Port@l creates one-stop-shop for managed property
Copyright: David Lawson
Published in Property Week October 2009
Few firms run their own canteens, which seems sensible when they know little about cooking chips. They don’t wire telephones, make desks or generate electricity for similar reasons. So why treat property differently?
Renting is a form of outsourcing but long leases and hefty tenant responsibilities makes it more of an accounting procedure than a real difference to the distractions of ownership. Managed space goes further, bundling services such as heating and cleaning into an all-in fee and cutting leases to as short as a few months. But even this can leave occupiers burdened with responsibilities when they prefer to concentrate on core business.
One multi-disciplinary group is exploiting a gap in the market for a ‘cradle to grave’ service ranging from strategic accommodation advice through development, funding and facilities management. All these are available separately from a string of professional specialists: corporate advisers, agents, builders, and facilities managers. Port@l has bundled them into a single package.
The Banbury-based firm sits awkwardly in a sector dominated by names like Regus and MWB but that causes no grief as it has no intention of competing for what it sees as a narrow interpretation of property outsourcing. The key difference is a breadth of service which includes building like a developer, funding like an investor and servicing like a facilities manager. Terms range from one to five years in an existing Port@l facility, from three years in other existing buildings and typically five to seven years for build-to-order. All provide a ‘clean’ exit with no dilapidations, legal fees or other write-offs.
Turnover has doubled in the last year as a clutch of big names such as Morgan Stanley, E.ON, BskyB and Vanquis have been drawn by what Port@l calls its ‘occupier solution’. Interest is expected to grow as occupiers react to economic problems by questioning how they handle property. For instance, a major insurance group has just asked the firm to fill a requirement for 40,000 sq ft. It normally demands freeholds but this is currently out of the question. It wants to rent with an option to buy when problems ease.
Few developers, let alone managed space operators, would contemplate such a deal but it is meat and drink to Port@l because the firm can tap the financial expertise of associate companies in the Cannock Group, which has funded and developed more than 1.5m sq ft since the early Nineties. Port@l was formed six years ago primarily to satisfy financial groups with seemingly impossible demands for back-office space. Spending on property and IT equipment was difficult to plan during times of uncertainty. Buying services was shunned as they prefer to use their own staff. Port@l stepped in to provide fully-equipped and serviced space on flexible terms. It also allows tenants to depart without penalty.
A key to this integrated ‘plan-build-run’ service was the ability of Cannock chairman Stephen Bantoft, a tax and finance specialist, to enlist backing from private investment groups. Some early centres have been through several tenancies, each with their own fit-outs and have been sold on. The group has now widened its net to general offices. It sees huge potential taking over ‘tired’ buildings and unlocking developments held back by lack of funding.
Variations on a Theme
Port@l has created seven centres totalling around 230,000 sq ft which reflect different ways of handling occupier requirements. In Chatham, for instance, Provident Financial wanted a quick move to a new HQ for its Vanquis Bank subsidiary. Port@l optioned a site from regional development agency SEEDA but Vanquis was reluctant to wait two years for a new building.
Port@l found an alternative by taking an existing 52,000 sq ft building which was converted within three months. Terms allow the bank to expand if conditions demand or walk away with no penalties. Costs of fit-out including cabling, workstations and kitchens were covered by Port@l, which also runs all services. Using Port@l as a strategic partner reduced risk and allowed the bank to concentrate instead on its core business. “We are bankers, not property experts,” said Vanquis head of projects and IT Mike Field.
One of the early centres was created in Glasgow, where a 32,000 sq ft building from the Cannock portfolio was fitted out for Morgan Stanley. Refits have continued with each subsequent occupier. After a similar deal in Rotherham, power supplier E.ON came back with demand for space in Nottingham. This involved a different approach, building a 52,000 sq ft bespoke centre from scratch in 14 months. Cannock organised funding and sold on the investment.
In Coventry one of the world’s largest IT groups was provided with serviced centres by converting two obsolete 30,000 sq ft buildings to order. Cannock bought them, leased to Port@l, which in turn runs them under an occupational licence. Similar conversion of an existing building was carried out for BSkyB in Leeds.