Susan Freeman
Hi, I’m Susan Freeman. Welcome back to our PropertyShe podcast series brought to you by Mishcon de Reya in association with the London Real Estate Forum, where I get to interview some of the key influencers in the world of real estate and the built environment. Today, I am delighted to welcome Simon Carter. Simon is the CEO of British Land. He has extensive experience of finance in the real estate sector. He joined British Land from Logicor, where he had been Chief Financial Officer since January 2017. Prior to joining Logicor between 2015 and 2017, Simon was Finance Director at Quintain. Simon previously spent over ten years with British Land in a variety of financial and strategic roles and was a member of its Executive Committee from 2012 until his departure in 2015. In May 2022 Simon was appointed to the Board of Real Estate Balance, a campaigning organisation working to improve diversity and inclusion in the real estate industry. So now we are going to hear from Simon Carter on his route to becoming CEO of one of our largest listed property companies and his plans for the company going forward. Good morning, Simon and welcome and thank you very much for joining us this morning.
Simon Carter
Good morning, Susan, thank you very much for having me.
Susan Freeman
So, Simon, you took over as CEO of British Land in November 2020 and we will, we’ll talk about the challenges of that period but what I found interesting was that you had worked for British Land quite early on in your career. Is it true that you were poached from UBS by Sir John Ritblat?
Simon Carter
Not quite, close enough. I was actually poached by Graham Roberts, who was the CFO of the business, at the time, he was looking for someone who knew a little bit about derivatives and financing and I found myself in that place and knew Graham from being an auditor at Arthur Anderson, so I started my career at Arthur Anderson and worked for Graham there and then he’d moved across to BCFO and I got the call and joined British Land.
Susan Freeman
So, that was what, early 2000s?
Simon Carter
2004, literally two weeks before I got married.
Susan Freeman
That’s very, very good timing. And what was it like then because it must be, you know, one of our longest standing property companies and I believe it was originally founded in 1856.
Simon Carter
Ah, you’ve been reading the blurb, that’s absolutely right. To give more people the vote, that was why it was founded.
Susan Freeman
Is that right?
Simon Carter
Yeah, yeah, so that people, because I think at the time, you had to have a land ownership and so by having a share in British Land, you could then have a vote. That’s my understanding of it. So, 1856.
Susan Freeman
So, interesting history. So, it was over twenty years ago, how different was British Land then from how it is now?
Simon Carter
Like many things, there’s elements of twenty years ago that remain in British Land and there’s bits that have changed so, I joined, as you say, when Sir John Ritblat was the CEO and Chair of British Land at the time, so a combined role which you don’t see a lot of now in listed company space. The company then, as I hope it is now, was very entrepreneurial, there was a real sort of pace and energy in the business. The culture, I think is also very similar to what we have. We’ve tried to grow it over time but it was quite unique that you had a business that had a big reach in terms of the real estate it owned across offices and retail but was a pretty small team, very little in the way of hierarchy and very sort of dynamic and as I say, very entrepreneurial and that was, you know that was what John was known for, he had a real nose for spotting a deal, he believed that if you bought the right real estate in the right locations, at the right point in the cycle, it would do well and I think that still holds today. At the time, probably one of the things that was different from now, used to have quite a lot of leverage in the business and I think that goes back to the period, you know, John made British Land a very successful business from the ‘70s where we had a lot of inflation and so having a bit more depth that was nominal in value and then your assets being real assets and going up created a lot of value but obviously since then we’ve had a lower rate, lower inflation environment until recently so, we’ve got less leverage in the business today than we would have had back then.
Susan Freeman
And as you mentioned, you came in as an accountant. Were you always interested in real estate?
Simon Carter
You might have been prompted to ask this question because people sometimes laugh at it. I proactively went out of my way not to work in real estate because it was what my father did. So, my father was a chartered surveyor and I think, you know, some sons follow their father’s footsteps and I was thinking oh I’ll try a different route so, I thought I’d go into finance and I started my career as an accountant and then very slowly, real estate got its hooks into me and I haven’t wanted to leave since then, since going to British Land in 2004.
Susan Freeman
So your father must have been pleased.
Simon Carter
He is very pleased but finds it quite amusing.
Susan Freeman
So, you stayed at British Land I think for ten years in different roles but you left in 2015 to go to Quintain as Finance Director. What, what prompted the move?
