In our penultimate article on Manchester’s intention to become a zero carbon city by 2038, we consider this week the built environment, the measures available to help contribute to objectives, and the implications for those involved in the management and/ or transaction of real estate.

Manchester’s Climate Change Framework estimates that housing, and the built environment generally, may contribute up to 30% of the city’s total carbon emissions. Real estate is therefore considered to be a key driver in efforts to achieve carbon neutrality, with buildings being categorised as ‘net zero’ if they have no net carbon emissions during either their construction or operation.

However, the obstacles to overcome to achieve this objective are two-fold: not only is it necessary to remedy defects or environmentally prejudicial characteristics within existing stock, which includes those premises constructed before there was the current awareness of climate change; but in addition, net zero requires that those buildings yet to be designed or constructed also contribute to the target to be achieved.

What has Manchester done to date?

Despite the enormity of the task at hand, numerous retrofitting measures are commonly available, for example: installation and upgrade to energy-efficient lighting; high efficiency boilers; installation of double-glazing; and cavity wall insulation.

Although these measures may not be considered individually onerous or overly time-consuming, wholesale retrofitting of existing stock is not without cost. To meet its net zero aims, Manchester estimates that around 84,000 properties will require retrofitting, at an anticipated cost of between £25,000 to £30,000 per property. With only limited funding available for retrofitting, the question remains: where is the money going to come from?

In addition, current plans to retrofit real estate portfolios do not operate in a vacuum and take place against the continued introduction and implementation of the Building Safety Act. That Act, supported by secondary legislation, prescribes and mandates new regulatory obligations in respect of building safety and fire management provision. Building safety is paramount, but those involved in the design of new builds will need to consider how best to balance the achievement of net zero and carbon neutrality whilst also ensuring the total safety of a building throughout its lifetime.

What about future builds?

A significant proportion of the real estate infrastructure which is expected to exist in 2038, being Manchester’s deadline to achieve net zero status, is yet to be designed and constructed. Therefore, there also needs to be consideration as to how these future builds will help towards reaching that goal. This requires consideration not only of how those buildings will operate once in occupation, but also how embodied carbon (being the carbon contained within construction and civils materials) will be either managed or off-set. This will require a full review of all aspects of a supply chain to ensure that materials are genuinely carbon neutral in their production.

We have already touched upon some of the measures which can be introduced to an in-occupation building to help limit climate change, but in addition to domestic measures, designers may wish to consider the introduction of on-site renewable heat and electricity generation, such as photovoltaic sensors, as well as district heat networks.

The UK Green Building Council’s framework definition of net zero carbon buildings recommends that onsite renewable energy sources should be prioritised and should be pursued by building developers, owners and occupiers, where feasible. Not only is it anticipated that the presence of such measures may increase a building’s value, but it will also concurrently reduce pressure on the national grid.

What are the practical implications?

Implicit in all of the foregoing is that a building’s Energy Performance Certificate (‘EPC’) is going to become an increasingly important document over the coming years. Whilst they are already central to many transactions, we anticipate that their contents will be subject to additional review and transactional discussions. For example, going forwards, it is likely that EPCs will need to be carefully scrutinised during transactions, with the buyer working to achieve full understanding as to when the EPC will expire, whether any measures can be taken to improve the rating and if they have been appropriately registered.

In parallel, we anticipate that corporate due diligence, to the extent it involves real estate transfers, will also become more protracted. For example, there will need to be careful consideration as to whether retrofitting is necessary, who is to be responsible for this and whether any such revisions are permitted within the lease in place. In addition, where on-site energy generation is available, owners and occupiers will need to be mindful of the ownership of the generating plant, as well as apportionment of the additional regulatory burdens which accompany the generation of energy.

In respect of this specific example, where building designers and/ or owners wish to benefit from the cost-savings associated with on-site heat and electricity generation, they also need to consider whether such use is permitted in terms of relevant planning authorities, as well as the possible health and safety considerations which may arise from its operation.

Conclusion

Whilst the move towards net zero is a laudable aim, the consequences for real estate are significant: the scale, extent and cost of retrofitting existing properties is sizeable, but in addition there are also numerous opportunities for the sector to take the driving hand in bringing about real change.

