Milligan ProfileNew look Milligan has built its reputation on stylish and successful developments. Founder John Milligan says the company intends staying small, but perfectly formed. Lauren Mills reports.
Agent-turned-developer John Milligan is regarded among many of his agency peers as a man full of innovative ideas. Ideas that sometimes fly, but can sometimes fail to get far off the ground.
But he can do deals. He brokered one of his biggest – the partnership between BAA and factory outlet operator McArthurGlen – as chairman of Jones Lang LaSalle’s global retail business.
But Milligan wanted a change. His move to developer in 2002 came about following Chicago-based LaSalle Partners’ merger with London-based Jones Lang Wootten in 1999. Having just completed his earn-out at JLL, he was able to cash in his shares for a tidy sum.
Milligan says he felt that he had achieved all he could at JLL so he began to think about what he wanted to do next. “All I’d ever done was advise on developing shopping centres,” says Milligan. I just wanted to do it for myself.”
But he was not on his own for long. Milligan was about to draw up a plan of action when private equity giant Blackstone asked him if he would help it buy Manchester’s Triangle Shopping Centre from Paul White’s Frogmore for £40m, although some media reports put it at £50m.
Milligan’s first deal as a principal was a success. Initially, his ideas to revamp the Triangle by adding a “skybar” to the mall were shot down by many of his peers, but the concept – which is now a Caffe Nero – was a hit with Manchester’s fashionable young shoppers.
His eponymous company spent between £7m and £9m redeveloping the centre, luring new brands to the city including Adidas Originals, Lambretta and Storm.
Within 18 months, footfall at the shopping centre had increased by more than 30% and the retailers were reporting a year-on-year sales growth of 10%. So Milligan thought the time was right to sell the scheme.
Morley Fund Management bought the centre in 2004 for about £60m, netting Milligan and Blackstone around £10m profit after costs.
Manchester’s Triangle was followed by the acquisition of a controversial scheme in Liverpool in October 2002. At the time, the 150,000 sq ft development had stood untouched for the two years since a steel frame had been erected on the site to keep alive a development option granted by the council.
While Manchester can be labelled as one of Milligan’s flyers, Metquarter has been a little different. Once completed in 2006, it got off to a good start with fashionable tenants including Armani, Diesel, Miss Sixty and All Saints, helping to push the footfall figures above 1m in the first four months of trading.
But a year later, insiders claimed that trading had started to fall off. Grosvenor was preparing to bring more than 1m sq ft of retail to Liverpool in 2008 and was luring new retailers with large incentives.
Milligan has not spoken of any trading troubles, but, nonetheless, he quietly put the shopping centre on the market for about £97.5 million in March last year.
Five months later, he accepted an offer of £85m from Dublin-based Alanis Capital.
The sale was still profitable for Milligan. However – the company bought the site for £17m and spent £25m developing it – just not as much as expected.
With both his UK shopping centre developments now sold, and the rapid fall-off in shopping centre values following last summer’s credit crunch, Milligan is ready for a new assault on the market.
He has teamed up with his old chums at Blackstone to launch a £500m opportunity fund to invest in rundown secondary shopping centres. A further €500m is available for continental Europe (see panel).
“We believe the coming months will produce some interesting opportunities and we are well positioned with Blackstone to take advantage of these,” says Milligan.
But prices are still a little high for Milligan and opportunities still a little scarce. Milligan reckons that just one in every 30 to 40 shopping centres he sees has potential.
“The key for us is finding an opportunity to add value,” he says. “We are in the business of creating places where people are inspired to shop. If we can’t do that, we don’t do the project.”
Right from the start, the company has been determined to do things differently from rival retail specialists.
“We will not do a project unless we can co-invest. So in everything we do, we share the risk. And that really focuses the mind in terms of how hard you work – when you can lose money as well as make money,” says development director Mark Morgan, an old friend and colleague from JLL.
Milligan is by no means a one-man-band. As well as Mark Morgan, the 13-strong company includes an artist in residence in the form of Mel Chantrey, a former Turner Prize nominee.
He adds artistic pizzazz to Milligan’s buildings, interiors, landscapes, furniture and sculpture.
