Investing in the future of Manchester's infrastructure

00:05

Davion Ford 

Welcome to Better Cities by Design, a podcast brought to you by Arcadis, where we talk to change-makers who are working to make our cities better places for people to live, work and play. I’m your host Davion Ford. This week, we’re headed to Manchester in the UK to speak with Natasha Rouse, Director of Asset Management at Equitix, a leading global investor, developer, and long-term fund manager. The company’s focus is on global infrastructure assets that make a meaningful impact on the communities they serve. Equitix has a commitment to responsible investing and they manage a diverse portfolio of over 360 assets in more than 20 countries around the globe.

00:57

Davion Ford  

The city of Manchester is the world's first industrial city and it holds a profound historical significance that shaped not only its own destiny but also the course of global progress. Its iconic landmarks, such as Ancoats, Bolton Museum, Castlefield, Peel Tower, and the People's History Museum, stand as testaments to its industrial heritage. In the 19th century, Manchester experienced unprecedented growth fueled by its thriving cotton industry. To learn more, here is Arcadis’ Senior Director for Investment Advisory, Antony Faughnan:

01:34

Antony Faughnan

Manchester is a very important city in the UK. Its legacy going back to being one of the world's first industrial cities goes back to when Britain was the workshop of the world. So as we got into the 1800s, the cotton industry very much created the impetus for Manchester to be established as a major manufacturing and industrial hub, a major trading center, and we look to build on that as we go forward.

02:00

Davion Ford

The cotton trade propelled the city into the heart of a new global network of manufacturing and trade, revolutionizing the way people lived and worked. However, that growth and prosperity came with a ugly side. Inequality and exploitation marred the mills, where countless workers toiled alongside machines, and in the plantations of the Caribbean, the Americas, where millions of enslaved people were forced to cultivate the cotton that Manchester relied upon. Industrial Manchester was characterized by overcrowding and pollution, but it was also within this context that innovation flourished, and campaigns for change were born. Today, Manchester continues to play an important role in shaping the UK’s economy, in particular when it comes to advanced manufacturing, digital technology, as well as life sciences and healthcare. The Greater Manchester region is home to more than 2.8 million people. But like many cities around the world, Manchester has thousands of pieces of infrastructure that need to be maintained and even upgraded from time to time. This effort is complicated by shifting needs, for instance the current need to adapt assets to climate change or the many ways in which, over time, citizen change how they want to use an asset. To address these challenges, Greater Manchester has collaborated with infrastructure providers to develop the Infrastructure Framework 2040. This framework encompasses various physical infrastructure elements and identifies 11 challenges that need to be addressed. They range from achieving zero carbon heat and reducing heat demand to improving transport capacity and connectivity, managing flood risk, and implementing the Greater Manchester Digital Strategy. Public-private partnerships play a crucial role in advancing infrastructure investment in Manchester. Once again, here is Antony Faughnan.

03:59

Antony Faughnan

So it's really important that we get the right dynamics between the demands of the public sector in terms of social value, in terms of creating great working environments and details. But then we need to bring the great skills that the private sector has, knowledge of markets, the ability to introduce finance, the ability to manage risk. So that dynamic between public and private partnerships really fundamental to delivering great infrastructure projects.

04:26

Davion Ford

To learn more about how Manchester is leveraging the expertise, resources, and innovation of the private sector to build and maintain a resilient and sustainable infrastructure network that benefits the entire community, it’s my pleasure to welcome Natasha Rouse to the program. Natasha is Director of Asset Management at Equitix, a leading international investor and fund manager in infrastructure, with major investments in the City of Manchester.

05:01

Davion Ford

Hello Natasha, welcome to Better Cities by Design.

05:05

Natasha Rouse

Hello, and thank you for having me.

05:07

Davion Ford

So let's start off by having you tell our listeners a bit about yourself what you do and what your organization Equitix does.

05:14

Natasha Rouse

So, my name is Natasha Rouse, I'm a Director in the Asset Management team of Equitix. Equitix is an infrastructure investor. We are a global firm that started its operations in 2007 in the UK, but since then we have grown quite significantly, we have 12 billion pounds of our investors’ money under management. And these are invested in about 360 different assets in the infrastructure space. So we operate specifically in the economic infrastructure. We cover transport, we cover social infrastructure, that's schools, hospitals, social housing, etc. We invest in renewables, environmental services, and network utilities. And our focus throughout our existence has been in long-term sustainable investment returns, which is a very good match for infrastructure space, which is obviously why we operate in infrastructure.

06:15

Davion Ford

Can you talk a little about the work your organization has done specifically in Manchester?

