PERSPECTIVE

Ergo is an innovative UK business, offering creative solutions for the investment, development and management of commercial property assets. Despite its relatively tender years (it was established in 2018), Ergo has already developed and managed more than 10 million sq ft of prime real estate. We talk to the company’s Founder, Martin Jepson.

Charles House, Birmingham, reception

Hi Martin - tell us about your career to date.

I have worked in Real Estate for over 35 years, always with a strong focus on the London office market.

Prior to Ergo, I was President and COO, UK Office Division, Brookfield Property Partners. I have also held senior executive positions at Hammerson, Howard Holdings, Taylor Woodrow and Delancey.

Much of my experience is in acquisition, disposal, asset management and development, on both a project and portfolio basis. I have been responsible for developing some fantastic buildings, such as London Wall Place, Principal Place and 100 Bishopsgate.

What led you to start Ergo?

When I left Brookfield, I had the luxury of time to think about what I really wanted to do. I had a number of offers from some great companies, but I took the decision to move away from the larger corporate machines and start something on my own. Ergo has now been trading for two years, and we have been extremely fortunate to get funding from NFU Mutual, who are great partners.

The first year was very much about setup and establishing £250-£300 million as

Partly as a result of the pandemic, sustainability is very much back on the agenda, with a far broader remit than previous green initiatives.

Charles House, Birmingham, interior an optimum level of assets. By the end of last year (2020), we had close to £200 million committed.

What do you feel sets Ergo apart from the rest?

We formed a Joint Venture Property Company with NFU Mutual, which is Aver Property LP, focusing on added value and opportunistic investments throughout the UK.

This flexible approach means we aren’t limited by the geography of sector. It is all about opportunity and prospects, with an objective to achieve good income through high yield income, producing assets that are robust in terms of having defensible asset values, alongside some developments and short- to medium-term asset management opportunities. It is a blend of risk underpinned by income.

The team at Ergo are incredibly enthusiastic. Like everyone else, we have had to deal with the challenges of the pandemic and lockdowns, finding better ways to communicate and to stay engaged, but I have a great team and sometimes the biggest challenge is getting them to slow down!

Looking at the Ergo website, it’s refreshing to see sustainability and philanthropy to the fore. Please tell us about your work in these areas.

Partly as a result of the pandemic, sustainability is very much back on the agenda, with a far broader remit than previous green initiatives. Now, sustainability encapsulates lifecycle cost, embedded carbon, electrification, wellbeing, health and sanitisation – it has to be the whole gambit and, as an investor and developer, much of this responsibility sits with us, not the end user.

In terms of philanthropy, we operate in a very privileged world and if you can help then I think you should, it’s as simple as that.

I was involved with Sparks, a charity that supports children’s medical research (now part of Great Ormond Street Hospital) for many years. During this time, we galvanised the generosity of our friends in the property and construction sector to raise over £2 million.

I have since, with a number of businessmen from the property and construction industries, set up The Breeze Club to raise funds for smaller charities, where the amounts raised will be particularly impactful. Our first year saw us raise £66,000.

I am looking forward to getting back out there to raise some funds, as this year has been curtailed by the lockdown, as is the case with many charitable endeavours.

This might be a silly question, but how are you finding the market right now?

Ergo has the advantage of being a young, dynamic and growing business and we did a lot of our buying pre-pandemic. Fortunately, we made some good decisions and we are not burdened by legacy assets.

We started afresh and the strategy we adopted has resulted in a strong performance. I am not saying everything has outperformed, because it hasn’t, but our portfolio is robust in the current market.

It is really important to understand sectors and our research has led us to target specific locations and specific opportunities in the

Charles House, Birmingham

industrial and distribution sector. Of the three traditional real estate sectors (industrial, retail and offices), it is the only investable sector of substance at this moment in time.

Like everything, no matter how well a sector is doing, not all deals are great deals and we carefully assess and make a judgement. Inevitably, other sectors will open up again and we will need to take another look and ask if this sector has been boosted by lack of opportunity elsewhere, which switches things up from our perspective.

Where do you see the future of the UK real estate market? What trends can we expect to see postpandemic?

I am very positive about the UK real estate market. Of course there will be changes that will bring challenges, but they also bring opportunities. The key is to remain flexible and adaptable. Many adjustments in the market would have happened anyway but have been accelerated by the pandemic. For example, we haven’t seen the death of the office, but quite likely the (end of the) five-day commuting working week, and working environments will be reconfigured to support different use.

Firstly, it is important not to underestimate the fear factor of the ‘return to work’ – there is a significant portion of employees that will be genuinely nervous and fearful of commutes and the hygiene of offices, and that is a key issue for the real estate market.

We will see a flight-to-quality, in terms of aesthetics, standards of sanitisation that will need to be addressed through SMART building systems and HVAC controls, and the requirement for state-of-the-art tech, as we have all become accustomed to more video conferencing. These have all become priorities for us at Great Charles Street in Birmingham.

I think lease length patterns will change and shorten, which will, in turn, shift the onus to create better and safer spaces from the occupier to the landlord/developer. There may need to be a level of acceptance that some buildings will become obsolete if they cannot be upgraded to meet new higher levels of sanitisation and safety.

We’ve had a virtual peek at Great Charles Street in Birmingham – one of your latest impressive developments. Tell us a little about it.

Great Charles Street is a great scheme and we already have two lettings confirmed – Davies Group and Fleurets, so that is great news.

Great Charles Street is located in Birmingham’s central business district (CBD), so perfectly placed with easy access to many of Birmingham’s major transport hubs and the city’s best-known squares, attractions and amenities within a few minutes’ walk. It comprises buildings at numbers 148 and 154 Great Charles Street with 148 refurbished suites, and every tenant automatically becomes a member of ‘In The Mix’ – Great Charles’ very own business club. This includes access to a new, stunning roof terrace, where members can meet and entertain guests. To my earlier point, both buildings include a state-of-the-art lighting solution, FUZONE500, which incorporates antiviral and anti-bacterial properties to keep spaces clean and safe 24/7 in a COVID-19 world and beyond.

Thank you Martin – great to have you

‘In The Mix’!w