The Hive Issue 03 by Howard Ventures

Industry insights from the heart of Howard Group

hive issue 03 Spring 2016

RESTORING A CAMBRIDGE ICON UNIVERSITY ARMS HOTEL STRIVES TO BECOME THE BEST HOTEL IN THE CITY

HOT PROPERTY

80 YEARS

HOWARD CAPITAL

The deals hitting the headlines

From past to present: the history of Howard Group

Championing innovative business

hive - EDITOR'S NOTE

WHAT'S IN A NAME? A special note from Judith Howard

Looking back to the past gives us a sense of where the future will take us – with our name above the door it's a reminder of how we got here My part in the Howards' story began in 1962, when my late husband's mother Margaret invited me to the family home for dinner. Much has changed in those 50 years, not least the etiquette of courtship... Rewind a few years and 1935 was the big milestone in our history. It was the year my husband Brian was born and also the year Jimmy was made redundant from an apprenticeship with Bedford engineering company Allens. Some might call that unfortunate timing. For Jimmy, it was to be the start of a steady ascent into the business world – which would eventually lead us to where we are today. With a young family to provide for, Jimmy had a very real responsibility to fulfil and this theme endures today as we prepare to pass on the business to the fourth generation. Long before my first official introduction I'd heard the Howard name. I remember my father-in-law

CAEC 'Jimmy' Howard as a larger than life character whose presence inspired those around him. His instinct for enterprise was innate. Even without the complex technology we have today to automate most operational processes, he ran the tightest of ships. Long before we became involved in commercial property, Jimmy was creating new and exciting opportunities to satisfy his entrepreneurial appetite. His strategic thinking allowed for diversification as the years passed. Our business has survived through the decades – through recessions and through significant changes in our core markets. In 1979, the haulage men who worked for Jimmy were on strike. When he died suddenly they went back to work as a mark of respect. His shoes were certainly big to fill. The legacy of such a strong founder shapes a family business

On the cover... The new frontage of the University Arms Hotel, which is much more in keeping with the original 1834 design. The two-year project will be completed in 2017 and return the hotel back to its former glory.

Jimmy had a very real responsibility to fulfil

and both my husband and now son-in-law Nicholas have preserved the strength of the family name through their individual leadership. As we prepare to evolve further and write our next chapter as a family, it fills me with pride to see all we have achieved together. It's thanks to those who make up our extended family – our employees and those who are committed to keeping our name above the door. Thanks to you all.

Image credits: Cover University Arms Hotel © John Simpson Architects / CGI by The Neighbourhood P3 University Arms Hotel © John Simpson Architects / CGI by The Neighbourhood P6-7 Post graduate housing at Northwest Cambridge P10 Current Spillers Mill images © Tim Crocker

issue 03

hive

THE COMPANY HAS EVOLVED OVER THE 80 YEARS

COVERING THE ENTIRE SPECTRUM OF PROPERTY ACROSS THE SECTORS, THESE ARE SOME OF THE DEALS THAT ARE CREATING A BUZZ... MELFORD CAPITAL REDEVELOPING ICONIC CAMBRIDGE HOTEL One of the most iconic buildings on Regent Street is being given a comprehensive re-build and refurbishment by Melford Capital, with plans to create “the best hotel in Cambridge”. The University Arms Hotel, which opened in 1834, is reported to be the oldest hotel in Cambridge and is undergoing a full two-year redevelopment. Work includes retention of the original façade and the removal of the 1960's extension, which was a prominent and unpopular feature on Regent Street.

The redevelopment, designed by awardwinning architect John Simpson, involves the implementation of a classical scheme to replace the unattractive extension. Traditional features will dramatically alter the building and provide Cambridge with a much-needed world class hotel. A refurbishment of the interiors will also take place. When finished, the hotel will include 190 elegant rooms, restaurant, bar, gym, and conference facilities.

PLANS APPROVED FOR KING’S COLLEGE STUDENT ACCOMMODATION Whichcote House, which forms part of the King’s College student accommodation portfolio, is to be redeveloped after plans were approved by Cambridge City Council in November 2015. Howards secured planning on behalf of King's College. The current three-storey building has 30 bedrooms, a common room and utility room. The new building will provide 46 high quality rooms for postgraduate students, along with common rooms, laundry and amenity facilities. The building will be re-orientated so that its main pedestrian access and servicing is off Milton Road, removing traffic from Springfield Road.

