234 Bath Road
Slough Estates is committed to building and owning quality buildings for business located in prime business centers in the United Kingdom, Continental Europe, and North America to provide its shareholders with superior growth of net assets and earnings per share to enhance overall shareholder value.
Slough Estates PLC is Britain's largest industrial property investment company, with a property portfolio valued at about £3.8 billion. The development and management of industrial or trading estates, sites containing a number of units of industrial property occupied by several different companies, was pioneered by Slough in the 1920s and still forms the bulk of its business, both in the United Kingdom and overseas. In recent years the company has also diversified into other property and non-property activities.
Slough Estates' Extraordinary Beginnings
Slough Estates began life in 1920, when a syndicate of businessmen formed the Slough Trading Company to purchase a 600-acre site on Bath Road in Slough, England, which had been developed as a mechanical transport repair depot during World War I. The government's original intention was to repair and sell the assembled vehicles following the war, but lack of progress aroused public criticism and after publication of the report of a parliamentary joint select committee in July 1919, it was decided to sell the site to a private buyer. "The Dump," as the site was known, was sold for £7 million, and included thousands of used cars, trucks, and motorcycles left over after the war. Prominent among the syndicate of businessmen who bought the site were Sir (later Lord) Percival Perry, the managing director of the U.K. branch of the Ford Motor Company, and Noel Mobbs (later Sir), founder of the Slough Trading Company as well as chairman of the Pytchley Autocar Company Ltd., which he had founded in 1904.
Some 8,000 people, nearly half the population of Slough, were employed in repairing and selling the vehicles. About 15,000 derelict vehicles were cannibalized to produce 10,000 workable ones. Repaired vehicles were sold at auctions, and by the end of 1920 auction sales had already raised more than £5 million. To speed up the disposal of the vehicles, the company employed what was then an innovative labor management policy; the workforce was paid regular wages rather than piece rates and a 40-hour, five-day week was introduced, without any reduction in earnings despite the reduction of 10 percent to 20 percent in working hours. This policy proved successful, resulting in the productivity improvements that it was designed to achieve.
By 1925 the vehicle sales were completed and the company turned its attention to building fully serviced factories on the site. Machine shops, other plants, and offices had already been built by the company for vehicle repair operations, together with utilities, including a power station, gas-producing plant, water mains, roads, and railway tracks. The establishment of an integrated industrial estate of the type envisaged by the company's founder, Sir Noel Mobbs, involved further infrastructure provision. Utilities were extended and other services were organized; both Barclays Bank and the National Provincial Bank established themselves on the site to serve the new factories. Early tenants included Citroen Cars, Johnson & Johnson, Gillette, The Mentholatum Company, and the Hygienic Ice Company.
The site at Slough was ideal for such consumer-goods industries, with good road and rail links to London, which was only 20 miles away, and the Midlands. Slough's first chairman, Sir Percival Perry, was succeeded by Sir Noel Mobbs in 1922. Mobbs was to remain chairman at Slough for the next 35 years. The passage of the Slough Trading Company Act 1925 permitted the company to build roads and lay water and steam mains, electricity cables, and drains. This facilitated large-scale industrial development on the site.
Within a few years the company had transformed itself from a motor-dealing firm to a property company, a transformation that was reflected in a change of name in 1926 to Slough Estates Ltd. A policy was developed in these early years regarding the management of the estate at Slough. Units were offered for rental rather than sale, thereby giving Slough Estates greater control over the estate and providing a continual source of revenue. Such a policy also proved popular with many small- and medium-sized tenants, who did not wish to tie up capital in the purchase of factory premises. Only light industry was to operate on the estate. Buildings were to be built in advance of requirements and were never custom built, although tenants' requirements were taken into account in their construction. The objective behind these policies was the provision of basic factories with a high degree of adaptability; units could be easily subdivided and could serve a wide variety of industrial needs. Adaptability was important since it meant that units could be easily re-leased, thereby overcoming a basic obstacle to successful long-term investment in industrial property.
