Patience maybe a virtue, but it is also proving to be the key to the remarkable success of one the leading business parks in the West Midlands.
Blythe Valley Park, situated off junction four of the M42, is one of the few major, multi occupancy developments than can boast that it is 97 per cent let despite one of the bleakest eras in the property world.
The park, which is set in 257 acres, is home to the likes of Arup, Virgin, Kier, Caterpillar, Infor Solutions and Balfour Beatty and is jointly owned by Liberty Property Trust and Doughty Hanson & Co Real Estate who have adopted an approach which is less common in the UK and might be responsible for the parks unique success.
While many business parks have become splintered by disparate ownerships, Liberty has taken a long-term view that success is achieved through continuity and maintaining and managing ownership of the whole which leads to greater opportunity.
It is a process that has taken no small degree of faith – turning down quick-win profits is never easy – and understanding backers.
But Liberty’s Paul Rubincam believes a combination of factors have made that approach particularly suitable for Blythe Valley Park.
“When you own the whole park and you control its management , it allows you to implement master covenants of improvement and maintenance and that means you are going to come out the other side with a more cohesive and quality oriented environment,” he said.
“That’s been our view and the view, fortunately, of those who have owned BVP before.
“There is a model which is more commonly found in the UK where pieces of estates are sold off once they are up and let, and therefore some value is realised.
“You can get parks where you have 20 to 25 different owners including pension and investment funds, but you then have a bunch of non-complimentary and sometimes competing interests.
“In any successful development there are key ingredients. The hardware, in terms of the buildings, have to be good but what makes the difference is the what I call the software.
“The original developers and Solihull Borough Council deserve credit because they established an ethos of quality which we have continued.
“Being a Real Estate Investment Trust (REIT) means we are focussed on income as opposed to realising the capital value of an individual asset at any one time.
“We come at it from a philosophy that if managed and planned as a whole and expanded and invested in intelligently, the whole ultimately is worth more than the sum of the parts, to put it rather simply.”
The so-called software is essentially caring for tenants and getting in tune with their business needs.
Rubincam said: “The focus on tenants and the willingness to be flexible with tenants going forward is also key. A REIT’s profits and value as a listed company are derived primarily from its rental income which is driven by occupancy. The way to get rent up is to manage your tenants growth and to be more aggressive at facilitating that growth than anyone else.
“Owning the whole of the park gives us great flexibility and means that we can say to companies that if they plan to grow, then no problem, we can help them do that.
“It is all about doing a deal and showing each company a willingness and capability to scale them up going forward.
“It’s about putting your business in the right place to allow you to survive and thrive, so when you are thriving there is scope to grow, but if you are in a period of survival then you have choices available.
“It is not paying two or three pounds more or less a square foot which should determine a deal. The real problem comes when they don’t need that space and they cannot get rid of it.
“All of a sudden they are saddled with £25 per sq ft in terms of rent, rates and service charge and they cannot move it. What kills a company is when they make what they think is a clever deal to save £2 or £3 a square foot and then the market moves against them, they need to downsize and they cannot get rid of that space for love nor money because they have not put themselves in a fundamentally good environment.
“We actively work with the tenants when they are growing and when they are shrinking but again we can only do that because we own the whole which gives us scale and breadth of choices.
“Another key thing is when you own an asset like BVP you are trying to achieve a certain quality and critical mass quality so that any deal in the market place is going to look at you.
“If I have one building then I am only going to appeal to five out of 50 prospects, but if I have 150 acres and a million square feet with a capability to build a million more, then everyone will take a look at me.”
It is a policy which has paid off. With almost 100 per cent of the project let, Liberty and Doughty Hanson are looking forward. It has planning permission for an additional 97 acres and for an on-site hotel, while an amenity development has also been discussed.
Liberty, which employs around 450 staff in the US and the UK and has 75 million square feet of property in its portfolio, has on-going developments in London, Cambridge, Kent and Manchester.
Rubincam hails from the other side of the Atlantic but has not let the harshness of the current market put him off life in the UK having just become a British citizen.
He said: “Everyone will tell you how tough conditions are. London is in fashion, but apart from distribution and out of town retail, nothing else is. Investment sentiment comes and goes but you cannot argue with income – and our model here gives us that.”