How to succeed in mixed use development – Part 2 of 4: Multi-Ownership
In almost every meeting I’ve attended in the last weeks, whatever the topic, it has been almost a given that at some stage someone will talk about collaboration. It has very much become the buzzword of the moment. And in some ways, it’s a good thing: at P-THREE we are very much in favour of bringing people together to work more closely.
Ultimately, collaboration on multi-owned sites will require some kind of tangible framework (at the very least) and more likely a legal and/or investment vehicle that will safeguard the interests of all stakeholders
However well-intentioned references to collaboration might be, they often actually boil down to little more than engaging in dialogue. Again, this is a crucial first step in so many property transactions and certainly critical in moving forwards plans for mixed use development. In the last Perspectives (the first of a four-part series considering successful mixed use development) we introduced the ‘halo effect’.
Achieving that is much easier if land is owned by single entities, as much of London’s commercial real estate is, as well as many major developments outside the capital. But there are many parts of the UK (including areas in central London like Oxford Street) where ownership is divided between investors. In these cases, dialogue is a vital part of the equation, but it’s very far removed from collaboration.
True collaboration is much more than a round of discussions though. It’s actually about something far broader: a shared vision and purpose. Ultimately, collaboration on multi-owned sites will require some kind of tangible framework (at the very least) and more likely a legal and/or investment vehicle that will safeguard the interests of all stakeholders.
So, here is P-THREE’s ‘Six steps to effective collaboration for multi-ownership mixed use schemes’, moving from a ‘light’ to a ‘heavy’ touch, depending on the particular circumstances and the individual players involved in any one scheme:
A: Shared Vision: A clearly set out document that specifies in detail the desired tenant mix for a scheme and how it will be achieved. This is a purely voluntary arrangement between willing participants, and is not legally binding.
B: Shared Standards: An enhanced version of the Shared Vision document that specifies not only the desired mix, but which uses should be excluded from a scheme. Part of this document could contain legally binding clauses. Some Business Improvement Districts (BIDs), such as London’s New West End Company and Newcastle’s NE1 have been conspicuously successful at this level.
C: Asset Management: Likely to be a legal document, this will build on shared vision and standards by setting out how the scheme will be run over time, how costs (for jointly owned realm, for example) and financial returns will be apportioned, as well as how disputes between stakeholders will be resolved.
D: Key Stakeholder: In a legally structured arrangement, one stakeholder can agree to take on a role of a major leaseholder and manage sub-lettings on behalf of other stakeholders. A legal agreement will set out how this works in practice and how financial returns are distributed.
E: Joint Ownership: The property industry is naturally good at working together, so a joint venture legal agreement, such as that pioneered by the Birmingham Alliance of the 1990s, allows potentially competing partners to work together on developing out an area over time. This is particularly relevant for large-scale schemes, where a long-term development structure can bring mean substantial rewards for investors willing to work collaboratively.
F: External Intervention: Popular in the 1980s and potentially due a come-back, this approach relies on a public sector entity (a local authority or a specific vehicle such as a development corporation) creating a critical mass site area (through CPO powers or existing land ownership or both) that is then developed out jointly, in a legally agreed way, with other stakeholders. In this case the public sector entity takes on the role of a virtual single site owner to kick-start development where it might otherwise be stymied by conflicting interests.
When it comes to multi-ownership mixed use development, collaboration, in my view, must include one of the above steps. To achieve collective commercial success requires, at the very least, some kind of formally agreed and documented vision. Collaboration here involves much more than talk.
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Collaboration on any mixed use scheme will also involve meaningful engagement with existing communities, a topic we’ll consider in more detail in the third part of this Perspectives series.
Article by Thomas Rose, Co-founder P-THREE
Photo credits: Unsplash