Simon Carter
Really came down to, I’d spent my time in financing and treasury and corporate finance and my last role at British Land was of Head of Strategy but I’d said to Chris, look I’d quite like to be a CFO and then the opportunity came up at Quintain, we had a very strong CFO at British Land, he’d been with the business for twenty years and Lucinda Bell at that point and so Lucinda wasn’t going anywhere anytime soon and this opportunity came at Quintain and I hadn’t had the traditional route to CFO because my experience was financing, derivatives, corporate finance strategy and less about sort of financial control and reporting but Quintain had a very strong financial controller but they were looking for someone with transaction experience because it was clear that for the business to move forward, it either needed to raise capital or effectively create a liquidity event for shareholders and we did that with the dale to Lone Star, which then enabled it to build out Wembley, which has been a very successful asset for that business. So, it was really finding the right opportunity for me to get my sort of CFO spurs and that was at Quintain.
Susan Freeman
And then your return to British Land was just three years later, in 2018 and you came back as Financial Director but you then would have gone straight into Covid and lockdown and the huge challenges of that period so that must have been quite character building.
Simon Carter
It was. I had maybe about eighteen months before we got into Covid. I did have some headwinds at that point in time, retail was clearly going through an adjustment that was then accelerated by Covid but yeah, when Covid arrived, like all management teams, it, you know, definitely tested your mettle and your, your resilience. It’s quite strange to sort of think back to then, isn’t it, you know, social distancing and no one knew how do you keep your people safe? How do you keep customers safe? All of those things that we’d taken for granted but yeah, there were definitely some challenges for real estate and particularly a business with the portfolio British Land at that time so, retail and offices. I think for the retail, actually, it was a really healthy adjustment, we saw a big adjustment in rents and sort of subsequently, retail has been a good performing asset for us, particularly the retail parks with those rents rebased and I’m sure we’ll go on to talk about that and then, as we know, it accelerated hybrid working in the office business and that’s had consequences for British Land and how we’ve thought about the shape of our portfolio.
Susan Freeman
And you then became CEO in November of 2020 when Chris Grigg stood down and I mean, Covid at that point wasn’t over was it, we were just about to go into a second lockdown period but what were the main challenges that faced you, you know, as you took over as CEO? I mean, there were obviously some, you know, that as you said, the challenges to the office and the retail market but you know, what was top of your agenda?
Simon Carter
Well, it was quite interesting because I was appointed CEO in September ’20 and if you remember, we’d sort of moved out of lockdown, we’d had a somewhat normal summer, albeit without international travel and I think I naively thought we were in the sort of the sunny uplands and we were going to sail out of it and then we had that second lockdown and I started the role in my study so, I think it was just adjusting that mindset. I’d been thinking about front foot, what could we do? How could we expand the strategy to take advantage of opportunities and then you had to move to kind defensive mode a little bit and I think what was becoming evident was that the way in which people were going to work in the future had changed and how we responded to that as a business and the way we chose to respond to it was continuing to focus and it perhaps even more so on the top end of the London office market and I guess, in retrospect now, it’s probably been more of an opportunity because we’ve seen businesses probably want less space but they’re upgrading the quality of their space, particularly with the jobs market being very tight and I think that was one of the consequences of Covid, we had a very tight, tight jobs market but navigating that and obviously the practical elements, we got quite used to it by then, locking down our assets, opening them up again, social distancing and then one of the big challenges of Covid I suppose for the real estate sector, was the moratorium, if you go back and remember, we weren’t able to collect our rent, well, we could ask our customers for our rent but they didn’t necessarily have to pay and some did and some didn’t and it was navigating all of that and also working out who could and should pay ultimately and who you wanted to help out and that required the business to make judgments pretty rapidly.
Susan Freeman
Yeah and I suppose you got to know your tenants a lot better during that period.
Simon Carter
Yeah, we definitely did.
Susan Freeman
So, as you said, the British Land portfolio was primarily offices and retail under Chris Grigg, I think 50% of Broadgate and Meadhowhall were, you know, had been sold off but I mean it seems to me sort of having looked at the British Land portfolio now that you have really re-invigorated it and gone in different directions so, I think it might be useful for our listeners if you talk about actually the sheer extent of the assets that British Land manages and owns and, you know, what the make up is now.