Our final commentary piece next week will bring together recent articles, together with our predictions going forwards for what net zero will mean for both Manchester and the country as a whole.

Pannone Corporate has advised multi-concept operator, Mission Mars, on the letting of a flagship London site, as part of an ambitious expansion plan for 2023/24.

The Manchester firm acted as legal adviser to the hospitality company on the acquisition of a prominent 20,000 sq ft building on Shaftesbury Avenue, Trocadero. The site will be transformed into the latest Bavarian-style beer palace, Albert’s Schloss – one of a number of new openings planned for this year and next.

The Pannone team was led by Real Estate partner, James Wynne and included Senior Associate James Brandwood and paralegal Harry Jenkins.

James Wynne said: “Mission Mars operates some of the most iconic bars, restaurants and event venues in Manchester, but over the last few years has extended its portfolio beyond the North West under its highly successful Albert’s Schloss and Rudy’s brands.

“The opening of its flagship bar and restaurant on the equally iconic Shaftesbury Avenue, is an exciting milestone for the company – one of a number of regional operators which have set their sights on London as part of their strategic growth. It demonstrates the wealth of potential that exists for Manchester leisure and hospitality operators, as well as the wider appeal of brands such as Albert’s Schloss on a national level.”

James has worked alongside BGF-backed Mission Mars since 2018, with the firm acting for the company on a number of real estate deals. This includes advising on conditional agreements for leases, leases and all ancillary documentation.

The Pannone Real Estate team works with a number of high-profile names, such as Boohoo, Bestway, and Junkyard Golf. Pannone recently advised the crazy golf brand on the letting of its second London site – its biggest location to date.

The Manchester firm acted as legal adviser to the competitive socialising brand on the acquisition of a prominent 19,500 sq. ft. building in the heart of Camden Town. The former Shaka Zulu restaurant will be transformed into an immersive crazy golf experience and will be the company’s seventh site opening. This includes its flagship venue on First Street in Manchester, Liverpool, Leeds, Oxford, Shoreditch in London, and Newcastle.

Wynne added: “We’re delighted to be working alongside such exciting North West brands as they extend their footprint across key cities in the UK. The London site openings are another significant step forward for Junkyard Golf and Mission Mars and demonstrate the vibrancy and potential that exists in the regional leisure and hospitality industry.”

Pannone Corporate has advised crazy golf brand, Junkyard Golf Club, on the purchase of its second London site – its biggest location to date.

The Manchester firm acted as legal adviser to the competitive socialising brand on the acquisition of a prominent 19,500 sq. ft. building in the heart of Camden Town. The former Shaka Zulu restaurant will be transformed into an immersive crazy golf experience and will be the company’s seventh site opening. This includes its flagship venue on First Street in Manchester, Liverpool, Leeds, Oxford, Shoreditch in London, and Newcastle.

The Pannone team was led by Real Estate partner, James Wynne and included James Brandwood (Senior Associate) and Harry Jenkins (paralegal.)

James Wynne said: “Junkyard Golf has become an iconic brand – not only in its hometown of Manchester, but across the country. The latest opening in one of London’s best cultural hotspots is testament to company’s growth ambitions, but also its resilience in weathering the COVID-19 pandemic, which significantly impacted on the leisure and hospitality sector.

“We’re delighted to be working alongside such exciting North West brands as they extend their footprint across key cities in the UK. This is another significant step forward for Junkyard Golf and forms part of ambitious domestic and international growth plans for 2023.”

James has worked alongside Junkyard Golf since 2017, with the firm acting on all site openings since.

The Pannone Real Estate team works with a number of high-profile names, such as Boohoo, Bestway, and Mission Mars.

James Harris joined Pannone in April 2022, having worked as a real estate partner at Knights plc and, prior to that, managing partner at Jolliffe and Co LLP.

As someone who knew from an early age that he wanted to go into law, James chose the traditional route into the profession to reach his goal, before eventually finding a home in real estate, where he specialises in residential and commercial property development, as well as licensing for restaurants and public houses. We caught up with James three months on from joining the firm, to find out more about the real estate partner and Ironman competitor!

What attracted you to Pannone?

