Fasset challenges property experts
Copyright: David Lawson
First published: Property Week March 2008
It is remarkable how many top names in managed space have no professional property training. They often came in by chance and learned that expertise in bricks and mortar is not necessarily the sole foundation for success. Chris Allington was a purchasing manager with Xyratex, an IBM spin-off, when he was dumped with the monumental task of handling 700,000 sq ft of surplus space near Portsmouth. ‘I had no idea about property, so I called in the experts,’ he says. ‘I got lots of disconnected advice, and no-one seemed to have a coherent strategy. A lot of proposed solutions were not deliverable.’
There were the usual ideas about alternative uses such as retailing or business space but standing outside the traditional mindset of a property professional made him sceptical. The buildings, created piecemeal by IBM from the Sixties, were considered obsolete, so offers were effectively at site value. This went against his own training to squeeze the best value out of assets. He felt he could do better.
‘I had some experience of science parks in the US and felt there would be demand along similar lines here,’ says Allington. He persuaded Xyratex to put up £18m to refurbish much of the space into a community of small technology tenants paying an all-in fee including facilities management.
Four years later the space, renamed Langstone Park, was fully let and sold to LaSalle Investment Managers for almost £54m – around 25% more than expected – after a scrap between more than 30 bidders. By then Allington had such as taste for the business that he and fellow executives were running Fasset, a property and facilities manager set up look after Langstone. It runs services such as restaurants, gyms, security and cleaning. The integrated workplace management approach typically provides tenants with a 15 per cent saving on buying in such services themselves. Ten years later, after a management buyout, the firm is generating annual profits of £750,000 on a £13m turnover and has ambitious plans to manage 5m sq ft within three years.
Allington sees huge potential in big companies facing similar problems as Xyratex – vast amounts of space no longer required for core activities. These so-called ‘reluctant landlords’ are squirming under the combined weight of shareholder demand for maximum asset value and cost reductions, surplus space generated by new working practices and, more recently, the burden of extra business rates on vacant property.
Last year Air Products, awarded a long-term contract to handle its 170,000 sq ft European headquarters at Hersham, Surrey, involving provision of all FM but also responsibility for recycling two floors of the building. Like Xyratex, AP is paying for refurbishment to transform surplus corporate offices to suite smaller firms looking for flexible space. Fasset is receiving a management fee plus performance payments for the tenants it attracts. First lettings have taken place at rents equivalent to the local market level of £17/ sq ft wrapped up in a total charge of £38/sq ft including FM.
Fasset is providing a mix of serviced and managed offices. Tenants can choose the level of FM services they require. It will gradually work through half the building over three years and structure the development as an investment which AP can sell if it wishes.
Another technology or science park north of the M25 is among schemes in the pipeline. Allington is casting his net wider nowadays, targeting investors in new property that could benefit from alternative management. The 5m sq ft target may be modest as more landlords look beyond traditional property management. The figure was not just picked from the air. ‘We looked at the total development in the south east and figured we could easily get 1% of that,’ he says.
But Fasset has no ambitions to rival traditional property advisers. ‘We see ourselves more as a business advisor, offering solutions which may or may not involve development,’ says Allington. Southern Water and Ordinance Survey have both sought advice but Allington called in Cushman & Wakefield to analyse the property angles. Any suggestions, however, are balanced against Fasset’s study of corporate goals.
The key is more intelligent treatment of space. That could involve serviced offices, various levels of FM or even straight sales. Serviced space is not a panacea. Allington recalls walking around a business park where the owner bitterly regretted letting to a leading serviced space operator which had leached prospective tenants from the rest of the park. A partnership or management agreement would have ensured the landlord did not suffer that loss of control, he says.
FASSET - Property & facilities management