Simon Carter
Sure, no, I’m very happy to do that, Susan. So, three elements of our business today. There’s our Campuses, our retail parks and Last Mile Logistics and the retail parks and the campuses, we had, as I became CEO and Chris was the one who coined the phrase, ‘Campus’, very successfully and had started to focus the business in that area and I felt that that was an area that had strength, for the reasons we spoke about this, people wanting high quality space and people define that in a lot of ways but for us it comes down to good transport infrastructure and we’ve seen post-Covid, there’s a trend for people to be next to the main transport hub, so all of our Campuses, there’s three across London that are up and running, Paddington Central, Regent’s Place and Broadgate, they all sit above mainline stations or close to them and the tube network. Paddington and Broadgate are on the new Elizabeth Line, which is very helpful and then we’re building a fourth Campus down at Canada Water on the Rotherhithe peninsula but all of them have the good transport infrastructure, we really invest in the public realm so, people have got a good environment to work in and then it’s about having the right amenity, bars, restaurants, coffee shops and, as we know, sustainability has gone up everyone’s agenda so, as well as having modern, flexible buildings, they’re very sustainable buildings. So, we’ve doubled down on that and sold up most of our standalone offices so, we don’t really own standalone offices, it is the Campuses now in our offices business and then I took the business into an adjacency, which is science and technology. That Campus format is just ideal for it, if you think science and technology businesses have talked about campuses for years and you play with what you’ve got and at Regent’s Place, we were just lucky to have a Campus in the middle of London’s Knowledge Quarter, where we’re seeing really strong growth come through from a very wide range of science and technology businesses so, we’ve been delivering the type of space they want from lab space to smaller offices to big HQ space, which is traditionally been what British Land has done and then those retail parks, we’ve been selling retail from 2016 through to about 2021 and then we saw with the rents rebasing post-Covid, there was an opportunity to start expanding in retail parks, they were affordable to retailers and we were getting additional demand from the multichannel retailers like Next and M&S and also, essential retail and so, we decided to start investing which, at the time, was probably quite a brave, brave call but in retrospect, has worked out very well and that’s, you know, one of the sectors that has done well over that period. And then the last bit was Last Mile Logistics in London, a new avenue for British Land. I felt, as a diversified REIT, we needed to have a logistics element to it and I felt that the supply and demand dynamics were going to be best in Last Mile in London because there’s just so little supply and demands growing for all the reasons people know.
Susan Freeman
Yeah, it’s interesting, you mentioned life sciences as being a sort of adjacency rather than I suppose a pivot and 1 Triton Square has been sort of in the news a little bit and…
Simon Carter
Yeah, yeah, yes. A little bit more than a little bit.
Susan Freeman
Guessing the surrender of premium for Meta must have been helpful in moving towards the life sciences.
Simon Carter
Yeah, it was, it was very fortuitous, I think as you say, got a lot of media coverage when we took that surrender and we expected it to do so but we were quite surprised by how much. It’s a lot of money, £149 million, so it got some headlines and I think the jury was probably split, some people thought well actually, Meta are doing it for their specific reasons and others thought, gosh, the London office market must be so terrible that they want to give back the building and fortunately, we had the data to know it was the former rather than the latter and it’s a great building for converting to innovation space, that’s got the right structure, the right floor to ceiling heights, good ventilation so, we’ve got an exciting plan there and the other thing that helped was that Meta were paying a rent which is below where market rents are today, they’re more like £90 than £70 so, good returns and then, and then we’ve brought in a partner in Royal London, who’ve bought 50% of the building and we will take it forward with us so, so far, I think we’ve taken out about 83% of the original value of the building by forming the partnership and the 150 million so, as you say, quite helpful.
Susan Freeman
And I suppose the location of that Campus is important as you know being part of the Knowledge Quarter so, I don’t know how easy it would be to make that change in use if you’re not in the right location.
Simon Carter
Yeah, you might be able to make the change in use, most London boroughs are supportive of innovation use. I think it’s more about where the demand is actually and it’s just like many things, these businesses want to cluster together and because they’ve got the institutions, they’ve got teaching hospital and UCLH, UCL University. For life sciences, the Francis Crick Institute’s really important, I mean we really are a certainly a European, perhaps a global leader in that discovery science and so, having that on your doorstep is so valuable to, to businesses to be in that part of London and actually, we’ve just signed a partnership with Francis Crick that we’re really excited about.
Susan Freeman
What’s the partnership going to be doing?
Simon Carter
So, it’s, it’s about, if I go back, the Francis Crick’s objective is to see discovery science translated into new treatments for the population to improve healthcare outcomes and so, a lot of it’s about that translation and commercial success. So, they’ve been working with many commercial enterprises in the past but they don’t have space that they can give them within their facility on Midlands Road by King’s Cross so, what we’ve done is, we’ve signed a partnership where the businesses that they’re speaking to will be able to take space with British Land. Alongside us, they will help run that space, it will be fully fitted labs, serviced labs but also those customers will have access to both the scientific discoveries but also the technology platforms they have within the facility on Midlands Road so, I think it’s sort of a win-win for both partners. Early days, we’ve only just signed it. First part of the partnership will be 30,000 spare feet at 20 Triton but we’re super excited because as I say, they absolutely lead in this space.
Susan Freeman
Sounds like a really exciting collaboration. And are you also expanding in life sciences in the sort of Oxford and Cambridge areas?
