New challenges are facing both rural and urban estate owners. Robert Marchbank looks at the ways in which they are moving with the times
Landed estates, both rural and urban, are examples of early family property development businesses, with many estates coming together over centuries of careful management, planning, acquisition, investment and family arrangements.
However, to many, the term “landed estate” evokes an image of a gentle Downton Abbey rural idyll with the family presiding “upstairs” over their estate, the day-to-day running of it left to those “downstairs” and its nature changing very little year on year. While such estates may still exist, they are in the minority.
Both rural and urban estates are taking a more commercial approach to property management and making the estate’s assets work harder. Where, historically, many estates have been viewed as asset-rich and cash-poor, nowadays every effort is made to find sources of revenue that are sustainable, to manage expenses and focus on overall return.
The most successful estates have a clear vision and strategy for development and are operated with a corporate approach. While the family remains central to the operation of the estate, perhaps with a board led by the head of the family, it is not uncommon to find a property professional or accountant with day-to-day responsibility as the chief operating officer (or similar) of the estate.
Urban estates
Some of the largest and most successful estates are urban estates that have taken advantage of the prime property that they own to ensure that it produces sufficient revenue to maintain and grow. This has been achieved by strategic planning combining mixed uses (known as “place-making”), responding to market trends and, where necessary, taking a strategic approach to mitigate threats from external factors such as increased enfranchisement rights.
Place-making
Place-making has become a buzzword in the property industry, with developers aspiring to create community developments and spaces that promote health, happiness and wellbeing. Urban estates are in an ideal position to bring together place-making schemes for two reasons. First, they already own large areas of neighbouring land; and second, in many cases, they have been place-making for hundreds of years, albeit perhaps not in such a strategic manner.
Responding to market trends
The nature of the ownership structure of many of the urban estates makes them well-placed to respond quickly to changes in the market. For example, the increase in central London residential values over recent years has benefited urban estates to be able to respond to the trend by achieving changes of use, where necessary. Alternatively, because of the quality of the property that they own, many urban estates make attractive joint-venture parties.
Mitigating the risk of enfranchisement
Enfranchisement poses a significant and ever-increasing threat to the urban estate, which can be mitigated by putting in place various strategies and structures. Such measures may not, however, always be appropriate or cost effective and, in many cases, such defensive strategies are reserved to protect the crown jewels of an estate.
It is not only the loss of the asset that may impact on an estate following a successful enfranchisement claim. In prime areas there may be a risk of enfranchised properties being allowed to fall into disrepair or altered so as to affect the character and value of both the enfranchised property and the adjacent properties still comprised within the estate.
The well-managed estate will be protected from potential damage by imposing a court-approved management scheme, which regulates how the enfranchised freehold owners may deal with their properties.
Rural estates
Until recently it would have been unthinkable for many rural landed estates to diversify away from the established agricultural use or to open their doors to the public. However, with increased running costs, rural estates are showing great creativity in order to make the valuable estate assets and land that they own work harder.
Diversification
With income from traditional farming uses decreasing, many rural estates have looked to diversify. Agricultural land may (depending what is on or under the land) have the potential to be used for fish farms, gravel and sand extraction or forestry. Solar or wind farms are other options, though the potential planning issues that these bring can make such uses less desirable.
Less traditional pursuits
While income can still be made from traditional agricultural and country pursuits and open house and garden events, rural estates are increasingly using their land for more imaginative activities. Such uses include the fast growing and lucrative music festival market, antique and country fairs, open-air theatre or opera performances, pop up cinemas, “glamping” or the less romantic but commercially rewarding park and ride.
Such activities all have the scope to generate significant income and may also provide tax benefits, for example, where an estate owns a valuable art collection that is opened to the public.
Development
Rural estates are not at risk of large scale enfranchisement claims in the same way as urban estates and in most cases will wish to retain as much property within the estate as possible. However, the increased pressure to build homes, and consequential rise in the value of development land, is a welcome potential resource to many rural estates with unused or surplus land.
Rural estate owners are becoming increasingly sophisticated in utilising such land. A field on the fringe of an estate may be of great value to a residential developer, and the well-run rural estate would look to exploit such opportunities, whether by requesting a suitably large premium, negotiating overage provisions or entering into another form of joint venture or profit-share arrangement.
Trial and error
For many estates, diversification will be completely new. Estates are trying different enterprises to determine what works best for them and accept that, for whatever reason, some enterprises will not work.
Consideration must also be given to the very particular historical structure, tradition and family involvement in both urban and rural estates. It will not always be desirable or appropriate for an estate to be operated purely as a commercially driven property company, and in many cases greater consideration will be given to the needs of the family, the estate tenants and its employees.
However, a structured and forward-thinking approach, combined with the desirable prime property and assets that they hold, will mean that estates that embrace modernisation are able to not only survive, but flourish.
Robert Marchbank is a solicitor in the property team at Boodle Hatfield
Luton Hoo Estate: foot in the past, eye to the future
The Luton Hoo Estate has been in the same family for generations. It extends to just under 1,100 acres and comprises many of the elements that are typical of estates of this size: farming, residential property, shooting, gardens and commercial space, writes Edward Phillips.
The estate is located 30 miles from central London and a few miles from Luton Airport and the M1. It is a rural yet convenient location.
Farming remains a significant part of the estate’s activity, with 800 acres farmed in an environmentally sustainable way. The estate also acts as a contract farmer to ensure the long-term viability of farming operations.
The aim at Luton Hoo is to create an estate with a firm financial footing for future generations and to secure and optimise existing enterprises, such as the farm and the estate’s residential property stock. Central to this was creating a strong team to work with and, as such, the estate has 16 full- and part-time staff working on the estate and various advisers playing a key role.
The estate also means different things to different people, creating a need to balance activities. Filming, for example, provides the estate with a valuable revenue stream and recent productions include War Horse, Call The Midwife and Downton Abbey.
Part of the estate’s strategy focused on how to better use the 20,000 sq ft of commercial space on the estate and to diversify it by identifying market trends. Its location has attracted grade-A tenants, including G4S and Land Rover Experience.
Expansion is planned, with a further 45,000 sq ft of farm buildings with planning permission to be converted into more contemporary use. There is also a thriving wedding and events business.
Five and 10-year plans, which are well researched, budgeted and detail expected returns, help to support future development. Like any business, it would be impossible to secure funding for future projects if approached in an ad hoc way. Future projects currently being considered include housing and green energy.
This commercial approach – with one foot in the past but with an eye for the future – will ensure Luton Hoo Estate not only survives but thrives for future generations.
Edward Phillips is the estate director at Luton Hoo Estate: www.lutonhooestate.co.uk