06:20

Natasha Rouse

Yes, of course, Manchester has been one of the UK cities where we have been present for a very long time. We've had an office there for over nine years now. And we've been investing there for much longer than that, possibly since the very inception of Equitix. And as I mentioned, when the business started its operation, our focus has been very much in the social infrastructure space. So our first investments were in developing Greenfield new social infrastructure facilities, so schools, hospitals, social housing, libraries, etc. But we've also been investing in, and operating what we call Brownfield infrastructure facilities. So facilities that have already been built by somebody else, but then require operation and maintenance for a period of time. And Manchester has been a home for Equitix in the same way as London is a home for Equitix. For a long period of time, it's been a focus of our investment. We have a very diverse portfolio of assets in Manchester. We have schools, we have medical facilities, non-acute health care facilities, we have community facilities, and a very large energy-to-waste facility that is currently processing the waste from Greater Manchester area and the City of Manchester, and generating quite a significant impact on electricity provision.

07:50

Davion Ford

I think it's fair to say that many private property and infrastructure investors are solely driven by profit. And of course, profit is important for investment, but that has the potential to lead them to make decisions that are not necessarily creating shared value for residents and communities. But Equitix takes a different approach. Can you explain?

08:12

Natasha Rouse

Yes, of course. And I'm not sure if it's a massive oversimplification to say many investors are focused solely on profit or driven by profit. It is, of course, the investors' job to focus on returns. That's why investors exist. And at Equitix, we do pride ourselves on delivering good value for our investors. That's our direct responsibility. But we generate these returns from investing in economically and socially important assets. And we manage those assets on a long-term basis and very proactively. So, unlike a lot of our competitors, not all but a lot of our competitors, Equitix is an active manager. So that means that our employees, my team, are directors on the project companies in which we have invested. Why is that important? It's important because for us these assets are not just a combination of figures. It's not, we're not just managing the balance sheets of those businesses. We are actually very actively involved in the operational decision-making. And we drive to a degree that the contracts allow us to the way these companies behave in the society and the way these companies interface and interact with the communities that are served by the facilities we invest in. So, this hands-on asset management allows us to contribute to the communities in interface with the communities in the way that are pure investment focused our pure return focused operator would probably struggle to do. For example, in our social housing assets in Manchester, we are providing the hardship funds for the residents. We are supporting, you know, childcare activities, we are organizing community spaces, safe spaces, warm spaces for those in the community who need that support the most. In our schools in Salford, we are supporting educational programs by those schools and contribute to active life support programs through provision of sport equipment and summer comm funding, for example. And of course, there is a lot of interface and interactions that happen between us and our public sector clients and counterparts on development of various community and ESG initiatives. So if I was to formulate what is the main point of difference between how we in Equitix approach our sort of investment ethos, and our business, and how some of our competitors and peers in the market do it, it's that we are proactive, we are hands-on, and we like the fact that we can touch and feel the assets that we invest in. And we can, to a degree possible, direct and manage how those assets interface with the communities that they serve.

11:11

Davion Ford

I think for many folks out there listening, it might come as a bit of a surprise that an organization like Equitix is playing such an important role in managing, administering and investing in public and social infrastructure. So why does the City of Manchester need you to carry out those functions?

11:29

Natasha Rouse

That's a good question. And it's a subject of much of a public discourse in the UK and possibly in other countries as well. Certainly in the UK, the conversation about how useful or desirable private finance participation in public sector and public infrastructure is, you know, is a very hot topic. And it has been a hot topic for a number of years now, I suppose my personal view, and my answer to your question is that there is a number of reasons why organizations like the City of Manchester or other public bodies need organizations like Equitix. The first and the most obvious and probably kind of less controversial is the investment itself. So, we talk about the growing needs on social infrastructure, for example, and also for transport infrastructure in the energy and energy transition infrastructure within our countries. But those needs to be answered require either improvement to existing infrastructure provision or development of new infrastructure. Both of those things need funding. So, investment is the first answer to your question to why Manchester needs us. Investment certainly has been put into the facilities that we now own and operate at the time when that was the best solution in terms of how to finance those assets. The second and possibly a bit more controversial answer is that actually, private sector and certainly the private sector organizations that Equitix represents and works with have the knowledge and expertise that is in a consolidated form very often lacking in the public authorities. We work with specialist companies that understand how to manage facilities, how to develop facilities, how to optimize facilities, and how to bring more efficiency in the way these facilities operate.

13:35

Davion Ford

I was just gonna say efficiency being a really important point there probably.

13:39

Natasha Rouse

Efficiency’s really important. And I think that is another very big contribution that private sector brings to the table.

13:47

Davion Ford

So we now understand the why and the how, which brings us to the what. Looking there in Manchester, what specific tangible benefits have resulted from Equitix efforts?