Simon Carter
We are, we are, you know, when I spoke earlier about the Campuses, I neglected to say we’ve actually bought another Campus in Cambridge, the Peterhouse Technology Park. We think of it in terms of the broader innovation. Life science is a part of it but that broader innovation space which can be physical science, data science, AI and just big technology as well but the Peterhouse Technology Park, it’s got Arm, the chip designer as its main customer, it’s their headquarters but we’ve had a development plot alongside it which we’ve now started to develop. It tops out in a few weeks’ time. We just love the Cambridge market. Supply is constrained, demand’s good, so that’s good real estate fundamentals. I think our building that we’re developing at the moment, will deliver it when it does deliver in 2025 but that year, it will be the only material delivery in Cambridge of any scale so, you know, that’s pretty favourable from an economics perspective.
Susan Freeman
We’ll look out for that one. And is there any concern that we could, I mean there’s an undersupply at the moment but I think in Boston for instance, they ended up with an oversupply of life sciences sort of real estate. Have we got an awfully long way to go here to arrive at that point?
Simon Carter
I think so, yes. So, if you look at the US, depending on how you measure it and this is slightly odd but it hopefully give… adjusting for the scale of the population, if you look at the amount of lab space per person in the US, it’s five times what it is in the UK so, we’re a long way behind and actually, one of the challenges for the growth of the life science sector is the amount of space. We did this report recently where we said look, there’s the NHS levy, there’s Horizon but then the space and the NHS levy’s getting sorted out, we’ve rejoined Horizon but there’s still a critical shortage of space in the right locations, there might be lab space in some locations but in the Knowledge Quarter, in Oxford, Cambridge; Cambridge has basically a 0% vacancy, there’s no lab space available so, I think there’s some way to go and when you look at the long-term, it’s just clear that this is going to be a growing part of the UK economy, science and technology.
Susan Freeman
It’s certainly an exciting opportunity and I know that you’ve published a report with Savills called Accelerating Innovation, which includes some pointers to boosting life science’s real estate. Have you had a good response from Government on that? Has it been helpful?
Simon Carter
It has been, it’s been very good. I think both Government and the opposition are very focussed on science and technology sector, you know, we have a dedicated Government department which is helpful and they recognise this is a, it is going to be this important growth driver of the economy and so, looking at how they can help it and as I mentioned, there’s been those changes to rejoining Horizon, the levy is getting reformed so, I think we do have their attention on this and I think just more broadly, Government and the opposition are looking at planning reform. There’s not a huge amount of money in the coffers, we know that, but if you can find low cost ways to improve the productivity of the UK economy, I think you’re going to seize them and this is one area where we can do that.
Susan Freeman
And you mentioned planning and I know you, last year you collaborated with Landsec, you know again, suggesting that we could improve the planning system to support brown field regeneration. Has that had any engagement with Government?
Simon Carter
It has, really pleased to say that. We’ve seen some of the recommendations from that report captured in announcements from Government and also, we’ve engaged with the opposition on it and in some of the announcements Labour made around the time of their party conferences last September/October. Some of those recommendations were captured so, really pleased with the engagement. I think it is quite an opportune time for the real estate sector to be engaging with Government, that window is probably closing now because we’re running into the election but the last six to twelve months have probably been the best I can remember in terms of public affairs and the real estate sector being able to put some of the issues it faces on their agendas.
Susan Freeman
That’s good and it was, it was good to see the collaboration with, with Landsec actually sort of coming together to tackle some of these issues together.
Simon Carter
Yep, absolutely.
Susan Freeman
So, since we’ve been talking about planning, I think we should probably move on to Canada Water. So, I think it’s 53 acres now so, it must be London’s largest sort of mixed-use development site and I interviewed Roger Madelin for the podcast but it was a couple of years ago and I just remember, he made the point that it’s effectively a new town centre and it’s only 11 minutes from Green Park and I think when you live in London, you just don’t really have the perspective, you think that, you know, things are further away than they are but I mean 11 minutes from Green Park make it pretty central. So, where are you up to there?
Simon Carter
So, we’re on site with Phase 1. Phase 1 is a little over 10% of the overall scheme so, it’s a 5 million square foot scheme, as you say, over 53 acres. Mix of residential, workspace, retail, leisure so, as Roger said, we’re delivering a new urban or town centre, so that first phase we kicked off couple of years ago now, we’ve had the first completion which is of our affordable housing block that Southwark have bought from us and then back end of this year, early next year, we will complete on the residential scheme that has some workspace below it and then the workspace and leisure centre, we’re building a leisure centre for Southwark so, yeah, it’s quite exciting times for us and these projects don’t stand still, no sooner have you committed to the first phase and then you start to think about working up the subsequent phases and the next project will be the Printworks, which we operated as a meanwhile use, as an events venue and been very successful and came out as the Best Nightclub in the World in DJ Magazine so, who would have thought.
