Property Week: MAG Property’s plans are ready to take off

Property Week talks to MAG Property chief executive Lynda Shillaw about the propco’s development projects – including Airport City.

Which UK propco owns and manages around 6m sq ft of space, has circa 1,000 acres of developable land on its books and is about to embark on a major development programme, including £1bn of investment into its prize asset? The surprising answer is MAG Property, formerly know as Manchester Airports Group.

At the end of March, the company, which has property holdings focused around its airport operations at Manchester, London Stansted, East Midlands and Bournemouth, will complete its transformation into a standalone propco, a transformation that began with the appointment of chief executive Lynda Shillaw in mid-2014.

Historically, MAG Property, which has existed in some form or other as a property company for the last 15 years, has – somewhat fittingly given its core assets – flown under the radar, but part of Shillaw’s remit was to build a brand and identity for the business.

Property Week caught up with Shillaw to find out what the MAG Property brand stands for and to talk through the development projects currently on the books.

When Shillaw was appointed, there were few better candidates for the job. With a background in chartered management accountancy, she worked her way up through the ranks at BT during an 18 year stint, eventually becoming property director.

From there she joined The Co-operative and ran the group’s estate for a four-year period, during which time she oversaw the creation of NOMA and the company’s new HQ in Manchester. She was then headhunted to run Lloyds’ real estate lending book before eventually jumping ship to head up Scottish Widows’ Investment Partnership real estate fund management business.

On joining MAG in 2014 from Scottish Widows, she immediately identified two key tasks. One was to undertake a detailed masterplan at each of MAG’s airport sites.

“Masterplans existed to some extent on some areas of land (surrounding our airports), but not in its entirety,” says Shillaw. “It’s really important when you’re looking at land use and land allocation to bring a masterplan forward that sits alongside the requirements of the operational business as well.”

The second task was to bring in a number of key hires to help undertake this masterplanning process and then subsequently deliver any development opportunities that the masterplan identifies. This resulted in the appointment of Jonathan Haigh, MAG’s director of development management and infrastructure, formerly of PwC, and Adam White, the new director of commercial and business development, who was poached from JLL.

Development Potential

The scope for development this masterplanning process identified was huge – the company owns around 1,000 acres of developable land, not including anything within the terminal buildings, such as retail, which is overseen by the management of the individual airports.

At East Midlands, MAG has around 330 acres of land available for development, with 500,000 sq ft consented at Pegasus Business Park that is only currently about 50% built out. Stansted boasts around 357 acres capable of being development.

“We’re doing ecology and site investigation work across 100 acres of land away from the airfield at the moment, so we will look to start bringing forward some of the first planning applications on that land in the summer,” says Shillaw.

She is also hoping to open up more land for development around Bournemouth on around 181 acres the company owns. The company has already created Bournemouth Aviation Business Park, where it is looking to create an aviation and aerospace manufacturing hub and has outline consent for around 500,000 sq ft of development.

The biggest opportunity of the lot is at Manchester Airport, where the company has formed a joint venture with Beijing Construction Engineering Group, Carillion and the Greater Manchester Pension Fund to deliver Airport City – a circa 5m sq ft project.

Shillaw concedes that, to outsiders, progress at the site, which has been split into two halves – north and south – may appear to have been slow, but she points out that projects of this scale can take as long as 20 years to deliver. “We’re about four to five years in and that has involved land assembly, planning, assembly of the joint venture and the creation of an enterprise zone,” she says.

Picking up the pace

She’s confident that the rate of development will crank up a notch as key infrastructure is currently being put in place around the 270,000 sq ft logistics unit Amazon took from Mountpark in the southern part of the scheme. The unit sits alongside DHL’s building, which was completed in 2013, and MAG is looking to deliver a 135,000 sq ft unit called ALPHA that will sit in between the two buildings.

The joint venture partners are currently close to finalising a deal with a UK institution on the unit, and claim there is “significant interest” in other aspects of the development, ranging from a “tranche of buildings on south” to – at the opposite end of the spectrum – an approach about the “whole of the remainder of south.”

Shillaw hopes to start infrastructure work on the northern part of site, which consists of 3.5m sq ft of office, hotel, retail, food and beverage and leisure space, later this year.

“We also hope to bring forward one, possibly two, hotel developments and the first office building in our central  business district area, which is right behind the train station,” she explains.

The joint venture partners will be looking to secure pre-lets on the scheme rather than proceeding speculatively, despite strong demand for office space in the area. “We’ll never say no to spec, but what we are trying to do at the moment is go ‘part spec’ so we have enough letting to effectively cover the construction cost, and that’s the basis on which the first office will, in all likelihood, be brought forward.”

She estimates that there is potentially another 10-12 years of development activity at Manchester Airport, during which time the airport is forecast to grow significantly – from 23 million passengers today to around 30 million by 2025. Airport City will enable the airport’s capacity to grow, with MAG committing to an investment programme worth £1bn, commencing in November this year, to improve facilities across the airport.

Local Approach

While Manchester is undoubtedly the jewel in the company’s crown, Shillaw is just as excited by opportunities surrounding MAG’s other operations.

“Each airport is very different and the communities and catchments they serve are also very different, and therefore what sits around the airport or what you do with the land as you bring it forward is very different,” she says. “It has to fit in with what the key local economic drivers and sectors are. You have to work closely with local authorities to make sure what you’re bringing forward is right and relevant.”

One things that’s no longer right or relevant for MAG is the range of significant residential holdings it owns around Stansted Airport. The airport operator inherited a number of homes amassed by former owner BAA in preparation for plans for a second runway at Stansted – plans that were ultimately ditched.

“The portfolio consists of about 268 house,” says Shillaw. “In some locations we own whole streets; in other locations it’s a single big house in the middle of the countryside, so it’s quite a diverse portfolio.”

“It’s also an interesting portfolio because it’s about 97% let at all times. It’s a good portfolio from that perspective, but it’s non-core to the business so we are looking at what we can release back to the market this year and over the next couple of years.”

At the moment, Shillaw is well on track to deliver on the initial targets she was set. Today, MAG Property effectively works as a standalone propco, which gives its parent company the ability to look at a wide range of different options further down the line, including a possible sell-off.

And just as importantly as moving towards a propco model, the work undertaken to establish a separate identity and brand for the company is also starting to pay off, according to Shillaw.

“We are now recognisable as a national property company,” she says. “There isn’t anyone else quite like us because of the nature of the airports that we own, the scale of some of those airports and the opportunities surrounding them.”

As for what’s next, Shillaw says that the master-planning exercise didn’t just identify numerous opportunities to build where the company hasn’t already built – it also identified opportunities to renew some of the existing stock it has. So get ready to take off.