“Significant” is a word employed often when St Modwen’s chief executive Bill Oliver and regional director Tim Seddon are talking about the importance of retail to their business. You can understand why.
The Midlands-based company – formed in April 1986 from a reverse takeover by Anthony Glossop’s capital goods engineering group Redman Heenan, of Stanley Clarke’s commercial property business Clarke St Modwen – is best known for industrial and residential schemes on some of the country’s mosthigh-profile brownfield sites. Rover’s former home at Birmingham’s Longbridge, the 600-acre former steel works at Llanwern, near Newport, and BP’s 1,000-acre former oil refinery at Llandarcy, near Neath, are just the most recent examples.
From day one, however,St Modwen has tried its hand at most forms of development – including a lot of retail. Oliver points out that the group is at present working its way through 18 town-centre retail-led projects (see panel, p47) – “significant retail schemes in the centres of places like Edmonton, Catford, Hounslow, Wembley”.
Oliver, a 51-year-old accountant with a talent for dry one-liners, says that the group’s retail business has evolved in three directions.
In London and the South East, St Modwen has a reputation for picking up struggling town-centre retail assets that soon after become the centrepieces of major regeneration initiatives. The strategy has created a retail business that differs from its activities elsewhere.
“In London and the South East, retail dominates,” says Oliver. “That developed some time ago from a strategy of buying a lot of tertiary shopping centres.” Part of the plan, he adds, was to “buy things close to transport nodes”.
If this sounds obvious, there were few groups competing withSt Modwen for such product 10 years ago. “At that time, the yields were much, much higher than now and they were not popular assets,” says Oliver. “Now, there are still assets out there that we would like to have, but you can’t buy them.”
In fact, he says, the steamy investment market has seen the group increasingly chase new business via development agreements.
In response, Oliver last year approached former Land Securities development director Tim Seddon to head St Modwen’s London office, following the departure of Nick Doyle to Coplan Estates.
Seddon was also brought in to head the group’s bid for the £1.5bn regeneration of Elephant & Castle in south London, which will include 800,000 sq ft of retail space. He and Oliver are still smarting from having lost the opportunity to Australian shopping centre giant Lend Lease last month.
However, as owner of the Elephant & Castle shopping centre, St Modwen still expects to be heavily involved. “We did not buy the shopping centre to lose it,” says Oliver. “We bought it to redevelop it. It will be great to hear what Southwark Council and Lend Lease propose.”
While they wait, Seddon’s team has plenty to be getting on with. The focus is on making the most of tired 1960s parades. “The principal skill is how you utilise air space,” says Seddon.
“Outside London,” Oliver says, “the schemes are about very large, brownfield, contaminated sites that need cleaning up and planning for a change of use and then regeneration. That is a totally different business.”
He is at pains to stress the importance of retail to this business. “When we are developing at Llanwern steelworks and Longbridge,” he says, “it is residentially led but with significant retail. The difference is, it’s a new place that is being created. At Llanwern, you’ve got 4,000 houses, but the idea is to create a place where people work, live and, obviously, shop. You are talking about 50,000- 80,000 sq ft of retail.”
The third strand of St Modwen’s retail business is, Oliver says, a “middle band outside London” where retail and another use are equally central to the scheme.
“In a town centre like Skelmersdale,” he says, “you have a couple of thousand houses but also 350,000 sq ft of retail. You will not get 350,000 sq ft of retail away in Skelmersdale unless you have 2,000 new homes and 2,000 new householders wanting to shop there.”
Taking on rundown town-centre retail projects has seen the group bogged down in its fair share of planning wrangles and local controversy. Oliver and Seddon have learned to be patient. “Not to sound trite,” says Seddon, “but if town-centre regeneration was easy, everyone would be doing it.”
What is most important forSt Modwen is to keep the asset working throughout the planning process. “Farnborough’s had delays in its programme,” Seddon says, “but it’s an asset that has been ticking over. All of the units have been occupied, so it’s not as if we have been hurt in terms of loss of revenue.”
For Oliver, the key is to ensure that St Modwen treats all affected businesses fairly. “We stick by the discipline that any viable business will get the opportunity to be relocated into the new scheme or elsewhere in the neighbourhood,” he says. “Extinguishment is the absolute last resort.”
Bedding down for long planning battles does require foresight. Seddon says: “Most retailers can only think 18 months ahead in terms of their own acquisition and expansion programmes. It’s about anticipating the market, ensuring that you understand the retailer’s needs and providing a product that suits.”
