Guinness turns developer to build £500m HQ

Copyright: David Lawson/Financial Times February 2000

Drivers crawling along London's Western Avenue  may be forgiven for failing to realise that a future free  from this daily grind may lie behind the rows of suburban housing running each side of the road.

 A jumble of ageing factories and warehouses is being cleared to create a 500m pound showpiece development which could become a template for easing the pain of commuting. It also shows how  a company can turn dross into gold.

 Ten years ago Guinness realised its world-famous Park Royal brewery was rapidly becoming obsolete. One obvious solution was to clear away the old, build anew and then think about what to do with the leftovers. But these leftovers were  too big to warm over and redigest. Changes in technology meant a much smaller production area was needed, leaving two-thirds of the 80-acre site fallow.

 Selling the land was one option. The location, half way between London's West End and Heathrow, would have developers hammering on the door. But this was no stand-alone site that could be neatly packaged up for the highest bidder.

 Even a decade ago planners would have expected a raft of measures for improving  access to surrounding roads  before considering regeneration. It also lies in the heart of a declining industrial area surrounded by housing - each  of which make competing demands.

 By the time the new brewery was under way, emphasis was also being put on shaping development to a new era of global warming, where  public transport played a larger role. This all made the process of extracting maximum value from the surplus land more of a problem.

  Guinness was also in the market for a new administrative headquarters by then. It had grown into a world-class company but was still scattered around Park Royal in smallish old offices. The firm  looked  at dozens of potential sites around the UK but after more than half a century on this site, preferred  to remain. Adrian Hill of real estate consultant Healey & Baker was called in and advised taking on a partner for a comprehensive redevelopment.

 Building a new headquarters depended on  creating an environment worthy of a flagship scheme, according to development director Brian Beanland. It could do that only by keeping some control of the site through a joint venture.

  'In its heyday the Park Royal Estate employed 70,000. By the time we started planning our future it was down to 28,000. If that decline continued, it would not have been the sort of place to build a world headquarters. Developing a high quality scheme would be a catalyst for raising the area.'

 The result is a 1.25m sq ft office park called Firstcentral made up of nine headquarter buildings. It is one of four planned 'gateway' sites  on the estate, which move away from the industrial past to  a shiny modern image and  create some 6,000 jobs. Guinness will take one 187,000 sq ft block and let out the others. The aim is  to merge the quality of West End offices with the open settings of a business park.

 'They will be stunningly different,' says Beanland. Healey & Baker  will be seeking  occupiers squeezed out of central London by rising rents, traffic congestion and sheer lack of new buildings. Rents are likely to be   well below the West End and less than some business parks further  out in the Thames Valley.

 This is more than just a cluster of offices, however. It has become one of the first major urban regeneration projects to match government demands for 'sustainable' development.  As well as improved road access, it involves a new Tube station, bus interchange and cycle paths costing around 30m pounds. Around 12m pounds of this will come from the Single Regeneration Budget.

 The scheme also includes an hotel, conference facilities, business centre, restaurants, nursery, housing. The 'green' image is supported by a nature reserve and water features.

  Getting this far has not been easy. 'We quickly recognized that we are brewers and not developers, so if we wanted to achieve our goals we would have to go to a partner,' says Beanland.

  One potential collaborator withdrew after plans for widening the nearby A40 were changed. Guinness went out to tender again and chose its  current partner, London & Regional Properties.

 'It had become apparent by then that this was not going to be an easy project and we needed a company that was highly entrepreneurial and could work very quickly,' he says.

 L&R has risen from relative obscurity to become a leading player in the property sector because of its flexible approach to development. Some of the offices, for instance, will be offered on a revolutionary kind of contract which bundles up services such as furniture, catering and IT in a single charge. This follows the lead set by government private finance initiatives, allowing tenants to outsource these peripheral responsibilities and  and concentrate on their core activity.

 The development was also complicated by the need to consider a much wider brief than just the Guinness buildings. It would never have materialised without the grants for transport improvements and these had to be justified within the context of community regeneration.

 The sheer size of the scheme, along with its intricate and overlapping relationship with surrounding housing and commercial activities, led to the creation of The Park Royal Partnership, a consortium of local authorities and companies, which has  co-ordinated and driven forward redevelopment.

 Beanland chairs the partnership, which takes him into a much wider sphere involving issues such as training and community regeneration. But these all link into  the prime motivation for Guinness - to maximise the returns of its surplus assets.  The company  has not revealed the terms of its partnership with London & Regional but this kind of joint venture arrangement normally involves profit-sharing.

 That means a swathe of land and buildings with no real value for the company's core activity and of little use to buyers without hefty servicing costs has been transformed into a prime asset with strong potential cashflows.

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