Susan Freeman
And will you be able to continue that use?
Simon Carter
We hope so. We hope so. So, we’ve got a planning consent, that’s planning application, I’m getting ahead of myself, a planning application in at the moment to keep part of the facility as an events venue and then the front bit will be workspace. We already have a consent to have 100% workspace but the Printworks have been so popular, the company that operated it for us, Broadwick, are fantastic, always staying ahead of the curve in terms of the stuff that’s interesting to people and you know that’s what these schemes need so, very excited, hopefully get that consent and then we’ll move forward with that.
Susan Freeman
And with the pace of change at the moment and working on a large development like this over a period of years, are you have to rethink the uses you’re planning or sort of rethink the amount of space that you’re allocating to those uses?
Simon Carter
Yeah, I think you’re constantly thinking about the shape of it. We’re really fortunate that the consent that Roger and his colleague, Emma Cariaga, achieved was very flexible so, within the 5 million square feet, we can flex the residential, I think it can be as little as 2000 homes and as much as 4000 and the workspace can flex from about 500,000 square feet to up to 2 and a half million so, it does give us that flexibility which is really important on these long-term schemes. The structural changes, the cyclical impacts and we’re already giving that thought as we move forward to future phases so, we do think that we will establish this as an important mixed-use location, we’re seeing good demand for the early labs that we’ve delivered, we’re in conversations with customers on the workspace that we’ll need to convert into deals but if we didn’t see the demand for workspace come forward, we could do more residential and vice versa so, I think that’s really valuable to have that.
Susan Freeman
And are you anticipating having an element of life sciences in there, you mentioned labs?
Simon Carter
Certainly some innovation space, so we have, as a meanwhile use, we established an engineering facility for a joint venture, it’s called TEDI-London, it’s a joint venture between University of New South Wales, State Arizona University and King’s College London and that’s been open for a couple of years now and that was constructed of modular units. If you think about the welfare units that you often have on our construction site, it’s effectively those bolted together but it looks incredible, it’s clad in wood and most people think it’s a permanent structure but it’s actually a meanwhile use. It can be there for up to seven years but it is a meanwhile use and importantly, we can move it around. But we saw that and thought actually, this would be a really good way to see if there will be demand for innovation businesses at Canada Water, we expected there would be and we saw a gap in the market because there’s a lot of space that will come forward for those businesses across London but not today and not at the price point we’re able to deliver with our modular campus so, we’ve got a second phase called The Paper Yard and we’ve got a number of businesses. Interestingly, it’s not been life sciences today, it’s been green tech and glean tech, the businesses that have gone down there and I think these, these clusters kind of establish themselves and they kind of grow organically and you just have to provide the right space at the right price point.
Susan Freeman
And there is a gap in the market isn’t there because when these startups want to start, they want to start immediately, they don’t want to wait until a building’s available so actually being able to house them, allow them to expand, contract, must be something that you’ll want to continue.
Simon Carter
Spot on. I think it’s, the demand’s there today, these businesses will either thrive and grow hugely possible or they’ll fail but they need space now to find out whether the idea they have is going to be, going to be successful so, yeah, we, we like it and I think the important thing is to make the space relatively generic for the customer so businesses can grow, move in and move out very, very quickly but this is, as you know as we’ve talked about earlier, the lack of space is holding back the economic growth of this sector so, having the space available today is good.
Susan Freeman
And you mentioned the homes that you’re going to be building there, somewhere between 2000 and 4000 which is interesting because one doesn’t always think of British Land as building residential but of course, there are some other residential schemes, aren’t there?
Simon Carter
Yeah and we’ve done it in the past. So, actually, where I’m sitting now, if you look over my shoulder, our previous Head of Residential, Jean-Marc Vandevivere, he works at Platform in one of our buildings behind but he came on board in 2009 and we had a very successful residential programme. For us, delivering for sale residential, zones 1 and 2 across London and then did the high end Clarges scheme, which was a very successful scheme for British Land but this is where we’ve got scale at Canada Water, the 2000 to 4000 homes and we have a build to rent scheme under construction in Aldgate at the moment which was a legacy from a joint venture we had with Barratt where we did for sale but we’re doing the last plot as build to rent.
Susan Freeman
So it seems that British Land can turn its hand to any sector really.
