What is Legacy Portfolio’s background and business model?
Legacy Portfolio is an acquirer of surplus lease portfolios from large corporates. The business was originally founded in 2006 in London and is currently one of two players in this market active in the UK. Legacy has also begun to expand its operation out of New York across North America and is beginning to look at Europe and potentially Australia.
The model of Legacy Portfolio is simple: at some point or other, large businesses go through change in their requirement for space. Since they occupy a lot of sites, at any one time it is not unreasonable for 10-20% of that portfolio to be up for grabs–either it becomes redundant or they have just found a different business model and move on. There is a way of future proofing the related costs, the leases can be exited and outsourced to a third party, namely Legacy Portfolio. The portfolio will be taken forward, meeting all the future obligations (rent, rates, service charge etc.); the prime objective is to de-risk the corporate's portfolio completely by surrendering each lease back to the respective landlords. This essentially fixes the exit cost for corporates.
How would you describe your target audience?
Our clients are generally big businesses, because fundamentally they need to have a big portfolio for us to work with. The business needs to have a significant number of surplus properties (>20) and the problem has to be small compared to their business and balance sheet. Overall, this step must be a route to cleaning their balance sheet and removing future management hassle. Effectively, Legacy Portfolio fixes the corporate's exit for the foreseeable future and we take on an element of risk in taking on the portfolio.
Is it difficult dealing with the landlords?
Landlords have a long-term perspective. They also have a vested interest in the bricks-and-mortar, a corporate does not. Therefore, when their buildings are empty, the last thing they really want is to sublet them to someone who is going to bring down the tone of the office building, the industrial estate, whatever it may be. If you give the landlord the confidence that you can give him sufficient money to take a surrender, they have no problem with it. We have done over a thousand surrenders in the last 10 years, 250 last year alone. At the end of the day, it is better for them to take the money today from us than hang on to their lessee. The lease is all about what you can do, what you can find in it to give you the angle that makes it worth for the landlord and yourself.
What message would you like to get across to your target audience?
We have just completed some research trying to identify the extent to which UK businesses suffer from the blight of surplus leases. The report suggests that the value of surplus space is around £75 billion; this is a big number, considering that at the moment the total value of deals done in the marketplace is just €500 million. The message to corporates is that it is all very well taking the pain, but ultimately things go wrong and they don’t just go according to the forecast. What we do is take the risk away, dealing with their cash burn and letting them focus on their core business. Ultimately, it is not a sign of weakness, but a sign on business evolution.