FURTHER PROVISION OF REFURBISHED LAB/OFFICE SPACE AT ICONIX PARK Howards has commenced the refurbishment of Iconix 3 following the successful renovation and letting of Iconix 1 and 2 in Sawston, Cambridgeshire. With a deficit of good quality, affordable laboratory space in the region, Iconix Park has proved extremely popular with occupiers seeking affordable space within the south

Cambridge BioMed cluster. Iconix 3 will offer up to 15,000 sq ft of laboratory space with ready-fitted fume hoods, extraction equipment, oil fired heating and write-up facilities. The £400k refurbishment has already begun and is scheduled for completion in June 2016.

Spring 2 016

03 hive - HOT PROPERTY

hot property

hive - 80 YEARS

JIMMY (FAR RIGHT) KEPT HIS OFFICE IN HIS POCKET

BUILT ON solid foundations From concrete blocks to office blocks… Judith Howard reminisces on the changing face of the family firm It’s hard to believe that in just three generations, Howards’ business has evolved beyond recognition to be primarily focused on commercial property. While 80 years may have passed since CAEC ‘Jimmy’ Howard took his first entrepreneurial steps delivering coke and coal in 1935, the company remains family run and dedicated to safeguarding his hard-earned legacy for the next generation. For Judith Howard, who married Jimmy’s son and former Chairman Brian in 1966, each change in

leadership has marked a new chapter in the company’s history. Led by son-in-law Nicholas Bewes for the past 16 years, there is a shift occurring once more – signalled with the exciting addition to the Cambridge residential portfolio of Spillers Mill at the CB1 station development. Known for his tenacity, negotiating skills and instinct for deal-making, perhaps Jimmy would have found this recent opportunity hard to resist too… “Jimmy didn’t have a desk – he kept his office in his pocket, in his

Jimmy didn't have a desk – he kept his office in his pocket, in his notebook

notebook. That’s how he ran the business and it was remarkable,” remembers Judith of her gregarious father-in-law, who soon ventured into retail and became Mayor of Bedford in the 1950s. “He was known throughout the town and I used to go to his milk bars as a teenager with my friends. He acquired furniture shops, a fishmongers, a café… and also a 24hour petrol station in Lincoln. Then it was a road haulage business, while at the same time the business was gaining scale as Jimmy pioneered the use of spent furnace ash from power stations in block making. We had various manufacturing sites up and down the country, many of which were also family-run, and our Hemelite blocks became the market leader.”

THE VARIED CHAPTERS IN THE HISTORY OF THE HOWARD GROUP

1935 After accepting redundancy from an apprenticeship with an engineering firm in Bedford, 'Jimmy' set up his company delivering coke and coal around the town.

1939

1958

1983

Howards owned more than a dozen gravel pits. At the outbreak of WWII the Air Ministry came to Jimmy and asked him to supply gravel for their runways.

Brian Howard, son of the founder, joined the company. He had studied engineering at Cambridge and used that knowledge to develop the engineering businesses.

Howard Group sold the Hemelite concrete block business to Tarmac. The capital from the disposal was used to develop Howards' commercial property interests.

issue 03

In the background, Jimmy was also establishing commercial property plans for the future, gradually buying up the land that would eventually become the Group’s flagship retail park site at St John’s Bedford – sold in 2015 for £32m. According to Judith, her late husband was a total contrast to his father – focused on detail, process and logic – which proved invaluable as coal-power was slowly being superseded by advances in technology and therefore diversification became essential. Having studied engineering at Cambridge, Brian brought insight

He was known throughout the town and I used to go to his milk bar

THE HEMELITE BUSINESS WAS SOLD IN 1983

St John’s and buying further office and industrial sites throughout the 1980s and 90s. Meanwhile, Brian and Judith’s children, Caroline and Gavin, both joined the board in the mid 90s and continue to be committed to shaping the values and direction of the company. When son-in-law Nicholas was invited to join the company in 1999 to support Brian, another agenda gained momentum. With Cambridge just a stone’s throw from the homestead of Bedford, making the move to relocate the head office was feasible – and essential in placing the Group in the heart of the city. Fast forward to 2016, and while diverse business interests are fewer than in Jimmy’s day, the dedicated capital investment arm still champions the entrepreneurial spirit that created the Group’s present day ambition. The Spillers Mill acquisition is just the start and Judith is excited about what the future looks like for the business that will eventually pass to her grandchildren. And the rest, as they say, will one day be history.