Simon Carter
Yeah, I, I think you’ve got to be careful in choosing sectors where you’ve got a competitive strength and you can use the kind of core DNA of the business but it is one of the privileges of being a diversified REIT and we’ve been very active in mixed-use that there are a lot of parallels between the sectors so, we talked a little bit about the lab space but a lot of the learnings we had from Storey, our flexibly workspace brand, went into setting up labs. There’s different, important differences obviously on the technical side but a lot of that core DNA about running a very operational business with shorter leases, I think it does, it does carry across well. So we, we do have that ability to do that and expand into adjacencies like we’re doing with the science and technology as an adjacency to our Campus business.
Susan Freeman
And with the flexible working, you would choose to use Storey rather than sort of bring in operators, you know, in the way that other property companies do?
Simon Carter
Yeah, that was one of the decisions that Chris took probably about seven years ago now to create the capability within British Land and you know it’s been incredibly valuable for me to have that and I think Storey is regarded as one of the leaders, it does, it does very well, it’s quite a high end product alongside the rest of the space we deliver on our Campuses and we’ve got a competitive advantage because if you want flexible space on a British Land Campus, Storey is your choice.
Susan Freeman
And sustainability, I mean I know it’s a huge feature of British Land assets and is it something that you feel you can sort of go alone on or do we need more Government support, more regulation? How do you see that?
Simon Carter
It’s a great question. So you’ve seen over the last six months maybe support from Government or a sort of slight backtracking haven’t we in terms of the sustainability agenda. As a sector, we’ve not got clarity yet on the minimum energy efficiency standards and when they’re going to come in but certainly in our office business, I feel that the customer demand has actually moved well ahead of the regulation and it might be the part of the market that we operate in, 80% of our space is headquarter space, so those headquarters typically these are financial services, technology businesses, other innovation businesses we’ve spoken about, lawyers, accountants and they’ve set Net Zero targets that they’re committed to and so they’re, they’re paying a premium for green space and so we’re incentivised to do that so, in that sense we’re going alone but it is helpful to have guidance as to when the standards will come in because lack of clarity does make decision-making quite difficult but I think as we sit today, customer demand is well ahead of regulation in this space, certainly in our office business.
Susan Freeman
Yeah, that’s interesting isn’t it and it’s the customers that you have to keep happy. So, having led British Land through a period of significant change, what leadership lessons have you learnt and what sort of advice would you give to the emerging leaders in the sector?
Simon Carter
Yeah, it’s been, it’s been quite a period to learn lessons. What have I learnt? I think one of the things I’ve learnt is dealing with ambiguity, that point that we were talking about earlier, that assumption that you know I naively made that we were sailing out of Covid and actually, we were back down in a lockdown, you just look at the world today and some of the risks out there and you know we’ve had another event over the weekend from a geopolitical perspective that it can just change the environment you’re working in overnight so, I think getting yourself match fit to deal with ambiguity and getting comfortable with it and I can’t say I’m always comfortable with it, you know, I’m a planner, I like to have a plan and execute it and you know I do find it uncomfortable but I think you do have to get more and more comfortable with that ambiguity. So that’s about having the right people in the roles because if you’ve got the right people, they all respond to a crisis and we saw that at British Land at Covid, I think our people were at their best during that really quite fast moving and very uncertain time we had as we moved into, into lockdown. Have the right people, have a flexible plan and then from a real estate perspective, I think don’t take too much financial risk, you know, that’s what gets real estate firms burned, too much leverage.
Susan Freeman
Yeah, that’s really helpful. And, I mean we’ve talked a little bit about how the British Land portfolio has changed and I mean looking forward, where are you going to be focussing or, you know, are you looking at more change or are you looking to focus on the new sectors that you’ve moved the portfolio into?
Simon Carter
Yeah, and very happy to cover this. I think in terms of investment in standing assets, that’s likely to be in our retail park business, if pricing remains roughly where it is today so, you buy a retail park today, you get a 7 or 8% yield, our parks are 99% occupied and we’re seeing very good rental growth at about 5% per annum so that feels like very compelling economics so, we would like to put more of our standing investment capital into that space and then for us, in workspace and Campuses, it’s more about the incremental is the deployment of inter-development, the next project we’ll do is our 2 Finsbury Avenue project so, continuing to invest right at the top end of the London office market where demand is strongest and supply is most constrained and that adjacency, that pivot of the Campus model to science and technology, the big opportunities we’ve spoken about is at Regent’s Place at the top of the Tottenham Court Road and 1 Triton, we’ll convert that into lab space and other innovation space, lease that up and then we’ll move to the next scheme, which is the Euston Tower so, we’ve got lots of really good imbedded development options in our, in our Campus business and our fledgling, because it’s early days, Last Mile Logistics business is development led because it’s about creating new space where there isn’t space today by repurposing assets or doing multistorey, basically densification, all in centra London.
