For 14 years, Manchester’s Trafford Park has been the prize in the biggest pass-the-parcel in UK industrial property history. Since 1998, when the Westbrook family’s Trafford Park Estates was bought by Green Property in a £145m hostile takeover, the portfolio – today amounting to 2m sq ft, roughly one-tenth of the industrial estate – has changed hands five times. Ownerships have ranged from a slender six months (Burford) up to a little over four years.
US investor Harbert Management is the latest to own what is widely regarded as the jewel in the crown of North West industrial property.
The £200m deal with SEGRO also brings Harbert the 1.8m sq ft Heywood Distribution Park. The M62 motorway site – famed for its good order and security – has scarcely had more stable ownership than Trafford Park, although SEGRO’s seven-year stint, and BP/Ropemaker Properties’ six years, have provided continuity.
Harbert’s team insist the Alabama-based family-run business is not interested in a rapid Burford-style resale. “This isn’t about a quick buck,” says a team member.
So what will Harbert do with Trafford Park and Heywood?
Those familiar with the deal, and those with a long-term interest in the two sites, expect to see a mix of land sales, new-build and refurbishment, and a gentle rise in rents.
Selling sites
Selling off sites has always appealed to owners of the Trafford Park portfolio and, as a result, the portfolio has shrunk from 2.7m sq ft in 2003 to 2m sq ft today.
SEGRO sold to special purchasers, such as Manchester United Football Club. Last year, the club paid £8.2m for a handful of sites close to Old Trafford football ground. These include the small, but prized, 1-acre Trafford Gateway site opposite the stadium.
Under Harbert, the next to go could be the 22-acre Trafford Point site next to B&Q at Redclyffe Road. Close to the mighty Trafford Centre shopping mall and a host of other leisure and retail occupiers, it could make a tempting buy for developers.
One source says: “SEGRO looked at higher-value uses on some sites, and Harbert will be looking in the same direction, selling to developers or owner-occupiers.”
Paul Daye, director at P3 Property Consultants, is not so sure about sell-offs. “It’s a bit of sad timing for SEGRO, which finally got Trafford Point cleaned up and ready to build just at the point when it sold Trafford Park. The temptation will be to develop, unless Harbert receives an offer it just can’t refuse.”
Occupancy levels
It will not happen soon, but it is sure to come sometime. SEGRO’s extensive programme of refurbishments has helped to improve occupancy levels at Trafford Park. But there is scope for plenty more. Developers such as Marshall CDP, long-time players in the Trafford Park market, are already positioning themselves for the next round of building with the acquisition of the 8.5-acre Blagden Packaging site at Westinghouse Road.
Top of everyone’s list is the Trafford Point site at Redclyffe Road/Ashburton Road West. A series of short-term lets has kept the site warm. Contamination issues are understood to be manageable or resolved.
To make the strategy work, a developer would need to know the Trafford Park portfolio well. What luck, then, that Mark Braithwaite is Manchester-based director of Canmoor, which will be managing the Trafford Park estate on behalf of Harbert. Not only is Braithwaite a veteran of hyperactive developer Easter Group, he was one of the advisers to Green Properties when it took over the portfolio in 1998. Canmoor is the precisely the kind of developer that can get something built, whisper the agents.
Andrew Aherne, director at Lambert Smith Hampton, says: “The real opportunity for new owners at Trafford Park is the development land, and sites such as Trafford Point will attract attention.”
The total developable land within the portfolio is estimated at between 25 and 50 acres, depending on assumptions about what is worth either demolishing or refurbishing.
Speculative development, especially of 30,000-50,000 sq ft units, where the supply of new stock has dwindled to zero, might be on the agenda, says Julien Kenny-Levick, director at Colliers International. “It would be a shrewd move,” he insists.
There is also the prospect of development at Heywood Distribution Park, which provides a large, central site capable of accommodating around 300,000 sq ft. Harbert may be brave enough to develop Heywood’s 15-acre HGV park, but that would mean forgoing the regular income from parking fees – something the park’s four previous landlords have preferred to leave untouched.
Nudge up rents
The last owners to try to push up rents – Brixton Estates – came unstuck. Manchester occupiers did not warm to the south London boys’ style, and vacancy rates grew to around 25%.
Paul Cook, director of industrial agency at CBRE, says: “Brixton was very aggressive with tenants, very take it or leave it, and when SEGRO took over, it had to do a good job to get void rates down.”
SEGRO succeeded, with vacancy rates approaching 10% today, industry sources estimate. But the price for filling space during a recession has been keenly competitive pricing.
The 213,000 sq ft Premier Park scheme – completed by Brixton in 2009 and still all but empty 12 months later – showcased SEGRO’s approach. Rents were cut from £6 per sq ft, incentives increased and lease terms softened. SEGRO called it a “bums on seats” strategy, and it worked.
Kenny-Levick believes Harbert needs to do better than its predecessors if it is to get top rents to move up from £5.50 per sq ft, where they have been stuck for the past 10 years. He says: “Neither Brixton nor SEGRO really grasped the refurbishment options as fully as they might, so there’s scope for Harbert to do something more concerted.”
At Heywood Distribution Park, the main opportunity to nudge up income comes from refurbishment. The departure of JD Sports for a 616,000 sq ft logistics base at Wilson Bowden’s Rochdale Kingsway provides the most obvious starting point. The lease on a 131,000 sq ft unit ends this year.
Timeline
Heywood Distribution Park
1994 Ascot Holdings sells to Burford for £24m
1997 Burford sells to BP Pension Fund for £75m
2003 BP Pension Fund sells to Moorfield Investment Managers for £120m
2005 SEGRO buys Heywood as part of a £276m two-site deal with Moorfield
2012 SEGRO sells to Harbert Management
Trafford Park
1998 Trafford Park Estates acquired by Green Property
2003 Green sold to Burford Beta Holdings
2004 Burford sold to Brixton Estates
2009 SEGRO takes over Brixton Estates
2012 SEGRO sells to Harbert