HOWARD GROUP'S ENGINEERING WORKS, BEDFORD

1988

1999

2005

After many years of occupying and assembling the site at St John's works in Bedford, Howards secured planning consent for a retail park and a new HQ office on the site.

Nicholas Bewes, Brian's son-inlaw, joined the company from BOC Group and set about consolidating its activities towards commercial property investment and development.

The Group relocated its head office from Bedford to Regent Street in Cambridge. An essential move for Howards, placing the Group in the heart of the city.

Spring 2 016

2016 The purchase of Spillers Mill showcased Howards' aspiration to acquire high quality properties in Cambridge, beginning the Group's next chapter.

hive - 80 YEARS

NICHOLAS IS THE THIRD FAMILY MEMBER TO TAKE THE HELM

and knowledge to the business from working elsewhere after graduation before joining his father. “Brian developed the manufacturing part of the business, where we made the machines to make the blocks. That was another new chapter and his leadership ultimately led us to the sale of the block business to Tarmac in 1983,” explains Judith, also recalling the story of the day Brian proposed while she was helping him with a trade display at the Royal Show at Kenilworth, Coventry. “We were trying to stencil the name onto some blocks at the last minute and we were throwing red paint everywhere to get the job done. He said he knew he wanted to marry me after that!” Judith has fond memories of Brian’s tenure at the top and you can imagine she was happy to roll up her sleeves alongside her husband – keeping strong family values at the forefront of all they did as employers. They also put their mark on the Howard corporate story, making a conscious move into commercial property – establishing the flagship retail park at

hive - THE BIG DEBATE

The big DEBATE One of the most pressing issues facing Cambridge at present is student accommodation... Cambridge receives a constant influx of workers, students and academics, and one of the main concerns is finding housing for the 30,000 people that enrol at the universities every year Views from those in the know...

The task of creating high quality, appropriately located student accommodation, according to Cambridge City Council’s director of environment, Simon Payne, is a complex one. “We have policies in our Local Plan that seek to address the local housing need," says Payne. "These policies assess the need for all housing, including general market, social housing and, indeed, the need of educational institutions. "We have a specific policy that states: where there is evidence of a need for student accommodation then, in principle, we will support that provision within the city. This is obviously subject to all the normal requirements in terms of suitability of sites, and provided it doesn’t undermine our objective of

GRADUATE HOUSING AT THE NEW NORTHWEST CAMBRIDGE DVELOPMENT

William Jewson Howard Group Development Director

Simon Payne Cambridge City Council Director of Environment

John Dix Darwin College Bursar and Development Director

issue 03

addressing local housing needs across the city. So student accommodation is a significant part of our strategy in relation to housing and the continued growth of the city.” One concern for the council with the development of student accommodation is that there is no allocation for affordable housing. This is because a student housing development is not considered 'residential'. “We typically look for 40% affordable housing as part of a new development," continues Payne. "It is really important to us that we’re addressing the local housing need. There are single bedroom units being built by the station that are £480,000 each. If you’re on a lower salary, how on earth can you afford to live in the city? It is vital for the economic

The main considerations for student accommodation are viability, planning and timing

provide accommodation for our first-year students. The majority of our students are doing PhDs and at present need to go into the private rental market for their later years. With high demand for private housing in Cambridge, the traditional sharedhouse model has become sharply more expensive compared to collegeprovided accommodation.” Howards works closely with the universities to try and help them secure accommodation for their students and has undertaken some extremely creative funding deals to take advantage of the strength and reputation of the institutions. “Properties let to universities are seen as low-risk investments,” explains Jewson. “So we looked to undertake 'income strip' deals, where the universities will enter into a long-lease deal with an annuity fund. There need to be annual rent reviews, ideally linked to RPI inflation. However, the colleges are considered low-risk, so the purchasing fund will pay a significant capital value for that asset.” Planning policy presents further challenges for the provision of

A VISION OF THE FUTURE? Rather than fight for space, Northwest Cambridge is building an entire development for all types of housing outside of the city. The development is the largest capital project in the history of the University of Cambridge. The 150 hectare site will provide 1,500 homes for University and College key workers, 1,500 homes for sale, accommodation for 2,000 post-graduate students, 1m sq ft of research facilities, and a wide range of community services.