Susan Freeman
Yes, I was looking at some of the Logistics premises and how multistorey can they go because obviously space is at a premium and you want to make the best use that you can of these sites but how high can you build with logistics?
Simon Carter
It depends is the answer, like many things. So we have a scheme in Southwark which is four storeys. It won’t have vehicles on the upper storeys but it has very big goods lifts that you can get forklift trucks in but that’s very central so that’s just outside Zone 1 on Mandella Way but then in the sort of outer doughnut of London between the North and South Circular and the M25, we’ve got a couple of schemes, one in Enfield that would have two storeys and that will have the HGVs going onto the upper levels and what we have to do is give exactly the same customer experience at ground and first floor, so yard in front of the facility on both levels but then in Wembley, we think we could go up to three storeys and if you look at where there are more multistorey assets overseas, Hong Kong, Singapore, they can go to seven and eight storeys, that’s quite rare but there are examples of that right in the middle of those, the cities there. So, as you say, I think there’s a lack of space, there’s demand. The GLA is really supportive of densification, as are the London boroughs so, feels like we’re pressing against an open door but we’ve got to get the customer comfortable with it and so that’s why we’ve got to give exactly the same experience on different storeys.
Susan Freeman
Interesting. And you mentioned earlier on the joint venture with Royal London on 1 Triton, Triton Square are if one looks across the British Land portfolio, there are quite a few partnerships and joint ventures so, I just thought it would be interesting to hear from you how you choose your partners and why these partnerships are important to you.
Simon Carter
How do we choose our partners? Well, it’s different for the different projects but I’d say there’s definitely some common elements so, it’s always good to have a partner that’s got ample capital. It’s normally good if that, the cost of that capital is relatively low, then it comes down to someone who’s going to have the same strategic alignment with you so, The Royal London are a great partner for 1 Triton, they’ve got the expertise today, they run a portfolio of 2 million square feet of innovation space so they’ve got expertise, they’ve got the same vision for the asset that we’ve got, so I think those are important and also time horizons is really important so, at Canada Water we were speaking about the size of the project, it’s a ten, twelve year project so, we have to be quite selective in terms of the partners we would bring in because a lot will happen in the ten to twelve years, we’ve talked about uses changing, we’ll go through a couple of cycles but having someone like Australian Super who’s got long-term capital, can take a long-term view, that’s, that’s really important there so, I think choosing the right partner for the project but there’s definitely some common themes there about alignment, cost of capital and then culture. Can you get on? Because you, you know as a lawyer, you know, you can put anything in a document but you only dig out the document when things are going wrong, it’s more about having the right cultural alignment on the way so that you can navigate, you know, tricky things that come up from time to time but for us, I think you asked the how important? They are important for us, capital is expensive today in real estate and this allows us to stretch our balance sheet and share risks so, we’ve got a number of important partnerships and I can see us doing more of them.
Susan Freeman
So we’re going to have a slight change of tack now. In May 2002, you were appointed to the Board of Real Estate Balance which is a campaigning organisation which is working to improve diversity and inclusion in real estate and I just wondered what your thinking was when you took up that role?
Simon Carter
I was delighted to be appointed. Real Estate Balance has been a, the great champion of diversity in our industry and the founding members were beginning to step away because they’d been there seven or eight years and they thought that actually that was timely to kind of have a succession plan so they were looking for non-exec directors and I just thought this would be a really good role to do because help me develop but also actually really help British Land and I felt that I could certainly add something to Real Estate Balance being a CEO in post today because we’re all trying to strive for ideas to promote diversity in our sector and you know, we have a number of different ideas and some of them work and some of them don’t and I think getting a practical handle on what may or may not work I think has hopefully been valuable to my colleagues on the Board but for me, just a great opportunity to hear other good ideas that we can bring into, to British Land so, it did feel like a bit of a win-win for British Land and for Real Estate Balance and I think what Sue and the team have done there is incredible.
Susan Freeman
And I am due to interview Sue Brown shortly.
Simon Carter
She’s fantastic, Sue.
Susan Freeman
So, how, how is it going because I looked at the last Real Estate Balance report which I think was actually back in 2002, I think they’re every two years and it seemed that in terms of female representation on boards, things seem to have sort of slid backwards. I mean, what are you seeing?
