If you were asked which companies were the most celebrated developers in the UK, it is unlikely that London & Continental Railways would be on the tip of your tongue.
But if you were asked what the best development in the UK over the past 20 years has been, it is relatively likely that you might say King’s Cross. Or, if not, perhaps the Olympic Village and Westfield shopping centre at Stratford, east London.
Well, at the heart of the genesis and delivery of both was LCR. So too was its outgoing chief executive, David Joy (pictured above).
Born out of the consortium that delivered Eurostar, it has been in public ownership since 2009 and has worked alongside the likes of Argent, Chelsfield, Stanhope, Westfield and Lendlease to deliver these flagship projects.
In 2013, the company was revitalised by being passed the property holdings of the British Railways Board Residuary, and as a result it is now involved in delivering some of the UK’s largest regional development projects, such as Axis Square in Birmingham and the Mayfield Quarter in Manchester, as well as its flagship London project, Waterloo.London, a 135,000 sq ft retail scheme at Waterloo Station.
A new chapter
The company is about to embark on a brand new chapter, with Joy retiring at the end of this month after eight years at the helm. The Department for Transport, which is the ultimate owner of LCR, is imminently to appoint a new chairman to replace interim chairman Tim Garnham, who will in turn appoint a new chief executive, most likely towards the end of the year.
Joy has, though, already set out a clear direction of travel for the organisation over the coming years. Through its ownership of the legacy British Rail assets, it is now working with public sector partners across the UK to help capture the opportunity around stations from HS2 as well as working with Manchester City Council and mayor Andy Burnham to bring forward development around the city’s stations – an initiative that could be broadened to the Midlands and Yorkshire.
For developers and investors wanting to be part of some of the most important projects around key infrastructure nodes, understanding and working with LCR will be key.
“Our job is to get the best value for our own assets, at times working to put those into joint ventures to get the best out of those assets, but also delivering homes, jobs and investment around government assets, predominantly transport ones,” Joy says.
“We have branched out from disposing and creating value on our own to being partners and bringing regeneration schemes together, working with other public and private sector partners. Generally, we work with station land or department land, and see if we can create interest by pooling or buying in, creating a bigger project. We can de-risk, do planning and infrastructure work and create opportunities with local authority partners, and then decide what the best way is to bring the private sector in.”
That is not to say that once LCR does the groundwork it walks away, and Joy stresses the importance of LCR’s role in delivering projects all the way through, noting that the company is undertaking the development of Axis Square and Waterloo by itself, for example.
“We don’t see ourselves as consultant on these projects; we are a development partner and manager with skin in the game,” Joy says. “Often, we are invited in by a local authority. We may buy a bit of land too that gives us extra interest or provide some sweat equity as well as take some consultation fees.”
Wise words
Given that Joy has been fundamental to the creation of two of the most successful British development projects of the past 20 years, what advice would he have for his successor, and the broader development community, to make the most of regeneration projects underpinned by huge infrastructure investment such as HS2?
“You need patience and flexibility, and with long-lead projects you need to adapt your strategy. You create the vision and you stick with it, but you have to be flexible with how you achieve it, responding to the market in terms of what the market wants and being ready to take advantage when the cash is there.
“When we were starting King’s Cross, we were going to borrow £400m and start with the first few office buildings, but then all of a sudden there was no debt around in the whole market and no [office] occupiers. We ended up doing a deal with the University of the Arts and built more housing. That allowed us to create the public realm which gave us the opportunity for office investment,” Joy says.
“When selecting partners, you can’t do it purely on the basis of how much money they will put in. Of course that’s one element, but it is primarily about the ownership and responsibility of the senior team and management, knowing that the board and chief executive of your partner are there for the long term, like with Argent at King’s Cross.”
Tangible legacy
When talking about King’s Cross and Stratford, Joy understandably swells with pride in the knowledge that he has a grand and tangible legacy.
“It was a privilege to work on. It’s been brilliant. That and working on St Pancras have been the highlights of my career. With St Pancras we have created a real destination station, and that has changed the way that people see stations in the UK. Around 25%-30% of people who visit St Pancras aren’t travelling – they are just coming in and meeting people or seeing people off – and we hope that in time Waterloo will be the same.”
The arches that run along Leake Street at Waterloo, at the back of the Shell Centre, have the feel of a place that is ready to come alive and already have a certain air to them with curated graffiti and a handful of temporary boutique coffee shops and bars.