The estate grew quickly and by 1930 had 100 tenants who employed 8,000 people on the site. As the businesses of some tenants grew, Slough was able to accommodate them in larger units on the estate, thereby enabling them to expand capacity easily without having to move to a new site or extend their premises. Sir Noel Mobbs envisaged the estate at Slough as an integrated industrial community. In addition to the provision of utilities and infrastructure on the site, he planned a variety of social and welfare services for the estate which would encourage a community atmosphere. His plans culminated in the establishment of the Slough Community Centre in 1937, and the Slough Industrial Health Service, launched in 1947 after delays caused by World War II.
The estate easily survived the 1930s, its variety of trades and concentration on the new light industries shielding it from the severe depression which hit Britain's older core industries. Slough claimed to have the lowest unemployment rate in the country, at 1 percent, and the estate was able to absorb unemployed workers from outside the area. This was encouraged by an extensive house-building program in Slough and the opening of a Ministry of Labour Training Centre for newcomers to the estate in 1929, which provided six-month courses in building, engineering, woodworking, and other skills required by the tenants. The growth of the town of Slough was closely linked with the fortunes of Slough Estates. When the company was established in 1920 the town had 16,000 inhabitants. By 1930 this figure had grown to 28,000 and by 1938 it had soared to 55,000.
In 1931 the company acquired a second industrial estate on a 55-acre site five miles south of Birmingham. Birmingham's diversified industrial structure made it an ideal location for the establishment of a trading estate to serve a variety of light industries. A year later, Slough Estates became the first company in England to provide metered steam for process and heating. This was particularly useful for industries such as food processing, where a high premium was placed on cleanliness, since it eliminated the coal dust resulting from an onsite boiler. The company's modern facilities and progressive outlook led a large number of foreign-based firms to establish themselves at Slough, something which Sir Noel Mobbs felt was impeded by the government's unsympathetic attitude to foreign companies. "The President of the Board of Trade," he complained, "can no more stop the tide of industry coming to sunlit open factories in pleasant surroundings than could Canute prevent the tide from advancing up the shores of Dover."
The estate at Slough escaped war damage during World War II. During the postwar reconstruction period, expansion was inhibited by shortages and government restrictions. Building materials were in extremely short supply due to wartime reductions in capacity. Government building licenses were difficult to obtain, due to local labor scarcity and a national economic policy that favored export-oriented industries at the expense of construction. Controls also extended to the provision of capital, and borrowing large sums for development required clearance from a government body known as the Capital Issues Committee. Despite a waiting list for new units, development at Slough in the early postwar years was restricted to expanding factory space for existing tenants.
In order to overcome these problems, Slough Estates sought further expansion outside Slough. During this time of tight government controls, undertaking government-sponsored projects provided one means of gaining the necessary official approval. Slough participated in such a scheme in 1945, developing an estate in Swansea at the request of the Board of Trade.
New Opportunities Following World War II
Just as Slough Estates' formation had resulted from government activity during World War I, demobilization following World War II brought new opportunities. In 1948 it obtained a 22-acre site at Greenford, Middlesex, which had been used as an ordnance depot, with 21 units leased to the War Department. As leases on these units were not due to expire until 1959, the investment offered little prospect of increasing returns in the short term, but the company's patience was rewarded by rising rental income after the leases terminated. Despite the shortages and government restrictions which inhibited expansion during these years, Slough Estates experienced rapid growth in asset values immediately after the war, reflected in an increase in the estimated value of its assets from £2.3 million to £3 million between 1945 and 1948. While postwar conditions had restricted the scope for expansion, they had increased the value of existing factories by allowing demand to outstrip supply.
Slough Estates Holdings Extend to North America
Government restrictions and shortages continued to plague Slough Estates until 1954 when building license controls were lifted, although the Birmingham and Greenford estates had been virtually completed and let by this date. Other investments included the purchase of land in Canada and a large injection of capital to improve the power station at Slough. A large land bank was also acquired, which the company was able to put to good use in the less restricted environment of the 1950s and 1960s. Rents had risen only moderately in the years immediately following the war, since most property was still let on leases which had been negotiated in the interwar period. However, in 1951, when many leases came up for renewal, rental income jumped by 25 percent.
