Real estate boss Matthew Cheyne tells Martin Walker about an £ 11m acquisition of Aycliffe Business Park land in an EXCLUSIVE interview ...

The positive vibes continue to reverberate around Aycliffe Business Park . This really is a new era in more ways than one .

When multi-national real estate corporation Valad decided to sell off 700,000 square feet of land in Aycliffe , London-based asset management firm M7 spotted an opportunity and was quick off the mark , snapping up the stock for a handsome , but bargain , £ 11m .

The land and properties incorporates 47 tenants - including some high-profile firms such as Palram , Stiller and Tyne Tees Packaging - which is all now owned by Empire 1 Sarl , a joint venture between M7 and real estate fund managers Europa Capital Partners , based in London .

Matthew Cheyne , a partner at M7 , is now solely responsible for the land and tenants - which equates to about a quarter of properties on the business park - while Vine Property Management will continue to manage the properties .

His first mission will be to breathe new life into some of the run-down and empty units around the estate - most notably those at Northfield Way , just off Horndale Avenue - as Empire has ear-marked up to £ 1m to regenerate unoccupied areas .

He ’ s also promising to be “ visible ” for tenants who want to contact the landlords for whatever reason .

For many firms on Aycliffe Business Park - who will already know about the deal - it will represent positive news indeed .

Property consultants Sanderson Weatherall and Jones Lang LaSalle , acting as letting agents in the deal , invited me to join them and Mr Cheyne for a coffee and an exclusive interview at the Xcel Centre .

Mr Cheyne outlined in detail Empire ’ s plans to improve the stock it has just purchased while maintaining rent rates wherever possible . He also says Empire ’ s protracted purchase has enabled them to ring-fence cash for some refurbishments without passing on cost to existing tenants .

“ We ’ ve acquired about 700 square feet of space , and rather than treating it as a single holding , it ’ s our intention to treat it as a series of separate estates and improve them individually ,” he said .

“ There are parts of the estate , most notably Northfield Way , which we intend to invest quite heavily in regenerating it as its own entity . We ’ ve actually ear-marked between £ 700,000 and £ 1m for further investment and invest in the stock we ’ ve already bought , to refurbish it .

“ Most industrial stock over the last five years or so has been starved of regeneration purely because of the economic situation .

“ We want to invest in our stock and improve it , to give local occupiers more choice , and from our point of view we ’ ll reap the rewards of having improved stock .”

M7 is one of the UK ’ s leading industrial real estate asset managers , with a portfolio consisting of £ 400m-worth of industrial properties from Penzance in the South to Dundee in the North .

M7 ’ s joint venture with Europa Capital is one of 18 multi-let deals it has done across the country , acquiring estates in Hull , Telford , Cannock and East Kilbride as well as Aycliffe . The portfolio , totalling £ 37m , consists of 258 units across the 18 estates and provides over 1,640,000 sq . feet of predominantly industrial accommodation .

Mr Cheyne explained : “ The stock that M7 buys is generally secondary industrial estates . We were established in 2009 , after the property crash , and the experience of all our partners is all in the secondary market , where we buy unused stock , improve them and get tenants into them and generally have better packages for longer-term investors .

“ When we ’ re appraising an estate we always consider what could we do to improve it , so the aim is to purchase the stock while factoring in revenue to pump into regeneration as well .

“ The hope is that the stock will be appealing to new tenants , but we also want to show our existing tenants that their landlord is paying some attention to their property and improving their environment .

“ There are options for us to change tenancy agreements and pass on the cost of improvements to them , but in most cases

we don ’ t do that , we see it as part of the purchase price .

“ We want to show companies and the local community in Newton Aycliffe that we want to improve the Business Park .

“ Our pay-back will be increased occupancy levels , a rental growth and , when it comes to the point of job done in five or 10 years time , selling on much-improved stock for a return .

“ We don ’ t see this as a gamble . We see it as a very calculated , sound investment .”