Pannone is highly regarded as a forward-thinking firm, which is developing in a sustainable manner and sets out to put clients at the centre of everything it does. That really appealed to me and aligned very much with my own management and leadership style.

Tell us what a typical day looks like?

I’m sure everyone says the same that no day ever looks the same, but typically the day kicks off with staff supervision each morning. I enjoy aspects of what I do, but I especially enjoy the supervision of junior members of staff. The rest of the day is a mixture of departmental management, which can include performance and staff-related issues; working on client matters; and also the all-important job of business development.

As someone who always wanted to go into law, what are your career ambitions?

I want to build the most respected Real Estate Group in the North West and be part of the development of Pannone Corporate over the coming years.

If you were managing partner for the day, what’s the first thing you would do? 

I’d probably have to say, apply what I learned last time I was managing partner at Jolliffe and Co LLP and do it better this time! However, on a serious note, having that level of management and leadership experience hopefully adds another level to what I can bring to the firm and it’s something I’m very passionate about imparting on the team.

What would you be doing if you didn’t have a career in law? 

Given the area of law I’ve ended up specialising in, I would have to say property development. It’s a fantastic sector and one that’s always been central to the success of the North West.

Thinking more widely, what can the legal profession do to better support clients?

For me, client feedback drives development and clients need to know they can approach you on any matter. Everything then follows from there.

Pannone Corporate – the North West law firm – has strengthened its commercial and real estate teams with the appointment of Andrew West and James Harris as partners.

Andrew, who set up his own commercial law firm Rushmoor Law 11 years ago, following more than a decade as partner at law firm Squire Patton Boggs, brings more than 30 years’ experience in advising a range of clients on IP/IT, data and commercial issues. Andrew will work alongside partner Amy Chandler in one of the region’s most prominent commercial teams.

James joins from Knights plc, where he was a commercial property partner for more than three years. He was previously the Managing Partner of Chester-based commercial law firm, Jollife & Co LLP, for 12 years. James brings considerable experience in residential and commercial property development, as well as licensing for restaurants and public houses.

Paul Jonson, senior partner at Pannone, said: “We’re delighted to welcome Andrew and James to the firm – two senior hires who will add significant strength and depth to our commercial and real estate offering. Both markets have huge potential for us and Andrew and James will complement our existing teams in capitalising on the opportunities for growth.”

Their arrival follows the news that Pannone has been appointed onto the legal framework for the Canal & River Trust. The firm will provide construction and property litigation support, as part of a five-year agreement.

Andrew commented: “Having worked alongside Pannone for a number of years in a consultancy role, I have built up a strong relationship with both the team and clients. When the opportunity arose to join such a well-established firm on a more permanent basis it was an easy decision to make and a seamless move. It’s very much business as usual for me.”

Commenting on the sector, he said: “There is a real opportunity in the technology services space, as corporate customers continue their digital transformation across all areas of operation. This is underpinned by the proliferation of cloud services, which enables businesses to test and adopt new technologies at a quicker rate.  This trend has been accelerated as a result of COVID-19, and currently shows no sign of a slowdown,  despite the obvious economic headwinds.”

James added: “There is also considerable market opportunity in commercial development, which remains buoyant, with licensing continuing to recover following an extremely challenging two years. I’m delighted to be joining such a dynamic and experienced team, and hope to bring both sector and management expertise to the role.”

In our latest My Life in Law, we speak to new recruit, Emma Hafez, who joined Pannone in April 2021 as part of our Real Estate team. 28-year-old Emma talks about her career so far and why she decided to join the firm earlier this year after taking a career break to have children.

Tell us a little bit about your career, before joining Pannone.

My route into law was the traditional route. In all honesty, this was the only one I really knew about. At college we had to lay out our career paths and this was the route I chose and stuck to.

I did a three-year degree in law, followed by the Legal Practice Course and then entered into a training contract with brief stints of working as a paralegal in between.

Prior to joining Pannone, I qualified and worked as an immigration and human rights solicitor, before taking a career break to have to have my two children, Ella and Oliver. It was during this time that I decided to pursue a career in commercial law.

Why did you decide to join the firm?

My partner is the managing director of a property development company in Liverpool. He’s genuinely passionate about his work and we often discuss it together in the evenings. As a result of this interest, I felt it was the logical step for me to pursue a career in Real Estate law.