The property boom period, from the lifting of government restrictions on development in 1954, to the imposition of the government's so-called Brown Ban on office development in and around London in 1964, did not prove nearly so prosperous a time for industrial estate developers as it did for developers of offices or shopping malls. In addition, Industrial Development Certificate legislation held back development activity in this sector. Development funds were raised by a series of rights issues, while rising rents provided further capital for expansion. Sir Noel Mobbs retired as chairman in 1957, and was succeeded by Lieutenant Colonel W.H. Kingsmill, with Gerald Mobbs as managing director.
Restrictions in the domestic market prompted Slough's expansion overseas in the postwar period. From 1950 onward, parcels of land were accumulated gradually in the town of Ajax near Toronto, Ontario Canada. The choice of Ajax paralleled that of Slough, both being small towns close to large population centers with good transport facilities to major national and international markets. The establishment of the estate led to the formation of two new subsidiaries; Slough Estates (Canada) Ltd. and its construction subsidiary Slough Construction and Properties Ltd.
By the late 1950s, U.K. currency controls made it impossible to remit funds to Canada for the development of the Ajax estate investment. The company had sufficient security for local borrowing from the early 1960s, but funding continued to present problems until 1969 when Slough Estates acquired Yorkshire and Pacific Securities Ltd., a U.K.-based investment company whose assets were held by a Canadian subsidiary. A second Canadian estate was established in the mid-1960s, covering 109 acres in Malton, a mile from Toronto International Airport.
Slough Estates Enters Australian and European Markets
In 1949, Slough entered the Australian property market, a favorite area for U.K. developers wishing to expand overseas, with the purchase of 1,500 acres of land at Altona, near Melbourne. Unlike previous developments the land was not located in a town and it took over ten years to get the local authorities to extend utilities to the site. Eventually another industrial development was established nearby and the necessary services were extended. Slough Estates Australia Pty. Ltd., a wholly owned subsidiary, was established in 1961, but it was not until 1966 that a final agreement was reached with the Melbourne and Metropolitan Board of Works for the provision of amenities.
During the 1960s, influenced by the growing prosperity of the European Economic Community (EEC), Slough decided to expand into Europe. Britain's failure to gain entry to the EEC at that time led to Slough's decision to establish a factory in an EEC country. Belgium was chosen, since it had a highly developed industrial infrastructure, a rich domestic market, and close proximity to London. St. Nicholas, a textile town within easy reach of both Antwerp and Brussels, which wanted to diversity into other industries due to the depression in textiles, was chosen as a site. Designated by the government as an official development area, the site also offered financial concessions.
During the 1960s, Slough extended its operations to the north of England. In 1967 it purchased an industrial estate in Wakefield comprising 17 acres of land close to the M1 motorway. In an area of high unemployment, this development was not subject to Industrial Development Certificate legislation. The purchase of the site prior to the extension of the M1 was an example of Slough Estates' strategy of buying estates before the provision of infrastructure, which was also a factor behind the later acquisition of the estate at Yate. The Wakefield site also had features in common with the earlier estates in Slough and Birmingham, in that it was located in a major conurbation, with a skilled industrial workforce and a large local market for goods produced on the estate.
Slough Estates Acquires Hertford Industrial Estates
Growth was assisted by the takeover of another company specializing in industrial property, Hertford Industrial Estates, which was acquired in 1969 for £830,000. This company owned 24 acres of industrial buildings in Hertford, Bishop's Stortford, and Braintree. During the early 1970s the company expanded rapidly to take advantage of booming economic conditions. Sites were purchased in High Wycombe, Yate, near Bristol, and Aylesbury. New overseas operations included the purchase of a major site in Australia and the launching of a joint £9 million development program with Mackenzie Hill to develop sites in France and later in Germany.
The company was in a good position to take advantage of the rapid rise in industrial rents during the early 1970s. By 1970, 75 percent of the leases were tied to the wholesale price index and were adjusted annually. This system of leasing, which was unique to the company, led to rapid increases in rental income during the inflationary years of the 1970s. A further 10 percent of the properties were let on leases with seven-yearly rent reviews.
