisit the cladding scandal with a ‘fresh pair of eyes’ and see how thousands of leaseholders – including many landlords – can be helped out of the unending nightmare many find themselves in.

Gove (pictured) made the comments during a grilling by parliament’s housing select committee yesterday, in which he responded positively to criticism that his department’s actions to help marooned leaseholders appear to have stalled.

“The government has a responsibility to ensure buildings are safe but we also have a responsibility to relieve some of the obligations that are being faced by leaseholders at the moment, who are innocent parties in this and are being asked to pay disproportionate sums,” he told the select committee’s MPs.

In summary, he promised to:

• Publish up-to-date figures on the number of buildings with unsafe non-ACM cladding and the number of buildings under 18 metres tall that require remediation.

• Bring the developers and cladding suppliers to book who allowed unsafe cladding to be fitted to buildings in a way that was catastrophic and ‘manifestly illegal’. “There is an urgent need to ensure that justice is done,” he said. “There are individuals still in business who are guilty men and women.”
• Ensure his department issues fresh guidance for buildings under 18 metres originally covered by the controversial ESW1 form that will enable lenders to recommence lending on and remortgaging properties within them these towers ‘before Christmas’. Gove recognised that these types of buildings feature fire safety risks that are ‘less than feared’ and that action is needed to free up leaseholders and return the properties to the housing market.
• Clamp down on the organisations who are ‘profiteering’ from the cladding scandal, including some who are offering exorbitant ‘waking watch’ services to building leaseholders.
• Revisit the cladding costs that many leaseholders are being asked to pay even though it is evident they have no hope of being able to pay them. He told the MPs that he understood how leaseholders are seen at the ‘easy people to sting’ while builders, developers, freeholders and cladding suppliers were to hard to chase for the remediation costs – but said this approach is not acceptable.

Gove also said his department has yet to fully bolt down the difference between buildings with cladding that is ‘ultra-risky’ and those where the risk is negligible.

But he also said that suppliers and developers involved who claim they are ‘squeaky clean’ in the matter of building safety are ‘wrong’ and said he now wondered whether some had put cost reduction ahead of safety while others had manipulated cladding tests in order to ‘evade responsibility’.

Read one landlord’s account of being caught up in the cladding crisis.

Gove promised to update the committee on progress. Watch the full session.

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My questions is why do leaseholders have to pay at all?

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Michael Gove, Secretary of State for Housing, Communities and Local Government, has questioned why leaseholders have to pay anything towards replacing unsafe cladding on their buildings.

Gove said that despite the £5bn government scheme he was: “still unhappy with the principle of leaseholders having to pay at all

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Half price loan exit fees for new builds with EPC rating A

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Paragon Development Finance has launched a Green Homes initiative to support SME housebuilders developing new domestic properties with an Energy Performance Certificate rating of A who will receive a 50% reduction on loan exit fees.

To qualify, at least five private units must be built within the development and 80% or more of these must have an EPC rating of A

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Filling out Form N5B Accelerated Possession Order for evicting tenant?

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Hi, I have a question about filling out form N5B specifically on Question 6 and 7:

6. On what date was the property let to the Defendant by way of a written tenancy agreement?
The written tenancy agreement I have with my tenants is an AST which commenced on 10 November 2020.

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INTERVIEW: Leading landlord and YouTuber Arsh Ellahi

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Not many landlords can say that they started out in the sector before reaching double figures, but Arsh Ellahi learnt the ropes from his father while still a young child.

“I remember going around with him, collecting coins from meters and I would take calls to set up viewings when I was only about 10 years old,” he remembers.

After leaving university, Arsh soon took on even more responsibility for his family’ property portfolio, then rapidly began to grow his own. Those early lessons obviously paid off because he now has more than 1,000 tenants in and around Wolverhampton in a wide mix of residential properties, from single flats to a 23-bed HMO – the majority of whom are benefit claimants.

“If you understand the sector and the benefits system it can be quite lucrative,” Arsh tells LandlordZONE. “It’s a sustainable strategy over a long period and means I wasn’t really affected by the pandemic and lockdown.”

His success buying and selling properties, first through agents then auctions, led to an interest in deal sourcing – marketing ‘investment ready’ properties to investors that can sometimes have tenants in them and an established income and profit – and went on to develop this into the Property Investor app which boasts 35,000 users.

Arsh also founded the Elite Property Tribe, a mentorship programme as a platform to share his property knowledge and experience. He insists that he wants to help people become more rounded investors rather than make a quick buck – unlike some training companies operating in the sector.

More protection

“The UK needs more regulation in this area,” he says. “However, we also need more protection as landlords because the power has shifted towards tenants which means that landlords can be thousands of pounds in arrears before they get their properties back.”

All those issues are discussed on Arsh’s regular podcast and YouTube videos as he’s happy to share his views and experiences with others. He’s also shared his story in a book, Boom, Bust and Back Again, detailing the good and bad times, and how he recovered from the property crash.

“Now is the perfect time to take advantage of lots of HMOs and blocks of flats coming onto the market as some of the older landlords are leaving the sector,” he advises.

“But the days of wood chip and magnolia are over as we’re seeing HMOs on the market up to the standard of boutique hotels. There are plenty of opportunities if you’re willing to adapt.”

Read more exclusive landlord interviews.

Pic Credit: Elite Property Tribe

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