14:00

Natasha Rouse

Yes, that's an interesting question. And I think it's important to highlight that the way I would probably rephrase that question before answering it is what specific benefits have resulted for the City of Manchester so far, because we don't have an end date to a lot of our involvement. Some of our contracts are end-dated, but they still have 10-15 years to run. Whereas for some other of our facilities, such as energy from waste facilities, the horizon is much longer. So it's important to highlight that one of the results of our investment in the City of Manchester is that the City of Manchester has got a long-term partner for supporting, developing, and maintaining in a good condition, the infrastructure that we have provided and we continue to operate. So, what we have is sound facilities for long-term future of the city, which the city can be sure will continue to be sound and will continue to be provided in a good condition. And when we come to the end of our ownership to the end of our contracts, we know that we can pass those facilities over to the next owner, whether it's going to be City of Manchester or somebody else, in a condition that is known that has been assured these facilities have been cared for. And there is record and understanding of what these facilities need and how they can be repurposed.

15:35

Davion Ford

So what we're really talking about here is just to make it really, really tangible is we're talking about schools, we're talking about medical facilities, there in the City of Manchester, that are going to be well maintained and kept up to the standards that they need to be kept up to. So they're useful for people living there in those communities. And at the end of the engagement with Equitix, they are in good shape, so that another organization or the city or whatever, can pick up those assets and continue using them to benefit the community.

16:06

Natasha Rouse

That's absolutely what we're talking about. Thank you for summarizing it so well. And I think we don't need to go very far. The recent examples in the press of reinforced aerated autoclave concrete, which is present in a lot of public sector schools, and some of the privately operated schools as well is an example of how badly maintained building with lack of records and lack of care and lack of investment for quite understandable reasons in the public sector space, lack of investment can really affect the quality of life and the quality of provision of social infrastructure in the space. And the parents of the kids who are in the schools that were affected by this technical issue, I'm sure are very unhappy and very concerned. So this is the difference that good investment makes. And this is the difference that good investment management makes. And this is the bit about infrastructure that is so pertinent because great infrastructure is never noticed, we don't notice good quality roads, we don't notice good quality internet, we don't notice that when we turn the tap, the water comes out. It's only when those things are deficient or absent, that we understand and appreciate how important it is. But actually a lot of time, design, work planning and investment goes into creating those facilities in the first place. But then making sure that those facilities long term are operational and deliver the service that they're designed to deliver. So this doesn't happen by itself. It happens by design, it happens by intent. And it's important to highlight that this is where the investment goes. This is what we do as Equitix, we invest in those facilities, and we'll make sure that they deliver what they're designed to deliver.

18:05

Davion Ford

Natasha, looking ahead to the future of Manchester. From your perspective, what does success look like?

18:12

Natasha Rouse

We see great opportunities in the future for both Equitix and the City of Manchester, and then actually arising from those benefits that we've lifted earlier in our conversation from public, private, cooperation, and coordination. So, for example, when you look at what are the needs for the future as a city, Manchester is complex, it has different stakeholders, it has different population groups that have different, and kind of developing needs and requirements. And whichever area we're looking at, be it transport, be it energy, be it housing, be it education, be it health care facilities. As we look to the future with demographic changes in political and economic changes, all of those areas will require investment. And going on the importance of knowledge and expertise, and the enabling function that private financing can bring to the table, I see no great alternatives to us continuing to try and find the ways of working with the City of Manchester and other cities, in developing new solutions, new facilities, new use for the existing facilities. One very obvious area for that is the energy efficiency and energy transition space. This is the work that we already started. There is a lot of scope for repurposing the facilities that we already own and operate, and deciding jointly with the City of Manchester how those facilities should be used in the future, and therefore making them fit for whatever the future use is going to be in 10 years time or 15 years time. So we see the whole kind of energy transition and energy neutrality as a big driver, I think for the society, but for the local authorities in Manchester, and for us as in Equitix as an investor, this is an objective that I think all of us are aligned on. And that gives us a great field for development and cooperation between us and the city.

20:25

Davion Ford

Natasha, thank you so much for your time. Thanks for joining Better Cities by Design.

20:30

Natasha Rouse

Pleasure. Thank you.

20:31

Davion Ford

Well, that's it for this episode of the show. I want to thank Natasha Rouse from Equitix for joining us. For all of you out there, please stay tuned for future episodes as we continue to bring change-makers to the table who are driving progress in urban development. If you haven't already, please be sure to subscribe and check out our other episodes. I’m Davion Ford, and you’ve been listening to Better Cities by Design, a podcast brought to you by Arcadis, the world’s leading company delivering sustainable design, engineering, and consultancy solutions for natural and built assets. You can learn more by visiting our website arcadis.com or by following Arcadis on LinkedIn or Facebook. And please, stay curious, get inspired, and remember, the future belongs to those who dare to make a difference in the cities we call home.