Diversification into the non-industrial commercial property market was also attempted, through a subsidiary, Gauntlet Developments, which was formed in 1972 to develop offices in the United Kingdom and Europe. This venture proved unsuccessful, leaving Slough Estates with offices in Brussels and Sheffield that remained vacant for several years. In 1974 the company turned its attention to the United States and entered into a joint venture with Chicago's Draper & Kramer to form SDK Parks, in which it took an 80 percent interest. Slough was the first British property company to tackle the industrial sector in the United States.
Following the property market crash in the same year and its aftermath, Slough was one of the few companies to achieve increases in profits. Industrial development did not suffer the same fate as the commercial market. Although the company had made minor excursions into commercial property, it emerged from the crisis largely unscathed. It was able to buy out the interest of Mackenzie Hill in their joint developments and successfully launched a £5.5 million convertible rights issue in 1975.
Improving property market conditions during the late 1970s allowed Slough Estates to enter a new phase of expansion, the most notable scheme being the Sutton Industrial Park at Reading, which was bought in 1976 and was intended to contain about 750,000 square feet of buildings. During 1976, Sir Nigel Mobbs, grandson of Sir Noel Mobbs, became chairman and chief executive succeeding his father Gerald Mobbs.
The early 1980s saw steady growth in Slough's profits, despite a depression in industrial property, as rent reviews led to increased rental income. Slough undertook a number of developments both at home and overseas. U.S. activities were expanded substantially with developments concentrated around the Chicago area.
Slough Estates Continues Expansion of Industrial Properties
In 1984, Slough merged with Allnatt London & Guildhall Properties, with assets valued at £159 million. Allnatt's properties were well suited to Slough's portfolio, since they were predominantly industrial.
In 1986, Slough Estates acquired an equity interest in Denver, Colorado-based Tipperary Corporation, an independent energy company, concentrating on the exploration and production of coal-bed methane, and owner of Tipperary Oil and Gas (Australia) Pty. Ltd. Slough planned to continue ownership in this company that holds a majority interest in the Cornet Ridge methane project in Southeast Queensland, with projected gas reserves valued at US$100 million.
During 1987 it was decided to broaden the company's asset base, with increased activity in the shop, office, and retail warehousing markets. Until 1987, only 8.5 percent of Slough Estates' U.K. portfolio was in nonindustrial property, though its commitment to other property areas increased sharply in 1986 with the purchase of a 52 percent stake in Bredero Properties, a development company that specialized in U.K. shopping malls.
Buoyant conditions in the industrial property market led to rising profits for Slough during the late 1980s. The company continued to expand its activities, launching a massive development program both at home and overseas, the eventual cost of which was estimated to be about £1 billion. Operations were extended into the French and German markets, while the company diversified into property and non-property activities unconnected with industrial estates in both U.K. and foreign markets. By 1990, investment in such activities amounted to £45 million.
In the late 1990s, Slough Estates eyed U.K. industrial specialist Bilton for possible takeover, culminating in a £276 million outlay in 1998 to acquire the company's £300 million portfolio of industrial estates in Southeast England. Later in the same year, Slough Estates announced plans to develop the Pegasus Business Park in Brussels, the site of a European technical assistance center for the U.S. Internet company Cisco Systems. Slough had also developed two additional business parks near Zaventem Airport, in Brussels.
Closer to home, Slough increased its presence in the U.K. with plans for the development in 1999 of a 180-acre commercial site near Farnborough Aerodrome, the former headquarters of Britains' Royal Air Force, and formerly the Royal Aircraft Establishment factory site in Hampshire. Its hometown of Slough also benefited from the company's development of a shopping mall complex, the Queensmere Shopping Centre. This location proved to be an extraordinary investment of the Slough Estates from its beginnings in 1920: a vibrant commercial center on the edge of London, close to M4, M40, and M25 motorways and Heathrow Airport. Slough commercial developments in the area attracted companies such as Leaseplan, Coca-Cola, and Unatrac. Slough upheld its reputation as the U.K.'s largest industrial property company with additional developments in Northampton and Southern Cross, near Southampton, in the Southeast corridor. Elsewhere in the United Kingdom, Slough's Buchanan Galleries, a shopping center complex in Glasgow, Scotland, set a U.K. opening-day record for first-day sales in April 1999.