The scheme will not have the same chic feel as St Pancras, with the space instead being marketed to “rebel/rogue, aspirational/accessible” tenants, and the Time Out food and cultural market that has taken 32,500 sq ft fits the bill.
“Time Out has set the scene for what we want from the rest of the food and beverage offering, and we want it to have an edgy feel. We will also have a large user for the basement, but we haven’t entirely worked out what we are going to do yet. We will have footfall of about 100 million people each year passing through and down into the Underground, so understandably we have a number of people interested.”
LCR might not be the most showy of developers in the UK, but it is certainly one of the most prolific – and with Joy soon departing, his successor will have both huge opportunities to shape some of the country’s most important regeneration projects and equally huge shoes to fill.
What is LCR?
London & Continental Railways is a developer and investor that is wholly owned by the Department for Transport and answerable to the secretary of state for transport. After costs and equity needed to fund its business plans, its profits are paid back to the state.
It works with public and private sector landowners to bring forward developments and create joint ventures to create best value from government assets, usually near transport hubs, to deliver homes, jobs and investment.
LCR often becomes involved in a project where it has a land interest, although this is not always the case and councils and local authorities are increasingly inviting it into projects. It will often provide consultation and take an equity stake in a project using resources from its own balance sheet in order to propel it forward by assembling land and advancing planning. It has around 50 staff, of which about 40 are based in London.
LCR’s journey
LCR was formed by a private sector consortium, which in 1996 successfully clinched the tender to build and operate the Channel Tunnel Rail Link, as well as manage the UK’s stake in Eurostar.
As part of its successful bid, it negotiated in a package of properties around both King’s Cross and Stratford in London, which later saw it instigate the development of King’s Cross Central and St Pancras station at the former and Westfield Stratford, the Olympic Village and the International Quarter at the latter.
Following an unsuccessful float in 1998 under pressure from competition from low-cost airlines, a government rescue package was needed and LCR was ultimately taken into public ownership in 2009 after racking up £5.1bn of debt from the taxpayer.
LCR’s ownership of HS1 and Eurostar were sold in 2010 and 2013 respectively, meaning that it became a pure property company.
Also in 2013, the company inherited the vast and varied property assets of the British Railways Board Residuary. This has transformed the company, giving it additional interests in a number of sites across the UK, including its ongoing 130,000 sq ft retail project at Waterloo station.
What LCR has coming down the track
Waterloo.London – Waterloo Station, London
LCR is redeveloping the former departures and arrivals area at Waterloo Station into 135,000 sq ft of retail space. The 40-unit scheme will open in 2021, will target “edgy” retailers and has secured Time Out Market as its 32,500 sq ft anchor tenant.
Axis Square – Birmingham
LCR’s 1m sq ft office project in Birmingham, near Brockton’s The Mailbox, has detailed planning consent for the first 400,000 sq ft of development, which will be split across two buildings. One of the buildings is set to be a new “transport campus”, co-locating various departmental agencies and sponsored bodies in the city centre, orchestrated by the Department for Transport.
The International Quarter – Stratford
The International Quarter is the final phase of LCR’s interest at Stratford, after what is now Westfield, the Olympic Park and Olympic Village (now East Village). The £2.4bn, 1.2m sq ft office-focused project is being developed with Lendlease and is already home to the likes of the Financial Conduct Authority, Transport for London, Cancer Research and the British Council.
Mayfield Quarter – Manchester
The £850m, 24-acre project being developed in a joint venture with U+I, Manchester City Council and Transport for Greater Manchester will ultimately include 1.7m sq ft of office space, a 650-bed hotel and 347,000 sq ft of retail and leisure uses.
The Rail Station Alliance – Manchester
LCR was brought into an alliance by the secretary of state for transport to work with Network Rail and Transport for Greater Manchester. The alliance has identified and is progressing the development of 87 acres of land around 14 stations within the city. It is a model that David Joy says could be replicated in the Midlands and Yorkshire.
HS2/regional strategic partnerships
LCR is working with a variety of public sector partners to make the most of the “halo effect” around prospective HS2 stations in order to capture opportunities brought about by the forthcoming infrastructure investment, as well as with councils in Leeds, Sheffield, Nottingham, Stafford, East Croydon and Worthing.
To send feedback, e-mail david.hatcher@egi.co.uk or tweet @hatcherdavid or @estatesgazette