What does a typical day look like?

Every day is completely different, as the work that we do is so varied. However, a typical day usually starts with a call with my supervisor to go through the day’s tasks, followed by liaising with clients and the other side’s solicitors in relation to large developments, leases, residential investment transactions and a whole variety of work.

What is the most satisfying aspect of your job?

I really enjoy getting positive feedback from satisfied clients which I get a great sense of achievement from.

What can lawyers / the legal profession do to better support clients?

I believe solicitors could always be more empathetic to clients, as I have the benefit and perspective of seeing the client’s point of view first hand and can appreciate the challenges faced from both sides.

Looking forward, what are your career ambitions?
I hope to be able to stay at Pannone and grow an impressive client portfolio.

If you were managing partner for the day, what’s the first thing you would do?

I would take all of the teams on a city centre canal party cruise!

What would you be doing if you didn’t have a career in law?

I’ve always said I would have enjoyed being a dentist.

What do you enjoy doing outside of work?
I enjoy taking my children on days out to the zoo or farms, anything which is outdoors.

Pannone Corporate has advised online fashion giant, Boohoo, on the acquisition of a new £72 million London headquarters.

The Real Estate and Corporate teams acted as legal advisers to Boohoo, which has purchased the high-profile offices previously occupied by Microsoft and Nokia. The team was led by Tim Hamilton, Corporate partner and Gareth Birch, Real Estate associate partner, with support from Barbara Wang, Danielle Amor and Helen Jadhav. Nick Davies, partner at Axis Property Consultancy LLP, acted as property consultant for Boohoo.

The six-story office building located at 10 Great Pulteney Street will become home to all London-based product, marketing, technology and central support teams – approximately 600 staff – as well as offering flexible working for Boohoo staff.

Gareth Birch said: “As a longstanding client, we’re absolutely delighted to have advised Boohoo on the acquisition of such a prestigious building in London’s West End.

“Boohoo is a real success story for Manchester and the North West and this latest move, which bolsters its expanding property portfolio and cements its presence in the capital, is testament to its exceptional growth in recent years and the boom in online retail, particularly over the last 12 months.”

The purchase of the 43,963 sq. ft. building, follows Boohoo’s acquisition of Debenhams out of administration and several Arcadia brands, including Oasis, Warehouse, Dorothy Perkins, Burton and Wallis, which significantly grow its presence in London.

Nick Davies added: “We were delighted to assist Boohoo in securing the premises, given the interest from other high-profile global brands. The premises is in the heart of Soho, providing a vibrant London West End headquarters building and a strong commitment to the city.”

Pannone Corporate has expanded its team with a triple appointment as it looks to strengthen the law firm across its specialisms.

Michael McNally and Adam Pavey have both joined as directors in the Employment and HR team. James Brandwood joins the firm as a Real Estate associate.

Michael and Adam will be responsible for advising clients on all aspects of employment law, including providing regular representation and advocacy in the Employment Tribunal.

Michael, who joins from Freeths LLP in Liverpool, has particular experience in acting for SMEs through to multi-nationals in the manufacturing, transport and logistics, hospitality and leisure and care sectors. Adam was formerly a solicitor at Poole Alcock, where he helped to develop the Cheshire firm’s employment department, with clients spanning a number of sectors. He has a particular specialist interest in healthcare.

Pannone Corporate’s employment team works with a wide range of clients, predominantly those with 400-500 employees across a number of sectors, including social housing, manufacturing, retail and hospitality.

James, who joins from Addleshaw Goddard, will work alongside a highly experienced Real Estate team, led by partner, James Wynne, which advises on a wide range of commercial real estate matters for major property groups, together with national retail and leisure operators. James will be responsible for property acquisitions and disposals, financings, as well as development, landlord and tenant transactions.

Paul Jonson, senior partner at Pannone Corporate, commented: “Both the Employment and Real Estate teams have built up an excellent reputation in recent years for their experience and expertise across their core specialisms. We’re committed to enhancing that offering and the appointment of Michael, Adam and James is testament to that drive and ambition.”

The Real Estate team recently advised Palmbest Limited, part of the Bestway Group of companies, on the acquisition of Staples Corner Shopping Park, leading the £28 million retail park transaction.

