United they can stand

United they can stand

There’s great opportunity for the North East of England to step up development and attract more foreign investment but the public and private sectors will have to work closer than before. Adam Serfontein tells Brian Nicholls how

Within the walls of a former fever hospital there’s renewed – shall we say? – diathermancy. It’s gripping Adam Serfontein and like minded property and investment specialists as they consider how best to take the North East’s inward investment aspirations onward from stand E31.

This hospital or “house of recovery”, built by public subscription in the early 1800s, is Newcastle’s original fever hospital, but home now to The Hanro Group, one of the largest property investment and development organisations in the North East, of which Serfontein is managing director; as well as to the Royal Institution of Chartered Surveyors.

A solid three-storey building, it stands on Bath Lane, immediately outside old city walls still stoutly in place. “At one time,” Serfontein explains, “if you had a fever they, in effect, threw you over the wall. If you got better they let you back in.”

And at this moment Serfontein and fellow members of the recently formed Developing Consensus, which Serfontein chairs, are working in unprecedented unity to get a major chunk of the North East region back into national and international investment prominence.

Developing Consensus comprises what would once have been an uneasy alliance of private and public sectors, the latter in this case represented by investment teams of the seven local authorities within the North East Combined Authority (NECA) that covers the region apart from Teesside – the province of the North East Local Enterprise Partnership (NELEP) in effect.

The private sector’s strong representation includes – besides The Hanro Group – Carillion, Clouston Group, Cobalt Park, Gentoo, Intu, Knight Frank, Quorum Business Park, Ryder Architecture, Sanderson Weatherall, and UK Land Estates.  It also brings in Newcastle Science Central and Northumbria University.

The collaboration – through its body Invest North East England – represents Durham, Gateshead, Newcastle, North Tyneside, Northumberland, South Tyneside and Sunderland councils. Some of these councils don’t always see eye to eye on other matters, and Serfontein marvels that even individual members of the private sector, normally competitors, should have joined in common cause too.   

The public and private sector in unison recently took stand E31 at the first MIPIM UK international show at Olympia in London. This was their three-day springboard into a crowd of more than 4,000 delegates representing some of the most influential international property players from all sectors of real estate.

The event previously, since 1991, had been staged only at Cannes in France. It gave the chance now to project, both nationally and internationally, opportunities presently for property investment and development; and business relocations in the North East, such as Newcastle’s newly emerging Stephenson Quarter and the established area of Gallowgate.

In the former fever hospital, now all elegantly officed, Serfontein explains how Developing Consensus has reached a pivotal stage. “The jury’s out because what matters is how we follow up and raise our game,” he says. “We’ve a combined and critical mass of supporters and members across the public and private sectors, and a good geographical spread. We’re well represented to support the entire NELEP area,” he points out. “And 2015 is our time for action. The North East has been punching below it’s weight in bringing in new business.

“All the individual local authorities have recently been reasonably effective in attracting businesses to their areas. But unless we aggregate the population figures, GDP figures, and housing statistics across the seven authorities, we’re not on the map for pan-European and global investment.”

There are hurdles. An outstanding inward investment team of recent years has been one Catherine Walker led within the NewcastleGateshead Initiative. It had been co-funded by Newcastle and Gateshead, but Gateshead is now withdrawing its funding from this function of NGI – “given the pressures on its reduced budget,” Serfontein concedes.

“But it’s a challenge, since this was the only inward investment winning business team formally designated to work across more than one local authority area. It was good when Newcastle and Gateshead pitched together.” Thus, the next couple of months could spell either problem or opportunity. “The loss of Catherine’s team working across local authorities would be a backward step at a time when inward investment has never been more important. Newcastle remains committed to it. But if Newcastle is paying in entirety, how can it promote Newcastle and Gateshead?

“Here’s an opportunity for us all to step in, including the private sector, with funding to advance an effective outward facing organisation for inward investment. We’re looking at funding from the private sector and to use this to attract funding from the public sector organisations across the combined authority area.

“That way the private/ public sector could represent the entire combined authority area. Councillor Paul Watson, leader of Sunderland Council, is charged by the Combined Authority to lead inward investment, and his efforts are very impressive. He’s buying in as much as we are to the importance of public and private sector working together, and a team that works across political boundaries.”

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Each local authority is perceived to have particular strengths: Newcastle finance and science, Gateshead performing arts, music and culture, Sunderland high-tech and automotives, North Tyneside business parks and renewables, South Tyneside offshore, Durham education and global research, and Northumberland heritage and tourism. “While these need considerable debate, it would be very healthy to reach some consensus,” Serfontein advocates.

He points out: “There’s already a head of steam for working together. To be effective, though, each constituent area must accept it can’t do everything – but can still benefit. When North Tyneside through Quorum Business Park attracted 1,000 jobs into Tesco Bank, Newcastle and Northumberland benefited significantly too, as did the remaining local authority areas.

“Nowadays only people working in local authorities respect political boundaries, since many of us live in one area but may work in another and find their entertainment in a third. So there’s a win, win here. Even in the private sector, who’d have thought four years ago that Hanro, Clouston Group and UK Land would be working together to promote the region?

