The Balancing Act: Partnerships, trust and patient capital

David Meecham: Hello and welcome to The Balancing Act. I'm David Meecham, a Partner at TLT, and in this podcast series we're digging into what it really takes to deliver successful regeneration today: the partnerships, the pressures and the practical decisions behind shaping the next generation of UK cities.

In our opening episode, you may remember Nicola Mathers gave us a compelling call to action that regeneration demands new ways of working. So that means more openness, more shared ambition and a far more collaborative mindset across the public and the private sectors. She challenged all of us to rethink how we partner if we want to create places that are genuinely resilient and future ready. So today, we're building on that conversation by exploring what those partnerships look like in practice, how trust is built, how risk is shared and how modern collaboration models are emerging to unlock delivery on complex schemes.

I'm absolutely delighted to say that I'm joined by Sophie White, who is the regeneration sector head at Aviva Capital Partners, leading investment into major UK regeneration housing and infrastructure projects. Sophie brings an extensive experience from her senior roles at Homes England, where she oversaw multi-billion pound infrastructure funding programmes and led teams delivering complex development schemes. Sophie's known for her collaborative leadership style and her ability to navigate public-private partnerships effectively. Welcome, Sophie.

Sophie White: Hello David, that was a lovely warm welcome, wasn't it? Feeling all glowy inside now.

David: Good, I'm glad to hear it. So, in terms of today's conversation, as I said in the intro, the intention is to be talking about ways of working. And obviously one of the things that you have been championing at Aviva is regeneration, partnership working, thinking about patient capital, just to land on that phrase that I know we've spoken about previously. There are obviously a number of different things that need to be thought about by both the public and the private sectors on delivering these types of really complicated projects. And obviously you've got experience from Homes England and predecessors. You're now in Aviva and it would be really great to understand a bit more of that.

Sophie: So I think, and I, as you know, I've sat on a number of sort of panels and public forums and talked about the importance of partnership. But it's really, it's a bit twee to say it perhaps, but Aviva Capital Partners was very consciously named in that premise that we work with rather than in isolation. And I think the idea behind Aviva, using balance sheet capital and setting up ACP what now four, four and a half years ago was to try and bring some of that ⁓ patient capital, a more immediate balance sheet. So we're using balance sheet capital to really try and invest into UK growth and opportunity. And there's obviously different forms of capital. I think we'll probably talk about that in a little while, but actually how do we use are a skill set within the team and it's a really diverse team across the board looking at infrastructure, regeneration, partnering with local and central government partners to bring forward particularly regeneration schemes where we can sort of change the ⁓ economic dynamics of local places working for communities.

David: So just taking a step back for a moment, Sophie, there are obviously a number of challenges, as I was saying earlier on, as you're more than well aware about the complexity of what's involved in these types of schemes. There's also a huge amount of pressure on both public and private sectors in terms of cash availability which is that point around patient capital or just capital, depending upon what that looks like. Do you have any thoughts on that from a high level point of view?

Sophie: Yes, I think we're in a really, we're in quite a complicated market at the moment. ⁓ And regeneration schemes and sort of market, new markets is always the ones that become a bit more difficult in that environment where yields are stretched, rent growth perhaps is a little bit compressed across all sectors. There's a, with the guilt rate being so high, actually there's real questions about where capital is coming from and investment in the wider market. I think also what's really interesting for me, and I certainly saw it from my time at Homes England, is actually from a wider fiscal challenges within public sector, if you look at some of the really big successful regeneration schemes that we've seen across the country and across Europe, I think, what's always been consistent is quite heavy loading of public sector investment into them quite often at early stages. And we there isn't as much available capital at the moment, seemingly, particularly within the grant sphere. And Homes England definitely see that. And so I think we're having to work much harder, much smarter in terms of different forms of capital in the absence of public sector capital. Can you use other assets, whether that be stakeholders working with us? And there's some really good examples of that. Thinking about land rather than cash. So how do we start using other opportunities to offset risk and face into some of those land challenges quite often, particularly in the early days, and how a partnership model and working together is becoming as critical as ever, recognising some of the wider challenges and also thinking, you know, the one thing about region is it's not quick. So even though the market has been tough for the last few years. Working on the premise that it is cyclical, it always has been, know, that positivity will come and actually what we need is economic growth and how does the likes of Aviva and others try and help lean into that to try and bring that forwards.

