Avanta moves into India and China
Copyright: David Lawson
Published in Property Week October 2008
David Alberto is looking drawn. He’s lost a couple of stones, which might be expected as the economy takes a battering and headless chickens swarm through the industry. Yet this is still the Alberto of old. Weight loss is due to a punishing new fitness regime which, incredibly for those who know him, includes giving up alcohol. It has not curbed a boundless vivacity and endless stream of jokes and indiscretions about competitors but he is stern about prospects for the future.
He dismisses suggestions that the sector has some God-given invulnerability. ‘If the economy goes under, we all sink,’ he says. Inevitably, he lightens the mood. ‘I’ve been through two recessions. I think I can manage another.’
Not that he intends going down with the ship. One thing has typified a 15-year rollercoaster ride working for most of the industry’s top names: he never stands still. Alberto’s creation, Avanta, has done very nicely in the UK, accumulating around 650,000 sq ft of managed space in less than five years but he was looking further afield long before the economy began to wobble. Kenmore’s huge cash injection as part of a management buyout will need to be returned sometime, probably by selling a stake or floating Avanta in the next couple of years. That means getting bigger.
Having the most centres of any operator dotted across the country was never top of the agenda. ‘You must spread costs to compete,’ says Alberto. ‘That means clusters of centres sharing administration rather than individual outposts.’
London and the south-east is a typical ‘cluster’ and the same is being considered outside the UK as Alberto undergoes a worldwide travel schedule as punishing as any fitness regime. This avoids mainland Europe, which he sees as ‘a busted flush’. It is also not the time for new centres in the US, although plunging values play into Avanta’s hands. Rather than struggle to create clusters in New York, Dallas and Los Angeles, he is finding that prospects for buying an existing chain at a bargain rate improve daily.
Meanwhile Alberto is concentrating on countries such as India and China. By the time of the float he wants to offer a portfolio spread across mature and emerging markets. Three centres have opened in Mumbai and Delhi and three more are on the cards. The target is 17 by the end of next year as part of a $15m [£8.1m] budget for expansion. By then, Alberto hopes to borrow another $10m [£5.4m] locally and expand partnerships such as the new joint venture to run business centres on mixed use schemes developed by Patel Realty. Booming Middle East financial centres are part of the grand plan and he hopes to capitalise on long discussions with Chinese partners to establish a foothold in Beijing.
The West’s economic pain could be a key to success. International groups scrambling to find alternative markets in cities like Mumbai have discovered serious problems. Regulations insist that if they want to buy, it must be more than 500,000 sq ft, which is far more than most require. Leasing is also a problem, as office space is built only to shell/core level. Either way, it may involve fitting out a smallish initial office in a huge chunk of space. Costs are half those in the West but still a drain on resources. Second-hand space is usually out of the question because it is so poor. Every monsoon dozens of buildings collapse, says Alberto.
The market is ripe for operators who can take on these burdens. Flexible terms are not the driving force they are at home, as leases can be as short as a year, but skills negotiating complex bureaucracy, fitting out and providing good services are crucial. For instance, while India has become the world leader in technology, IT services to offices are, to say the least, crude. Facilities management is also a lottery because ownership is often split between many landlords. Avanta has 117 in Senator House, Mumbai, which is only a tenth of the 200,000 sq ft block. The number increased by a half dozen during negotiations when one died and left a sliver of space to his sons. ‘In one building we looked at, the lift had been broken for six months because owners could not agree who would pay to fix it.’
These problems could ease as new space comes through via JVs, helping to tap into the fastest growing business centres in the world. Inquiries are already running at three times the level in London, so Alberto’s waist may shrink but his wallet will get a lot fatter.
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