“One good thing recession has done for us all is to break down barriers of competition, making us realise that in working together we may lose a couple of battles but we’ve a far greater chance of winning the war for inward investment - both from national and global investment in real estate and business relocation. Like the other private partners and their companies, I’d be delighted to get more interest from national property funds throughout the region because it raises the value of existing portfolios.”

The Hanro Group is a good example of a firm that has seized opportunity. A family business, it was founded over 100 years ago as R Rankin and Sons Transport. It diversified into car and fuel sales with subsidiaries in finance and oil, employed about 650 people and became Minories, named after Minorite Nuns whose retreat its headquarters neighboured.
Foreseeing the motor trade consolidation, the group in 1987 – Hanro, by then – sold many of its assets retaining just two Mercedes dealerships, the finance company and a core property portfolio.

Thereupon the Rankins concentrated on property development and investment. They have certainly made their mark. Serfontein, who qualified as a chartered surveyor in 1987, worked for Gavin Black and Partners and Chesterton before joining Hanro in 1999. Within a few months Hanro sold its remaining non-core interests to make property its focus, and Serfontein has been managing director for seven years now.

The business grew significantly between 1999 and 2005, buying property at “sensible” prices. Near its present home Hanro in 2002 completed Citygate, a 200,000sq ft landmark mixed use scheme, establishing a new commercial district near St James’s Park – the first new development there for 30 years. Three years later Hanro undertook development at Abbey Woods Business Park at Durham, and the year after that commercial premises of 35,000sq ft for Peugeot on Benton Road, Newcastle.

In 2010 it achieved for the occupier Ryder architects a striking transformation on Westgate Road of the 20,000sq ft, architecturally listed, former Coopers Motor Mart – into Coopers Studios. The 1897 building, standing over a submerged part of Roman wall, had been a purpose built horse, carriage and cycle display hall – with “ladies’ viewing gallery” – and later one of the city’s first motor dealerships.

In 2011 Hanro provided a 100,00sq ft superstore for Sainsbury on Benton Road, Newcastle. Being both developer and an investor, it acquired properties selectively throughout the recession, including in Edinburgh, Brighton and Liverpool. “During poor markets our activities are more investment based for we can acquire products at a sensible price,” Serfontein points out. “When the market recovers its strength we focus on mixed use development to create stock for our portfolio. Most developers build to sell. We build to hold.”

Hanro, now with 10 staff, expects ongoing growth. Its investment portfolio is worth about £150m. It has rent income of about £10m a year, a development pipeline of about  £100m, about 200 tenants and total stock nearing 2m sq ft. “We still own a 64,000sq ft office building at Citygate completed in 2002. Our long term commitment gives us an edge,”

Serfontein says. “Our strategy is to maintain steady, sustainable growth. Instead of trading our developments we’re happy to get a return over a longer period. We re-invest that in quality stock.”

Citygate is fully occupied, and recently Hanro negotiated a simultaneous surrender of an 11,000sq ft floor from the training awards body NCFE, which relocated to Quorum, and that floor has been taken by Ernst Young. The success of its personal tax centre is enabling it to hire 200 more staff over the next two years.

The determination that Serfontein carries to see regional inward investment result from a rewarding marriage of private and public sector should not be underestimated. He personally was so taken by the survival of the old fever hospital and its potential for new commercial life that he tried for 10 years to buy it from the city council – finally succeeding on Hanro’s behalf in 2013.  

“It’s not the biggest building in our portfolio by any means, but it’s a beautiful building,” he says. “The Rankin family who own this company have such a long history with Newcastle and the North East. While you can’t put love in the bank, we’ve derived a lot of pleasure from bringing this building back into use.”

Stephenson Quarter

Where kindling cash can come from

The biggest plus from the Government during the last 18 months, in Adam Serfontein’s view, has been its introduction of accelerated development zones enabling local authorities to keep and re-invest rate revenue received from new development within those zones, rather than having to turn said income over to the Government. “A fantastic opportunity for the public and private sector to work together,” he says.

He’s confident many private sector participants in Developing Consensus could probably make revenue-raising projects available to the local authorities. Hanro for one holds land for a 175,000sq ft mixed use development on a site bordered by Strawberry Place, Strawberry Lane, Gallowgate and Percy Street close to Newcastle United’s stadium.

Says Serfontein: “The construction of 100,000sq ft of offices would produce to the local authority an income through rates of about £800,000 a year. If local authorities keep income like that, instead of giving it to central government as before, the capital value to the council would be a significant enabler particularly in these times of budget cuts.

“That’s win, win for commercial development. So the stars have never been better aligned for the public and private sectors to work together. We’ve now proved that, working together across sector and geographical regions, we can hold our own with other key UK investment destinations. Clearly we must have in place one single point of entry for all inward investment enquiries. 

“This will streamline them, reduce duplication and cost, and improve conversion rate through pro-active targeting. There could also be substantial savings from reduced sub-regional investment products and individual initiatives.” He believes joined-up thinking between NECA and the private sector must replace individual local authority initiatives, “which are less effective on a national and international stage, and potentially divisive.”

Adam Serfontein, aged 50, is also deputy chairman of governors at Northumbria University and serves on the board of NE1, Newcastle’s business improvement district, whose recent re-election by its funding business and other members was the most successful re-election of its kind in the country.