Mr Cheyne , having already done his homework before our chat , already knows all about the work of the Aycliffe Business Park steering group .

Smiling , he says : “ Yes , I ’ ve heard of John Finley and the steering group ! To have tenants working so proactively is music to our ears , and we want to work with them as much as possible to make sure we continue to improve the park on the whole .

“ All our stock will continue to be managed by Vine Property Management and we ’ ve retained the services of Joyce Steel , whom a lot of tenants will already know very well , and anyone who wants to contact us can do so through Joyce - but we aim to get round to seeing all our tenants in due course .

“ There are parts of land which has nothing to do with us , but we ’ re actually responsible for , so there are grey areas . While we ’ ve invested in bricks and mortar , we want to match that with having pride in where we work .”

Ultimately , Mr Cheyne ’ s remit is to increase occupancy levels , so the last thing they want is to lose tenants . He wants everyone onside . And while a lot of businesses-owners will be tired of empty promises , this bold and positive new approach must be refreshing for tenants .

Mr Cheyne goes on : “ Out of the 700,000 square feet of stock we ’ ve purchased , around 125,000 is currently vacant , which amounts to about 18 %.

“ It ’ s our aim over the next 18 months , through marketing the properties and making all the improvements , to get the vacancy levels down to between 7.5 and 10 % which is about the average figure for an estate of this size .

“ If we can do that without impacting on current tenants , and maintaining those who are already here , it will automatically increase revenue and that ’ s where we ’ ll start seeing a return .

“ We want to improve the service we offer , we want to be around so our tenants can contact us , we want to be good landlords for businesses here in Aycliffe .

“ It ’ s important for them to actually know who the landlord is - real people - and our stock in Aycliffe is my sole responsibility . I hope it ’ ll be reassuring for tenants to know that .

“ Clearly we ’ ve acquired these assets to make money for our investors , but doing that by improving the quality of stock . If we end up selling our stock on for profit at a later date , it means we ’ re improving it , and that has to be good news all round !”

Although based in Edinburgh , Mr Cheyne is no stranger to County Durham .

“ My two eldest daughters went to Durham University , so I ’ m already quite familiar with the area ,” he says .

“ The benefits here at Aycliffe Business Park is its accessibility . It ’ s straight off the A1 , there are two ports not far away , two airports ... so in terms of location , we see this as a very strong one .

“ Manufacturing is at the heart of this business park but there are also a lot of good service providers and SMEs on the park , which all makes for a good mix .”

We can ’ t conclude the interview , of course , without talking about the ‘ H ’ word .

Mr Cheyne added : “ Of course Hitachi will be huge . The fact they ’ re coming here was a major factor in our investment . It wasn ’ t

necessarily the only factor , but it played a big part .

“ One of the driving forces behind us reducing our void here will be inward investment . Demand is what it ’ s going to be , but our general game plan is to work within the local economy . If you make your property more attractive and better quality , then people will come to it in favour of something else .

“ If you ’ re doing that against the backdrop of something like Hitachi , then of course it ’ s going to make that job a little bit easier , so we think from a timing point of view , buying now is quite a shrewd move .”

Jonathan Sanderson , from Sanderson Weatherall , told Aycliffe Today Business : “ M7 ’ s acquisition of the estate could not have come at more exciting time for the estate .

“ Arguably at this moment in time occupancy levels on the estate have never been as good , with take up exceeding 1m sq ft over the last two years . Much of this activity has been buoyed by the strength and growth of manufacturing in the North-East .

“ Having been heavily involved with the estate over the last seven years I am now looking forward to working with M7 on the next chapter of the estate .

“ The change of ownership also coincides with the planned investment from Hitachi , and whilst in its early stages we already starting to receive enquiries from companies within the supply chain , which is further evidence that our client has made a shrewd investment in the business park .”

More details about M7 can be found at www . m7re . co . uk , while more details about Europa Capital is at www . europacapital . com

• Vacant properties will be marketed at www . m7propsearch . co . uk