Simon Carter
So I think in terms of board representation, it’s pretty good now but as we know, that tends to be on the non-exec roles so, British Land, we’re now 50/50 and I think if you look at most of the sector, they’re pretty close to the target of 40% at board level. I think the area where we all struggle is the executive committee and the direct reports of the executive committee, I think, you know for under the Hampton-Alexandar, they call it, the senior management, that’s how it’s defined and that’s much harder. We’re at sort of 36%, we’ve got an ambition to get to 40 in the short term and you know 50 longer, longer term and I think that’s where we’ve struggled as a sector and more needs to be, to be done, you know, are we giving the support, the career development for the female talent to come through to the, the senior management team, I think we need to continue to work on that but also think about bringing in talent from outside the sector, you know, diversity in its broadest sense, you know, we’ve seen ourselves as a business, we’ve benefitted when we took a CFO from outside of real estate, from Tesco, and you know real breath of fresh air and looked at things in a completely different way than many of us had done who’d been in the industry for a while. So, I think there are a number of levers but it’s definitely work in progress.
Susan Freeman
And we do talk a lot about trying to get people from you know diverse backgrounds and who think differently and, you know, who aren’t trained in real estate to come into the industry but one of the problems seems to be the negative image that the property industry has, I mean, do you think we could be doing more to counter that and what should we be doing?
Simon Carter
I think we should. It’s interesting isn’t it, I don’t know if this resonates with you but it does feel as though once people get into real estate, they love this industry and you know we have you know really good retention at British Land and, you know, people might go on to other businesses but they tend to stay in real estate. It’s getting people in, isn’t it because it’s a great industry so, we probably just need to be more on sale mode. Look, there’s a number of organisations like Pathways to Property that do brilliant work and I think our job as a business is to support those, go out to the schools, go out to the universities, tell the story about why real estate’s great, I mean, we’re relatively small businesses in terms of head count but we get to do some amazing projects that literally change the skyline of London so, look, I’m sold as you know but I think if we can tell that story more clearly, it’s not, if you doctor, lawyer, accountant, banker, tech, those are the things that are on kids’ agendas and I don’t think they think of real estate and if they do, they probably think of estate agency.
Susan Freeman
I think you’re absolutely right because I’m with you, I just think it’s such an exciting industry and who wouldn’t want to be involved in creating the places that people spend their lives, you know where they live, where they work and I think you’re right, I think we’re just, we’re not selling it well enough but it’s how you do it. And has anyone been a role model or inspiration to you as you’ve gone through your career to date?
Simon Carter
Yeah, absolutely. I’ve been very lucky to work with all three of the previous CEOs of British Land and you know different ways they’ve been, you know, great role models to have if you take from Sir John, we talked about that sort of buccaneering, entrepreneurial spirit, I mean that was, that was brilliant to see and that, you know, being bold at the right point and, you know, taking on the market, excellent to see that and then you know with Stephen and Chris, a kind of professionalism, a focus, a drive that, that’s been inspirational as well and I think with the latter two, particularly that focus on the customer was, you know really clear, real estate was changing wasn’t it, we talked about tenants and it was landlord and tenant and then I think it was, you know, Chris who was probably one of the first in the sector who started talking about customers and people thought this was a bit weird, you know, I think it wasn’t in their vocab but every other sector talks about their customers so, yeah, I’ve been lucky to work with some great CEOs and also some great CFOs earlier in my career so, yeah, you do look up to those role models and they definitely have an impact on you.
Susan Freeman
You’re right about looking for the customer because when I came out of Business School in 2001 and went to talk to some of the people running property companies about customer service and, you know, it was something that didn’t really resonate.
Simon Carter
What’s that?
Susan Freeman
Quite. And assuming that you do have some downtime, how do you spend your time when you’re not working?
Simon Carter
So, I have children who are bit older now. They’re 16 and 14 but they’re still at home and it’s interesting because when they’re younger, you kind of decide what they will do and you make suggestions and you know, you pretty much plan their days. Now, with teenagers, they plan their days but interestingly, you need to be around I think almost as much because there’s just certain windows where they really want to engage with you so, my, my kind of thing is to make sure I’m around at the weekends and spend as much time with the family because they’ll be off to university. I do, yeah, play tennis, cycle, I like exercise and, you know, will try and do as much as I can with my wife but, you know, try and keep the weekends free and, yeah, be around to respond to those times when the kids need you. Normally, it’s driving to get them there but they actually open up in the car, don’t they.
Susan Freeman
And do you think either or both will be going into the real estate sector?
Simon Carter
Not at this moment it doesn’t appear but you never know because, as I say, I didn’t want to go into the real estate sector so you just don’t know.
Susan Freeman
You never, you never know. Well, thank you very much, thank you for you time, Simon, that’s been really, really interesting.
Simon Carter
My pleasure, really enjoyed it so, thank you, Susan.
Susan Freeman
Thank you so much Simon Carter for taking the time to talk to us about your strategy and direction of travel for British Land in this time of great change and great opportunity.
So, that’s it for now, I hope you enjoyed today’s conversation. Please join us for the next PropertyShe podcast interview coming very soon.
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