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Ten years ago Midlands-based developer St Modwen had a legacy of large-scale mixed regeneration to manage after a period of expansion into town centre partnerships with local authorities. The business was looking a little lost. Today it is a regional champion and one of the industry's success stories. What happened?
Good with a knife
Ruthless focus is essential to growth, and St Modwen has shown itself able to cut loose what it does not want. Its retail portfolio has been heavily pruned over the last five years, sometimes at impressive prices. Now parts of the office portfolio are going the same way. This week saw the £6.2M sale to Bradda Capital of 3 Devon Way, a 21K SF grade-A office building in the heart of Longbridge Town Centre. A 15-year lease (with 13 years to go) at £19.25 per SF might have been an appealing source of secure income, but having spent many years pushing regeneration in Longbridge the time had come to trade. A further 48K SF office building is now under construction.
Strategy fix
St Modwen was a little late to the beds-and-sheds mix but this week’s results, which relate to the year to 30 November 2020 showed it is delivering, and it promises more. The logistics side of the portfolio has grown from 39% by value to 49% since 2019, with 6.1% rental growth and 97.7% of rent collected. Already 27% of the 1.5M SF of new industrial development is pre-let and it has a 19M SF long-term pipeline so the flow of development isn’t at risk. The portfolio will be worth more than £1B by 2023.
The residential part of the portfolio held steady at 27%, with sales and margins a little down in a difficult year, but a healthy pipeline ready for 2021 with margin expected to recover to 14.5% and a pathway to margins of 16% to 17% by 2023.
Both sides of the business are fed by a strategic land and regeneration strand, in the midst of a £180M to £200M asset recycling programme due for completion by 2023.
Lots of talented people equal lots of opportunities to make a mark, and drawing on the widest possible pool is doing St Modwen no harm. The 2018 appointment of Danuta Gray as chairman marked a distinct changing of the guard at St Modwen. Since then the developer’s diversity score has rocketed. A long list of new arrivals joined group finance director and interim chief executive Rob Hudson, one of the leading figures in regional LGFBT+ property group Open Land.
Former Centrica Consumer chief executive Sarwjit Sambhi joined as CEO in November 2020. Last month former Crown Estate chief executive and Olympic Delivery Authority boss Dame Alison Nimmo joined the board as non-executive directors.
Earlier this month Polly Troughton joined as managing director for its fast-growing £600M-plus St Modwen Logistics business. One of a handful of women in senior roles in the logistics property business, she will oversee plans to deliver a further 1.5M SF of new urban and big-box logistics units in 2021, 25% more space than in 2020.
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