The most significant factor in recent years, Seddon says, has been the changing demands of retailers in terms of store size. He explains: “If you look back to the late 1980s and early 1990s, the big drive was all 2,500 sq ft units. Now, there is an interesting paradox where the small units are letting well and the larger fashion retailers are more interested in the boxes.”
St Modwen’s treatment of its completed product remains very simply defined, however. Oliver explains: “We are very much into the master developer role. We would always build, let, hold as an investment or sell the retail. The residential, we tend to get the planning, put the infrastructure in, do the decontamination and then sell off the land to a housebuilder.”
Looking forward, St Modwen is “always buying”, although Oliver expects the market to be significantly more “challenging” in the nextfive years.
The firm’s focus will remain on the UK. “Going into a totally different environment in Europe is tempting, but is not something we need to do,” Oliver explains.
The group, Oliver says, is keeping most options under review. “We are looking at funds and at the potential of REITs,” he says, “but at the moment, we have too much development to make that work.”
So where is St Modwen looking most keenly? “We are very keen on publicly owned land, because that fits the government’s criteria,” Oliver says. “And we are very keen oneco-towns.”
And as he drily points out: “You’ll need some significant eco-retail, I presume.”
18 town centre retail opportunities
How has St Modwen done it?
St Modwen’s stated strategy is an ambitious target of doubling net asset value per share every five years.
Since its formation in 1986, the group has seen increases from 10p per share to reach 361p in its interim results for the year to June 2007, while first-year pretax profits of £1m have grown to £65.1m.
The growth has been organic, Oliver explains. “We’ve never issued shares, so it’s all from retained earnings,” he says.
He adds: “A lot of the landbank is financed by way of development agreements. You are paying for the land when you have created value. So that is less capital-intensive. Outside London, we are buying large sites with problems and that can be negative – a lot of schemes we’ve been paid to take away.”
He concludes: “Your initial capital base is low – you control lots of product and then you go for change of use, which gives you the value against which you can borrow to redevelop, so it allows you to carry a large landbank of opportunities from a lower capital base. That balance has helped us.”
The Malls, Basingstoke – masterplanning under way for a makeover of the 290,000 sq ft shopping centre adjoining Festival Place and Basingstoke railway station
Bedford – a £200m mixed-use development of 19 acres in the bus station area of Bedford town centre, including 385,000 sq ft of retail
Catford shopping centre – jv discussions under way with Lewisham for shopping centre and housing scheme
Edmonton Green shopping centre, Enfield – £100m mixed-use regeneration including 36,000 sq ft of retail
Elephant & Castle shopping centre – key site within £1.5bn regeneration scheme being developed byLend Lease
Farnborough town centre – £80m mixed-use town-centre scheme including 50,000 sq ft Sainsbury’s and 150,000 sq ft of additional retail
Great Homer Street, Liverpool – £60m mixed-use development including a 120,000 sq ft superstore, 55,000 sq ft additional retail space
Hatfield town centre – £100m mixed-use regeneration scheme.
Hednesford town centre – mixed-use town centre regeneration 80,000 sq ft major foodstore and 40,000 sq ft retail.
Hounslow high street, London – mixed-use regeneration plans being worked up.
Leegate shopping centre, east London – working up plans for what it calls a “major mixed-use development”.
North City, Harpurhey, Manchester – 120,000 sq ft retail scheme
Queens Market, Upton Park, east London – mixed-use plans in public consultation
Walsall, St Matthews Quarter – mixed-use development in the centre of Walsall at the former Shannons Mill clothing and food store site
Wembley Central Square – mixed-use scheme in the heart of Wembley, including 140,000 sq ft of retail and leisure
Wythenshawe shopping centre, Manchester – potential 100,000 sq ft retail and office extension
Walthamstow town centre – major mixed-use scheme being worked up
Bognor Regis town centre – mixed-use plans being worked up
tim sedd0n
Born February 1965
1983-86 John Moores Liverpool University, studying urban estate management
1986 First Job – Edward Erdman
1994 Joined Land Securities
2006 Joined St Modwen as London regional director
bill oliver
Born 1956
1977 Graduated from Exeter University with a degree in mathematics
1980 Qualified as chartered accountant with Turquands Barton Mayhew (now Ernst & Young)
1982 onwards Finance director of companies including Barratt Southampton, Alfred McAlpine’s housebuilding division, Rutland Group, Dwyer Estates
2000 Appointed finance director of St Modwen
2004 Appointed chief executive of St Modwen