Autumn Spring 2 2 016 015

student accommodation, particularly in Cambridge where such welldocumented pressure exists on traditional housing stocks. “The market is currently focused on housing, particularly affordable housing. The city is desperately short of affordable residential units and suitable sites are those which are similarly attractive for student accommodation development,” says Jewson. “Planners will generally give preference to housing over student accommodation, despite the fact that relocating students to fit-for-purpose bespoke accommodation often releases traditional family homes back into the market.” The third issue is timing; any development must be timed for completion by the start of the next academic year. “If the accommodation won’t be ready by September, the whole project slides," concludes Jewson. "Your ducks have to be in a row, because there’s no point constructing a building and having it lie empty for a year.” John Dix echoes these sentiments and believes that building student accommodation would help alleviate the housing crisis. “Colleges generally need to continue to renew and upgrade accommodation to meet student expectations, but the pressures of the Cambridge property market and building costs are making this increasingly difficult to do if new sites are involved. When colleges build student housing schemes it releases homes back into the private market.” With land at such a premium in Cambridge, the council has a difficult job to accommodate everyone. “There are a number of new sites being identified within the city and the surrounding area that are intended to address the housing need,” explains Simon Payne of Cambridge City Council. “We need people to recognise that there is a particular need for student accommodation within the city. We also need to ensure that there's a way for the students to travel between their home and the universities that supports our sustainability objectives. It truly is a very complex issue,” he concludes.

07 hive - THE BIG DEBATE

success of Cambridge that we are providing a balanced range of housing for all budgets.” Developers in Cambridge have to work extremely hard to ensure that their proposals address the council’s objectives for housing creation as well as the university and college requirements for accommodation. William Jewson, development director at Howards, says there are several factors to take into account when it comes to student accommodation. “The main considerations are planning, timing and financial viability. The universities and their development partners have the challenge of competing for sites against private developers in an increasingly competitive market. At the same time many colleges are subsidising rents for their students because they are competing in their own internal markets for the best and the brightest.” The sheer number of students that need homes concerns the universities. John Dix, bursar at Darwin College, explains: “The challenge we face at Darwin College is that we can only

hive - EU referendum

THE EU REFERENDUM WILL TAKE PLACE IN JUNE

THE EU REFERENDUM

and you Patrick Bushnell, Non Executive Chairman at Howards, discusses what a Brexit could mean for the Cambridge property market…

While we are primarily a local investor, there’s a lot about our occupiers that isn’t local Patrick Bushnell

The EU referendum is fast approaching. On 23 June 2016, Britain will have its say on whether or not to remain part of the European Union. But what is actually at stake? “What’s confusing currently is that the case hasn’t yet been effectively made on either side,” says Patrick Bushnell, Non Executive Chairman at Howards. “I’m sure that’s going to change over the coming months. People will begin talking more clearly as to what the realistic impact of staying in or leaving the EU will be. However, for the time being we can only speculate as to the potential outcomes." Patrick Bushnell joined the Howards board in 2009. He has enjoyed a very distinguished career

issue 03

in the commercial property world serving as the European director of property investment at Henderson Global Investors. He is also involved as a consultant to a number of property investment funds both in the UK and overseas. “The thing that Howards is going to be particularly conscious of is the effect a Brexit will have on inward investment,” he explains. “While we are primarily a local investor, there’s a lot about our occupiers that isn’t local. "As a result of Cambridge’s ‘bio boom’ in recent years, we’ve been getting increasingly involved with technology companies. There’s quite a lot of European and international flavour to the occupational market, both in terms of the commercial and residential market.”

investors from looking to the UK and, more importantly, Cambridge. "There’s a reason why the region has been dubbed ‘Silicon Fen’, and I don’t see our membership to the EU playing a large part in whether or not that title continues to stand. "If there is a Brexit, we will need to agree new trading arrangements with the rest of Europe. Exactly how long that will take and whether it will look like any current trading arrangements with non-EU countries around Europe is, at this moment, unknown. "However, the referendum will slow the property market for a time,

There's a reason why Cambridge has been dubbed 'Silicon Fen'

EU REFERENDUM: SHOULD I STAY?

whatever the outcome. This is due to the uncertainty that it brings, which in turn makes investors cautious. The property investment market is already showing signs of this, through reduced investment volumes, and is something that's likely to continue until well after the referendum. “Interestingly, for the moment, the occupation market appears relatively unaffected," concludes Bushnell. "And with Cambridge being one of the most established biotech clusters in Europe, the city is well placed to be resilient whatever the outcome in June."

