If anyone was in any doubt that Mark Allan means business, they aren’t any longer.
No sooner had we absorbed the news that Landsec had agreed its first takeover in 20 years with its £190m acquisition of ailing regeneration specialist U+I than it struck a second mega deal, to acquire the majority stake in Salford’s MediaCity for £425.6m. After assessing the lay of the Landsec business for 18 months, Allan is finally starting to make his mark. So what of the two deals?
MediaCity is a no-brainer. Landsec gets a 5.8% yield on what has already been built as well as the chance to build out an additional 1.6m sq ft that has outline planning consent and an estimated GDV of £750m. What’s not to like?
The U+I play is more complicated. As well as the three projects Landsec wanted, including what Allan hopes will become the King’s Cross of the north, Mayfield in Manchester, there are a couple of others it is not so keen on.
Moreover, it is buying a loss-making business, one formed from the merger of two incompatible businesses (Cathedral Group and Development Securities) that were never properly integrated or rationalised; the departure of Matthew Weiner this January proof of that.
Hopefully, the takeover will put an end to all the side hustles, which seemed to distract U+I from actually delivering anything. As one observer notes dryly: “It was all brand, no product. Landsec will drag it forward, focus on the valuable projects and put some adults in the room.”
Another of the big criticisms of U+I was the lack of any discernible ESG strategy, the business seemingly maintaining the view that because it ‘does regeneration’ it was a given. It wasn’t, not to investors anyway. Landsec should be able to help with that as well as bring forward projects that had stalled through lack of funding.
How many of the U+I workforce it keeps on remains to be seen. U+I had already downsized its workforce and sublet its eye-wateringly expensive Victoria office (presumably to make itself a more attractive takeover target). Will further staff be dispensed with and just a handful retained – and what of Richard Upton? He is not exactly cut from the same cloth as Allan, as Property Week columnist and Broken Homes author Peter Bill attests.
“Richard Upton is from Venus, Mark Allan is from Mars,” he says. “Richard is intuitive, imaginative and driven by a desire to create great places and spaces. Mark is dispassionate, determined, driven by a desire to put his financial mark on Landsec.”
Sometimes opposites attract, sometimes not. Bill hopes the former holds true. “Landsec sort of needs a character like him in the same way British Land needs Roger Madelin for Canada Water,” he says. “Landsec’s takeover of U+I should pep up the former and bring more discipline to the latter, as long as it does not morph into an ‘assets, yes, people, no’ deal.”
We will find out whether he is right sooner rather than later. In the meantime, spare a thought for the U+I shareholders. At one point, in June 2015, shares were trading at £2.90. While Landsec paid £1.49 a share, 73% up on the 86p shares were trading at last Friday, that is only just over half what they were worth at their 2015 high water mark. Hopefully, the only way is up now for U+I.
As for Allan, the question is not so much is there more to come as what’s next?
Liz Hamson is editor of Property Week
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