Slough Estates Enters Hi-Tech Market Worldwide
In early, 2000 Slough Estates acquired Cambridge Research Park with plans to convert it into a hi-tech cluster, attracting tenants from the hi-tech, communications, and IT sectors. Motorola, once poised to open its European headquarters at Slough's Farnborough Aerodrome site, scaled back expansion plans in early 2001. At that time, only 20 percent of Slough's tenants were in the technology, media, and telecommunications sectors.
Through its U.K. and worldwide operations, Slough Estates continued to provide "Buildings for Better Business." In the South San Francisco, California, area, the Oyster Point Business Park and East Grand were acquired for the development of office and R&D facilities. San Diego provided the location for the company's largest ever pre-letting deal with Agouron, a research subsidiary of Pfizer. In Brussels, Belgium, Slough Estates acquired Pegasus Business Park near the airport for site expansion. Additional space acquired in the same area provided for the development of a hotel and buildings for tenants of Cisco Systems and Deloitte & Touche.
In Toronto, Ontario, Canada, industrial space was completed at Mississauga, Goreway, and Oakville. At Willingdon Park, Vancouver, construction began in early 2000 to meet the needs of high-tech industrial growth, including space committed to Nortel. Other worldwide developments included a 25-hectare site at Marly la Ville, north of the Charles DeGaulle Airport in France, and construction sites in Mönchengladbach, Ratingen, Glinde, and Kapellen, Germany.
The company's interests in the United Kingdom continued to be in the areas of business park and industrial space development, particularly in Southeast England and Thames Valley area. Additional buildings in the company's Bath Road location were leased to health science occupiers. Industrial developments were being completed in Farnborough, Feltham, Acton, Uxbridge, Wokingham, Luton, High Wycombe, Southampton, Birmingham, Northampton, Elstree, and East Midlands Airport.
The Company's investment property portfolio for 2000 reflected worldwide interests in the United States (12 percent), Europe (6 percent), and Canada (5 percent). Types of businesses included office/business (18 percent), retail (14 percent), land (10 percent), and industrial (58%).
Slough Estates Continued Its Core Development in 2001
Slough Estates made notable progress with its major developments in the United Kingdom, Belgium, and the United States and grew its core investment property earnings by 13 percent in 2001. The Oyster Point, South San Francisco development began construction of four health science research businesses, with completion projected for 2005. The Group's San Diego Torrey Pines Science Center scheduled for completion in 2004, was developed for Pfizer, the world's largest pharmaceutical company. The Toronto, Ontario, Canada portfolio was sold at £2.5 million above book value. This property was Slough's first investment in Toronto in 1950. The Elk Grove, Illinois industrial property near Chicago was also sold as well as the Group's remaining Canadian assets in Vancouver.
The Brussels' Pegasus Park development continued its transformation with the completion of offices and hotel facilities in late 2001. Tenants at this location were Cisco Systems, DHL, and Deloitte & Touche. Other developments in the planning stages would be located in Antwerp and Düsseldorf.
The United Kingdom remained the largest piece of Slough's investment portfolio in 2001 at 78 percent. North American activity made up 16 percent, with 6 percent of activities concentrated in Europe. Approaching completion in early 2002 were the Farnborough Business Park and the Cambridge Research Park in the United Kingdom. Sales of buildings in London and Bournemouth raised £55 million.
The Group's strategy has continued through the years to follow the principles of owning and developing business parks, industrial and distribution estates, and retail centers in prime business locations, while creating flexible and economic accommodations. In the future, Slough Estates portfolios will be centered on prime business centers in the United Kingdom, Continental Europe, and the United States. Chairman Nigel Mobbs offers confidence in the Group's future earnings' growth potential from its existing portfolio and contributions from an extensive development program.
Principal Subsidiaries:Guildhall Properties Ltd.; Slough Commercial Properties GmbH (Germany); Slough Developments (France) SA; Slough Estates Australia Pty. Ltd.; Slough Estates Canada Ltd.; Slough Estates USA Inc. (USA); Slough Heat & Power Ltd. (England); Slough Properties NV (Belgium).
Principal Competitors:British Land Company; Brixton Land Securities; io Group; Mountcity Group.