Speaking to LBN Vermont founder Mark Connor talks about how a ‘lack of clarity’ from Liverpool City Council is scaring off investors and says news on a £50m Liverpool Waters scheme is imminent. Tony McDonough reports
Ongoing turmoil in Liverpool city council is scaring investors away from the city, one of the city’s leading property figures has told LBN.
Mark Connor, founder and chief executive of property firm Vermont, said the arrival of commissioners in 2021 to take over the running of property, regeneration and highways had “contributed to a slowdown in development and a lack of investment”.
He also talked about how, despite the crisis in the UK economy, Vermont’s pipeline of work was already stretching into 2024. It is currently working on projects in Manchester and a stalled £50m residential development at Liverpool Waters could come back to life in weeks.
‘Lack of clarity’
Early in 2021 the Max Caller report into the running of the city council identified a “fundamental failure of governance”. Government commissioners swooped in to take over three council departments. This year, errors over the renewal of the council’s electricity contract led to the resignation of chief executive Tony Reeves.
In August, a new report from the commissioners said not enough progress had been made in turning the three departments around. This means Whitehall is effectively taking full control.
According to Mark, Liverpool has long had a reputational problem when it came to attracting outside developers and institutional investors. However, he said prior to the current crisis there had been an improvement in the city’s prospects.
He explained: “10 years ago there was seemingly a reluctance to invest. Liverpool wasn’t perceived as having the same value as Manchester where there was a lot of commercial funding.
“Prior to the problems at the council I think that had improved. The institutional investors saw value in Liverpool and that was borne out by a number of fairly significant investments.”
But events, including a number of high-profile arrests (but as yet no charges), led to a collapse in confidence at the council. Mark added: “I think Liverpool had reached a point where there was some intervention needed.”
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He said investors he spoke to after that intervention were reluctant to part with their money. And he said: “That will be the case until there is some clarity. And clarity is something we do not have right now.
“We need clarity as to who is driving the bus. Until recently we all thought it was Tony Reeves and that he was supported by the Government officers. But it feels like he left because there was very little communication and support between them.
“Until there is some clarity as to how the city will be managed, then you have a vacuum in terms of investment.”
£100m scheme completed
Vermont found itself directly affected by the turmoil. It had been working with Elliot Group on a number of Liverpool schemes. However, founder Elliot Lawless was arrested by Merseyside Police in December 2019. He was released shortly afterwards. No charges have been brought and he maintains his innocence.
The arrest caused a collapse in investor confidence and several Elliot schemes fell into administration. One scheme, a £100m student residential development in the Baltic Triangle called Aura, was rescued by the original investors and Vermont completed the work this year.
Mark said: “That was a great result for us, the investors and the city. A credit to all involved. A very pragmatic set of investors who listened, who worked with us to get the. We worked with them fantastically and got it over the line, 1,000 beds for the city finished on time. A great result.”
A different model
Vermont was founded in 2004. Prior to that Mark had founded Space Developments. This was acquired by Northern Ireland housebuilder McInerney in 2001 but Mark wanted to carry on doing his own thing and took on his old team in the new business.
Unlike traditional building contractors, Vermont works to a different model. He explained: “We are not a contractor as such. We work with the developer right from the front end. We will secure planning for them and we will negotiate the 106 agreements. So we are almost like a development partner.
“All of our work is negotiated through that development process so we steer clear of competition. We don’t submit tenders and all the work is negotiated and driven organically by our development team at the front end.”
Similar to many in the property sector, Vermont had to weather the storm during the pandemic. In its last published accounts, covering the year to March 31, 2021, the business saw revenues plummet to £32.7m from almost £62.5m in the previous year.
However, the firm did remain profitable, reporting a pre-tax profit of just over £1.1m for the 12-month period.
Currently its two biggest clients are Peel L&P, owner of Liverpool Waters, and Liverpool residential developer X1. Vermont is currently on site at a number of projects for X1 in Greater Manchester.
In March LBN reported how Your Housing Group had pulled out of a £50m residential tower at Princes Dock in Liverpool Waters for the second time. Patagonia Place was to be a 31-storey scheme offering 278 apartments for rent. Mark says good news on a revival of the scheme is imminent.
“Unfortunately for reasons outside both ours and Peel’s control it stalled. We have now picked up the baton and we are moving it forward slowly but surely. We hope to be able to provide some positive news in the next three to four weeks.
“We are very busy over in Salford and Manchester at the moment. We are working at Media City with X1 developments on the third of four towers which is a scheme in total with 1,100 apartments.
“We are also working over in Trafford, at Manchester Waters, again with X1, and we are on the third of five blocks there which again has gone fantastically well. We are currently looking at the other end of Pomona Island where Peel has a masterplan to build more than 2,500 homes.”
Fractional sales
Mark said Vermont had been careful to largely steer clear of the fractional sales model that was employed on a number of now failed schemes in Liverpool. He explained: “A few years ago we set our stall to work with institutional investors.
“We deliberately restricted our exposure to the sales market and, in particular, the fractional sales market. You didn’t have to be a brain surgeon to realise there was a limited shelf life for it.
“We have focused on those institutional funders and on those larger regeneration schemes where there is an institutional funding component.
“We wanted to be more linked to the residential rental market than the residential sales market. That seems to have paid off because we have delivered a number of build-to-rent schemes and that is the bread and butter for us now.
“The rental market seems to be continuing to go from strength to strength. Given the current interest rate issues it is inevitable the sales market is going to stall or slow. But all the indicators are the rental market is still extremely bullish and that it is likely to grow.”
Uncharted waters
Vermont’s pipeline, according to Mark, is looking “remarkably resilient”. He added: We have always worked between Liverpool and Manchester.
“Since the early 2000s Manchester has been extremely buoyant. It has changed beyond all of my expectations. We were one of the first doing city centre schemes in Liverpool and Manchester back then.
“None of us could have predicted just how much development was going to happen in Manchester. So Manchester is a great place for us. Liverpool is where we are based and where I live so it is very important to us to stay active here where regeneration is taking place.
“When you turn the TV on and you see the economic picture you would think it would be having an impact… Looking where the interest rates are going I think inevitably there are going to be some casualties and things slowing down.
“At the moment we are moving into uncharted economic waters. 2023 will be tough for everyone. Next year will be a tough time for contractors but we have a pipeline secured until 2024. That is the difference for us.”