EU REFERENDUM: SHOULD I GO?

The Pros

• Free trade between member nations

• Create a freer economic market

• Maintain negotiation power in Europe

• Regulate the free movement of people across borders

• Continue to attract the best and brightest people from abroad, plus free movement and rights overseas

• Could rewrite laws on giving tax credits and child benefits to migrants

• Stability and security through being part of a 28-member bloc

• Able to claim back its territorial fishing waters

The Cons

• Continue to incur billions of pounds in membership fees

• Continue to be subject to EU politics and economics

• Inability to control movement of people

• Once departed, it would be all but impossible to get back in again

• Less freedom to create UK own laws

• May lose some military influence

Referendum

stats

65%

of property experts say

THAT LEAVING WOULD HAVE A NEGATIVE IMPACT

Only

10%

OF BUSINESSES WOULD CONSIDER MOVING OVERSEAS IN THE CASE OF A BREXIT

Autumn Spring 2 2 016 015

Opinion polls suggest THE PUBLIC ARE SPLIT

50/50

09 hive - EU referendum

In 2013, Howards acquired Iconix Park in Sawston, a 44,320 sq ft office, lab and R&D development. Following on from the successful refurbishment and letting of Iconix 1 and 2, the Group has recently begun refurbishment of Iconix 3, which will be ready in June. Similarly, in 2015, Howards completed a bespoke letting in Lewisham to global logistics company DHL to facilitate its continued export success in the UK. “We’re obviously keen to continue attracting inward investment, however some people believe a Brexit will dissuade foreign

hive - LOCAL LANDSCAPE

A new dawn for SPILLERS MILL THE INSTANTLY RECOGNISABLE SPILLERS MILL

The acquisition is one of the largest residential transactions in Cambridge in recent years and marks a significant milestone in the company’s 80-year history. It is an important step in Howards’ drive to secure and develop high quality investments within the region. Despite predominantly being a commercial development company, Howards has wanted to expand its residential portfolio for some time – and this was a prime opportunity to do so. In just this one transaction, Howards has achieved its selfset residential acquisition target, showing its commitment to this sector of the market.

Howards has wanted to expand its residential portfolio for some time – and this was a prime opportunity to do so

Howards has acquired Spillers Mill, an important and landmark residential development at the heart of the CB1 gateway regeneration project

The Victorian building is one of the more familiar landmarks in Cambridge, and one of the few remaining legacy buildings of pre-twentieth century large-scale industry in the city. Despite being damaged by fire in 2010, this distinctive landmark has been transformed into 19 beautiful apartments, blending modern living with a strong statement in architectural history. Elaborate stepped gables and a prominent castellated water tower originally topped the restrained colonnade architecture of Spillers Mill. These features have been restored and incorporated into the stunning penthouse apartments.

PREVIOUS INCARNATIONS INCLUDE A FLOUR MILL It is fitting, perhaps, that a building originally constructed for one Cambridge family business – the Foster family – has been acquired by Howards, another family business committed to investing in and preserving it for the future.

SPILLERS MILL IS AN ICONIC CAMBRIDGE LANDMARK

THE TRANSFORMED PENTHOUSE

issue 03

HOWARD CAPITAL

11 hive - HOWARD CAPITAL

Supporting innovative

BUSINESS

Howards has a long tradition of investing in creative and innovative business ideas, dating back to the company's inception over 80 years ago... When finance director Huw Jones joined Howards in September 2014, it was part of his remit to grow the portfolio of investments in early stage businesses. Huw begun his career working in corporate finance with PwC, and also has experience as CFO of both a private equity fund and a technology company with private equity backers. Immediately prior to joining Howards, Huw worked in private equity with global investment bank JP Morgan.