Palmbest confirms £28m retail park acquisition

The business has completed the purchase of Staples Corner Shopping Park

Palmbest Limited, part of the Bestway Group of companies, has acquired the 50,500 sq ft site on the Edgware Road. With tenants including Decathlon, Wren Kitchens, Bensons, Argos and HomeSense, the high footfall out-of-town retail scheme is adjacent to the entrance of the future Brent Cross West Thameslink Station.

The Bestway Group is a multinational group of companies which is also the owner of the adjoining four-acre site.

KLM Retail completed the marketing and sale for the vendors. KLM Retail’s Jonathan Perkins said: “The scheme attracted numerous investors and developers, not only due to its reputation as an iconic retailing destination, but also due to the potential future residential value of the site given its close proximity to the new Thameslink station opening next door in 2022.

“This asset is a good example of the resilience and agility of the retail warehousing sector given the continued strong trading performances of the stores; the flexibility for the retailers to use their stores for online fulfilment; and the adaptability of the buildings in the future should other more valuable uses present themselves.”

Pannone Corporate advised Palmbest Limited.  Real estate associate partner, Gareth Birch represented the seller and led the deal. He added: “Palmbest is a strong property business with big growth ambitions. We take a commercial approach to any transaction we’re involved with and in this instance, we were able to lead the acquisition negotiations, as well as handling the legal aspects against a very demanding timeline. The deal is a great result for everyone involved.”

Commenting on the acquisition, Zahir Fazaldin, Head of Property at Bestway said: “The sentiment around retail parks is positive, and Staples Corner is home to some high profile and long established tenant companies that have traded relatively well throughout what has been a very challenging year. The location and connectivity of this site together with its strategic value made this a compelling acquisition for us.”

In the complex and often costly world of property development there are various potential restrictions on the progression of a property developer’s best laid plans. Restrictive covenants can rank right up there in terms of both costs and navigation with potentially severe consequences of breaches. Understanding restrictive covenants and how to tackle them is vital right from the start of any new commercial property venture. 

What is a Restrictive Covenant? 

A restrictive covenant is a control imposed on the use or development of a certain piece of land. They can date from decades and even hundreds of years ago and are meant to ensure the continued enjoyment of the neighbouring land. In modern times restrictive covenants have morphed into a many faceted tool for the crafty, and a barb for the unwary. 

As indicated by the word “restrictive”, restrictive covenants have a negative rather than a positive implication. They will state what cannot be done rather than what a land owner should do. 

For commercial real estate, restrictive covenants can be implemented in many ways. They can restrict the activity of tenants by the landlord or a lender can use a covenant to restrict activity on the property while the owner owes money. These covenants can be written into a property deed, either for a set amount of years or on an indefinite basis. 

Restrictive covenants can also operate in ways that you might not expect. They can restrict opening times, stop certain types of business from operating on the land (prohibitions on selling alcohol, for example), or prevent parking of commercial vehicles on the property. All of which can be potentially damaging for the smooth running of a business, not to mention the possible implications of preventing healthy commercial competition.  

Challenging Restrictive Covenants – is it worth it? 

There are a few options available to those wishing to challenge a restrictive covenant.  Challenges may be based on the premise that the restrictive covenants are not valid, that they are not enforceable or that they are contrary to the law or updated legal policies. For example, restrictive covenants against competing businesses opening in nearby premises may fall foul of competition laws.

A variation of the covenant could be negotiated by an express release between the parties. Alternatively, the subjected party may apply to the Upper Tribunal for modification or removal of a restrictive covenant, though this can take much longer and be much more expensive to resolve. 

Another option for those with less time, and shallower pockets, is obtaining indemnity insurance for the intended breach. Policies can be obtained for a one off fee and can provide cover for landowners, lenders and tenants under one policy. A key point to note here is the cost saving property developers will make if they obtain their insurance prior to the commencement of any planning application. Once planning has been granted the cost of a policy is invariably much higher than a pre-planning policy would have been. 

For more information about restrictive covenants and its impact on your commercial real estate, get in touch with the Pannone Corporate team. Either call on 0800 131 3355 or by filling out the contact form.