David: And do you think that is coming? In the, you know, build it and they will come type thing.

Sophie: So I think, you know, I'm a surveyor by background. We are ultimately the optimists, I would say. I think the challenges around build it and they will come, you need to be very careful. So it's about being very conscious of what your product is, what your offer is. know, undoubtedly within the residential market, there is steep demand for homes. But what do those homes look like? And trying to make sure that you're as much as possible trying to get the right place, the right location, the right offer to meet your market.

David: So you are actually talking about in that scenario what they look like in terms of place making. You're not necessarily meaning what they look like in terms of how does the transaction deal get structured.

Sophie: Absolutely. Yeah. So I think this idea of going back to your point about sort of build it and they will come, I think is that is probably quite a bold move at the moment in the wider market. So for example, our scheme at London Cancer up in Sutton, so that's a million square foot of life science led development. We have picked that scheme and opportunity very consciously. You've got Royal Marsden adjacent. You've got Institute Cancer Research within the wider what we call the London Cancer District.

There is incredible, deep, latent opportunity there to build upon. But we're doing an awful lot of work with Socius who was our DM there, and the wider team and populate, about building the ecosystem, thinking about how we make it become a known thing, really thinking about what early development might look like. It would be very easy to say, and I think particularly having seen some of the life science activity in the last, again, three, four years, say, it's life science, London loves life science, let's just build it. But actually you have to be very careful about making sure timing, product, bringing things forward is as spot on as you can make it.

David: That's really interesting and probably something that's naively thinking about you and your organisation. probably hadn't necessarily thought that you would interrogate in so much detail. I thought that you would probably be more interested on, well, ultimately, this is the amount of money that Aviva Capital is going to be putting in. This is the structure of the financial stack. This is the basis on which we exit and this is how we get our money back. But actually,it sounds as though it's considerably more nuanced and detailed than that. And I'm laughing because that, me just having said that, sounds quite naive.

Sophie: And not at all, but I think because of where ACP is investing within the sort of life cycle of the development or the regeneration or whatever it is, actually we tend to be very early on. And so we're not making investment grade investment. We're taking a much earlier risk. And so actually what's really interesting for me across the team is so we have four sector leads. We all have public, private, public experience. So everyone's done some time in public sector. Everyone's done some time in private sector. We've got quite deep development experience. We've got really good funding experience. I'm sort of the idiot surveyor around the table. But actually, I think we're much more involved than might happen in other opportunities, but we have to be because we're much more invested much earlier on and so understanding for our investment committees and understanding the risks and the opportunities is really important.

David: Yes, of course. And actually, just taking a step back from that, is that a change in the way in which ACP has approached these types of schemes from, you know, let's say when the day you joined them as  the organisation? You know, is this something that has had to happen as a result of the complexity of the schemes that you are now looking to invest in? Or is this just the way in which ACP goes about its business in funding, infrastructure, large scale region, residential and…

Sophie: Yeah, I think we've always been quite focused on the detail and sort of understanding opportunities with the benefit of our growing portfolio. What that does do is it's sort of every time there's lessons learned, right? In terms of that worked really well. Actually, we should have investigated that or looked into that more. So I think there's a natural, which you would expect in any business, there's a natural growth of things that really work well for us, things that aren't such a good fit. also as Aviva Capital Partners, we are investing in opportunities that we want to spin out to the wider Aviva businesses. So Aviva Investors is a really important partner for us, how we bring in annuity leases and how we can de-risk some opportunities for that as we do with the schemes that we've got coming forward or the scheme we've got coming forward with Stories and others. So I think actually I would talk about our triple bottom line. you know, fundamentally, we are using shareholders money, we have to make a return on it. So it's really, you know, they are commercial deals, we're a commercial entity.

