The Subplot | Stockport’s big test, Arndale sell-off, office investor ker-ching

Welcome to The Subplot, your regular slice of commentary on the North West business and property market from Place North West’s analysis editor, David Thame.

THIS WEEK

• Stockport’s big chance: the town’s Mayoral Development Corporation is picking up speed, but can it maintain it?
• Elevator pitch: your weekly rundown of who and what is going up, and who is heading the other way

WHAT A DIFFERENCE A MAYOR MAKES

Stockport’s £1bn DevCorp revs up

Painfully complicated site assembly, and some delicate traffic-light politics, will be needed if the 130-acre Town Centre West area is to meet its targets.

Stockport’s Mayoral Development Corporation announced on Tuesday that it is seeking a long-term joint venture partner for an eight-acre residential site, a tricky plot that has taken two years to assemble. The aim is to create a new digitally-capable, walkable neighbourhood of 1,200 new homes. The £250m proposal represents a big step towards the 4,000 homes and 1m sq ft of employment space envisaged when the MDC idea first emerged in 2018/19.

Thinking hard

The Stockport 8 site arrives as the MDC rethinks its strategy – or at least it appears to rethink it. What goes on at board level is opaque: no minutes are published, only agendas, and everything on the agenda is listed as confidential, so top level action is hard to piece together. But the January 2022 agenda included “REFRESHING THE STRATEGIC BUSINESS PLAN (CONFIDENTIAL)” followed by “UPDATE REPORT ON DELIVERING THE 2021-2026 BUSINESS PLAN (CONFIDENTIAL)” so we know something is up. The current post-Covid delivery plan 2021-25 aspired to 1,000 new homes by 2023, which is a tall order. You can find the paperwork by following the links from here.

Keep it flowing

More or less everyone agrees that the MDC is a fine idea and that its challenge, if it is to meet the stated targets, is to keep up a steady flow of good, actionable sites. It’s an aim that gets harder as it penetrates further into the area beyond the railway line, where ownership is a patchwork and plenty of existing occupiers will have things to say. This won’t be a walk in the park as even the (relatively) straight-forward Stockport 8 site shows: vacant possession will be taken in phases through 2023 and 2024.

Keep it rolling

“The issue is momentum. The Stockport 8 announcement is a positive and we’re seeing funding and progress on Stockport Interchange and Weir Mill,” says Cushman & Wakefield North West managing partner Caroline Baker, who was involved in the early days of Town Centre West strategic planning. “Other proposals, the next wave, are being worked up. So the task is to get the private sector and landowners to work together to ensure sites become available,” she adds.

Fiddly work

Can they do it, and how will we know if the MDC is really trying? Matt Dawber, associate director at the planning consultancy once called Barton Willmore but now called Stantec, says: “Land assembly is the key thing. That’s the area they need to get to grips with. They are making all the right noises. Weir Mill and Interchange got funding, but they will have to push to get the compulsory purchase funding and backing they need for more complex sites.” Working out how to relocate existing Town Centre West businesses – which means thinking about the whole borough, not the MDC site – will be key to making progress.

Trouble at mill?

The acid test will be the progress of the super-prominent and long-awaited redevelopment of Weir Mill, where Capital & Centric is piloting a £60m project (with £7m input from Homes England) to create 250 apartments in a hugely visible grade two-listed building. Flunk this conspicuous project and the prognosis for the MDC looks less encouraging. “Weir Mill has been a long-term aspiration, and if it gets delivered it is a sign the MDC is doing its job because no two ways about it, this is a difficult site,” says Dawber. “If they pull it off, it will generate impetus for sites around it.”

A model to follow

The early-days hope was that the Stockport MDC might prove to be a model for other areas of Greater Manchester, and for metropolitan areas elsewhere. So far there hasn’t been a mad rush to emulate Stockport: Wigan has chosen a joint venture partner, Oldham is on a DIY mission… maybe Tameside could be suitable, but who knows? London has two, but they operate rather differently. The Greater Manchester Combined Authority had not responded by the time Subplot shipped and neither had the MDC.

It’s all about friends

The MDC delivers the intangible benefits of confidence and an address book full of useful contacts. Now that Homes England has decided to morph into something wider, rather like the defunct English Partnerships it replaced, the door is open to some fancy arrangements. But maybe the key to the MDCs success is that, in a borough where three political parties regularly vie for control, the serious business of regeneration can be taken out of the political fight. In which case the MDC is not so much a solution for everyone as a clever tailor-made solution for Stockport.

Traffic light politics

The danger, politically speaking, is that one of the sponsoring parties – Labour mayor and recent council leadership, Conservative government and large Lib Dem council group – might think another is claiming all the credit. That could be awkward, at best.

For now, Stockport 8 is a great opportunity to show what can be done. Developer interest will be revealing. Adam White, senior director of UK development advisory at CBRE and an advisor on the Stockport 8 scheme says: “The scheme benefits from its scale, strong, cross-party, local leadership and significant public sector financial commitment…and has the latent potential to outperform its local and regional peers over the medium term.” Lots of hopes are riding on it.

ELEVATOR PITCH

Going up, or going down? This week’s movers

Two risers this week, both jostling for the right to jab the call button. Office investors think they sniff an opportunity to cash out, whilst Intu creditors pray for relief.

Ker-ching moment for office investors

With war and inflation threatening a bumpy post-Covid phase for the economy, now would be a good moment to cash out of big investments, particularly if they are the kind of big investments somebody else might want to buy.

No 1 First Street, the 180,000 sq ft block that plays host to Auto Trader and others, was acquired by Standard Life in 2016 paying £66m, a yield of 5.5%. Now the talk is of a sale at around £73m. Investors in many regional cities and in the capital have spotted a ker-ching moment and this absolutely won’t be the last discrete off-loading effort.

Arndale sale and Intu debt paycheck

Can you sniff the sale of a share of Manchester’s Arndale Centre in the gentle spring breeze? Maybe you can, as creditors of collapsed part-owner Intu fathom the depth of their losses and look at ways to mitigate them.

The Intu collapse represented a massive destruction of value. Around £4.5bn is owed, with investors likely to get back no more than a few pence in the pound. But paperwork posted with Companies House suggests one route to a (very slightly) more generous payday could be the sale of assets like the 1.6m sq ft Manchester Arndale Centre.

Subplot (4 May 2021) has already reported on the complications caused by a revolving credit facility attached to Intu’s holding (M&G Real Estate has the rest) and, as a result, the temporary measures agreed whilst everyone worked out what was for the best. The moment of truth – and of disposal – now seems to be at hand. The issue will be timing.

Get in touch with David Thame: david.thame@placenorthwest.co.uk | 01544 262127

The Subplot is brought to you in association with Oppidan Life.