While John Milligan put up most of the cash to get the company going, he also brought in two external investors each with a 15% stake in the company, to give it added credibility and financial weight.
The first is JW Kaempfer, chairman of London-based McArthurGlen, Europe’s leading developer, owner and operator of designer outlet centres.
The second external shareholder is Richardson Developments, developer of Merry Hill shopping centre and the Fort retail parks in Birmingham, York and Edinburgh.
“They put up a reasonable sum of money when the company was founded and they are there to help us with development finance. They are good partners and we look to them for advice and counselling,” says Milligan.
Despite the weight Milligan has behind it, the company is determined to stay small and specialist.
Milligan says a stock market flotation is definitely not on the cards. He says: “We would rather keep doing a small number of projects, but do them exceptionally well. It is all about quality rather than quantity for us,” he says.
Milligan’s Schemes
Triangle Shopping Centre, Manchester
Bought in partnership with Blackstone in 2002 for £40m. Sold to The Morley Fund in 2004 for £60m on completion of a £9m revamp.
Metquarter, Liverpool
Bought site for £17m in 2004. Spent £26m developing it. Sold to an Anglo-irish investor for £86m in 2007.
Manchester Airport
Helping Manchester Airport to develop and manage its retail offering.
Maremagnum, Barcelona
In partnership with existing owners, transformed dowdy leisure development into vibrant shopping centre.
Center Parcs
Working with Blackstone to transform restaurant and shopping offer at the leisure parks.
London City Airport
Carrying out strategic review of the airport’s shopping opportunities.
Airports take a turn for the better
In addition to shopping centres, Milligan has also turned its expertise to airports. At Manchester Airport, the company is half way through a £35m redevelopment of terminal one. It is also proposing a £14m refurbishment of terminal two and is just beginning to consider what could be done to improve terminal three.
“We have been brought in as change agents at Manchester to bring in some entrepreneurial thinking,” says Milligan. The shops in T1 will be moved airside to create a more relaxed and comfortable environment for shopping.
It seems Milligan’s flair for improving airport retailing will soon be showcased at London City Airport. The company, in partnership with the airport, is carrying out a strategic review to find out what passengers want.
“This is no queues, no fuss – and probably no retail,” says Milligan. “So how we make money out of it is going to be a challenge.”
Milligan is unlikely to plonk a series of shops in London City Airport. Once the company has an intimate knowledge of the airport’s mostly wealthy business customers, there may be other ways to build lucrative relationships with them.
“We are looking at the idea of brand showcasing and looking for partners to work with on that,” says Milligan.
Wine merchants, jewellers, watch retailers and high-quality toy shops all come to mind. Given that passengers using London City Airport are time-poor, they will not want to waste time browsing for gifts. But they could be goaded into making “guilt purchases” if the right product is available at the right time.
Milligan: A Potted History
2002 Milligan leaves Jones Lang LaSalle to set up Milligan
2002 Milligan acquires Triangle shopping centre, Manchester
2004 Milligan sells Triangle shopping centre
2007 Milligan sells Metquarter, Liverpool, days before credit crunch hits
2008 Milligan signs joint venture with Blackstone for £500m UK shopping centre fund
European Expansion
At first sight, the Maremagnum centre, in Barcelona, did not have the kind of potential that John Milligan usually looks for. It had become divorced from the city’s retail heart and was very run down.
But Milligan, who bought the centre from John Beckwith’s Pacific Group and Credit Suisse, believed that to make it work, the nightclubs and leisure outlets would have to be replaced with shops.
The front entrance was imaginatively redesigned and retailers such as H&M, Mango, Calvin Klein and Lacoste flocked to be part of the action.
Milligan’s latest acquisition may prove to be its most challenging yet. The firm has bought a site for a retail park just south of Lisbon. “We want to do a retail park, but to make it a place where people are inspired to shop is quite a challenge.”
Elsewhere in Europe, Milligan is working with Blackstone to return Berlin’s shopping heat to its former glory. The company is also working with the private equity firm to transform food and shopping experiences at Centre Parcs.
Milligan is open-minded about where it goes geographically, though the UK and continental Europe are set to remain the focus for the time being.