Secondly, we really want to think about generally when we would invest in things, we're either producing assets that we think the wider business will have interest in, or it's got a broader regenerative community impact effect, which is really important for the Aviva brand and opportunity. And I think what's relevant to that is I think it's something like one in four adults in the UK is an Aviva customer. So we're everywhere and actually it makes it really interesting and you know the brand is rightly and hotly protected. It's really important that we're doing things that we're proud of and that we can stand behind. And then I think thirdly Aviva was one of the very early insurers to come out around its sort of sustainability ambitions and the like and it gives us by being involved in projects so much earlier it enables us to shape and manage some of that early design and delivery work to make sure again that we're sort of looking to a sustainable future.

David: I think my car insurance is with Aviva. But there are other insurers out there.

So tell me about Aviva's risk appetite, because you've spoken about the things that you look at, the things that you consider when you're seeking to fund, you're saying about the conversations that you may be having at investment committee and elsewhere. But what's the approach of Aviva to risk?

Sophie: The way that I have shaped it in my own mind is particularly within the regeneration or early projects. So quite often the things that we might look at have a local government, either an ownership or some kind of. So again, actually, Sutton is a really good example. The site has been vacant for probably 15 years, the local authority own it, it's former hospital site. They have invested some money in clearing it and sort of making it invest, sort of investable as a cleared asset. They brought forward the school that is next door. And then we signed an agreement for lease with them, which is now, gosh, just over two years ago. And so actually, if you think about sort of the scales of one to 10,P public sector can get opportunities to sort of effectively what I would call ground zero. So, it's cleared, it's ready, it's had some opportunities, perhaps had some infrastructure put in it. ACP then is able to cover the sort of one to four, let's say. Which is, you know, maybe it doesn't have planning, maybe there's some uncertainties to work through. We can take land risk, we can take planning risk. We have to be quite confident of our thesis. Again, why is this a good fit for us? We don't have unlimited funds. We want to try and get our biggest bang for buck that we can. But so we can do that sort of early de-risking, enabling and unlocking approach. And then we're looking to say, actually, well, we've done our piece now. So then it's a more investable asset with typical sort of investment grade returns. And then we would be flipping it out, like I said, either to wider Aviva or externally out to the market. So we have an accepted level of risk that we can take that would go further than perhaps the managed funds can do because we have different return metrics and we're using a Aviva’s own capital. But it's hard to pin down, but we're looking at really making changes, like I said, investing in that UK growth piece, which means you have to be a little bit more bold and recognise that there will be challenges along the way.

David: Yeah, and I know one of the phrases that you've talked about previously, is that point around patient capital, which is where, there needs to be a view taken on the length of time for return. So perhaps you could say a bit about that.

Sophie: Yeah, so I mean, it's interesting. in my experience, the higher the inner private sector entity anyway, the higher the risk appetite, probably the shorter the period investment might be. So a business that is investing in sort of higher risk opportunities probably is recycling capital. And as you know, there's a period of thinking again about that sort of matrix of numbers if you're investing in that wonderful once your bit is done then you want to be moving that out into the longer term truly patient capital and recycling and doing more typically, I mean ACP investment can go anywhere from sort of one year, five, six, seven years depending on what it is I think that's something that we probably have changed a little bit or a saying changing over the period in that It's hard to do regeneration and be the sort of almost master developer role and do that quite quickly so I think we're recognising that we're probably going to be invested a little bit longer than we might have thought when we originally set the price. But we're not a 10, 12, 15, 20 year hold. Because that's not the money that we're using right so like I said ideally we would keep it within Aviva but it wouldn't be Aviva Capital Partners money so it's not balance sheet money once it's ready to be invested.

David: You think you ever will become one?