INVESTING EARLY “I have experience of investing in early stage companies as a fund manager, and I also know what it feels like to be on the receiving end of that investment. This gives me a great perspective to take this business forward within Howard Group." In recent years the Group has been an investor in private equity backed vehicle replacement provider Drive Assist, which was sold in 2007 for £250m. The company has also built Howard Sandcliffe Investments, a group of high-quality building service companies, which continues to flourish after weathering the storms that have recently hit this industry. Huw’s early days were focused on the existing portfolio. “We have the existing portfolio in good shape, and we are now ready to expand our activities. While we are very pleased with the performance of the Howard Sandcliffe portfolio, our focus on the building sector meant that our core

property business and our private company investment portfolio experienced the same business cycle. As we look to the future, we will be investing in activities that have a different cycle to the property business.

CAMBRIDGE FOCUS “Our focus therefore is on Cambridge and technology. Cambridge has developed an outstanding record of business success, based on a symbiotic relationship between a world-leading University and one of Europe’s top technology clusters. Cambridge has nearly nine times the number of patents per head than the UK average. "Research from Cambridge Ahead shows that there are over 4,500 knowledge-intensive companies registered within 25 miles of Cambridge, which have grown employment by 7.4% pa since 2011. We are based in the heart of this success story and we are passionate about contributing to this continued growth any way we can."

Huw Jones ACA FINANCE DIRECTOR Huw became finance director for Howards in September 2014. Prior to joining the Company, he worked for JP Morgan in London where he established its Private Equity and Real Estate Fund service business in Europe. An experienced chartered accountant, he has worked within both large businesses and smaller early stage technology companies. Huw spent eight years with PwC working on M&A work in its Cambridge office and is a graduate from Cambridge University.

BRIGHT FUTURE

We have the existing portfolio in good shape, and are now ready to expand our activities

“However we won’t be making risky bets on unproven technology and management teams. We will be taking a multi-faceted approach to investment sourcing, co-investing with angels, funds and partners. We are not looking at the short term, we are long term investors, and we will be looking to build a portfolio of 12 to 15 companies in total over the next five years. "I am very excited about this new initiative. We are confident that this will be another successful chapter in the history of Howards,” concluded Jones.

What a good idea...

CAMBRIDGE HAS NEARLY NINE TIMES THE NUMBER OF PATENTS PER HEAD THAN THE UK AVERAGE Spring 2 016

hive - THE BUZZ

THE buzz...

All the latest activity in and around the Howard Group community

FOCUS ON:

Man vs Mountain

Stephanie Faulkner PROPERTY ADMINISTRATOR Howards has changed substantially over recent years with the reshaping of our portfolio and the increasing focus on Cambridge and London. With that, the types of investments we’re now acquiring and developing require a much higher level of customer care. With our recent rebrand, we’re keen to demonstrate that Howards’ values run through everything we do. We’ve been working hard to service our customers’ needs and adapt ourselves to provide an outstanding level of care. This is where Stephanie Faulkner’s role comes in… Stephanie joined us back in March 2014, primarily in an administration role for the property management team. However, due to the evolving needs of the business and greater focus towards customer management, her role includes shaping relationships with our tenants and ensuring we provide them with an excellent service across all functions. This is in addition to the property team administration that has been developing over the past two years. Her role spans everything from picking up the phones and having personal accountability for any management issues that arise, right through to meeting a tenant with the STEPHANIE FAULKNER keys when they arrive on-site.

DOMINIC IN ACTION Dominic Reilly, our non-executive director, recently returned from an amazing adventure climbing Mount Kilimanjaro. The climb took seven days and on the day of the ascent Dominic completed 17 hours of walking including a 3,000m, nine-hour descent back to camp. Dominic's efforts raised £12,000 for Médecins Sans Frontières - the non-profit humanitarian-aid organisation. Since returning he has sworn to stick to more leisurely sports such as golf, tennis and horse racing.

Cycle to Work It's not just Bradley Wiggins and Mark Cavendish that put in the miles on their bikes. Seven members of the Howards' team cycle to work on a daily basis and between us we covered 10,600 miles on our bikes in 2015 – just commuting. That's more than the distance from Cambridge to Sydney! We're pleased with that figure considering the average family car does 7,600 miles per year. And in terms of the environment, we have also saved more than 2,650 litres of petrol.

THE TEAM HAS SAVED OVER 2,650L OF PETROL

issue 03