Sophie: It will move out. So my scheme that I have in Barnet, and we have two, one of which I am responsible for, which is a residential scheme we're dealing with Stories, who you know well. You know, we are pushing through to getting hopefully spades in the ground in the summer. Once that construction starts, it will be a new C-lease model. So that will be basically the lease will be signed by Aviva Investors through investment management fund into a new C-lease. And so that will be our, we've done our bit, we've unlocked it and enabled it, it's now de-risked enough that it would be appropriate for a new C lease model because the certainty of return spendable terms are there. And they will have that then for 40, 50 years. But we're not, we're here in isolation, we're here at ad infinitum of the cycle, not the full cycle.

David: Absolutely.

Sophie: Within wherever we can, it makes sense to Aviva to be to provide that full cycle. It's just not within ACP.

David: Regen takes a long time and therefore five to seven years, although that may sound as though that's a relatively long period of time, actually will be gone in the blink of an eye. So it'll be interesting to see, I suppose, from my point of view as to will ACP end up moving on that five to seven or but, you know, hearing what you've just said about spinning out into wider Aviva opportunities.

Sophie: And I think also on some of those bigger schemes, you would hope that you could unlock and enable some early phases. There's ways of returning capital through the pot, we've washed our hands and stepped away from it. There might be some plot phases that come forward so it can either be sold or developed other ways. So I think there's definitely a difference between how long we might be involved in projects compared to how long we might be, you know, what your peak investment looks like, how that results within the project.

David: There's whole question around a topic that we're not touching on, which is around viability and all of that. And that just feeds into it all, doesn't it? But just trying to take us back to ways of working and collaboration. Obviously, you've mentioned Stories. It is very well known in the wider industry and sector of your joint venture with Stories, and clearly that is an innovative way to deliver schemes. So can you tell us a bit about that?

Sophie: Yes, so the JV was signed as a sort of partnership intent back in December 22, the first sort of project I closed, And we are now, so the first project that we contracted, are, just about to hopefully be on site in the summer. So brought it through design, secure planning. We’ve got a really good contractor partner lined up, really exciting. So we will hopefully be seeing activity on that site. So that's about 130 homes on a really beautiful building on what's called Buns Lane in Barnet, it's really exciting. We have just signed our second project direct with Stories as well. That one is not yet out in the public domain, but the next one coming along through that sort of overarching approach. But I think what's really interesting with that partnership with Stories is we're now working on a number of other opportunities with them, which have come through different ways. But actually, there's just an umbrella relationship where we've worked really closely together. We like their way of working. It's worked well on both sides. Their sort of capability capacity piece is really impressive. So they're a great partner for us I would say actually one thing I think ACP have been very lucky with is selecting our…we have other DMs. We do a lot with Moda, who are our JV partner on our Digbeth scheme. And we have Socius Surrey, who work really closely with us and are appointed DM on London Cancer Hub. We have others with Chiropractor and others coming And I think actually across the board, we have really good relationships with partners. We've been very lucky. Moda were excellent through getting Digbeth into delivery and construction as it is at the moment. but I think we try to treat as we would want to be treated. We're very open, we're very engaged with our development partners. There's a lot of meetings, a lot of engagement, lot of communication. And I think that's really important to build that trust on both sides and be sure that we know what we're doing. So we're possibly a bit more hands-on than some investment partners, but I think that's really important to us.

David: But that's what's needed, right? Because ultimately, if these complex schemes are going to get away, you've got to have everybody around the table and everybody being prepared to muck in for want of a better phrase.

Sophie: I think definitely having that sort of shared understanding and an intent and this is where Paul Clark's sort of latest sort of collaboration, relational agreement. It's a really interesting concept. I must admit, I took a little bit of winning over. But it's a document that sits along your standard documents. So we still have a development agreement. We've still got the land agreements, all those kind of things. But it's basically the sort of overarching, this is why we're doing this. it sort of sets out premises of how partners will engage with each other, the original intent.

You know, and it just it gives you a place to go back to when you know these things are difficult. There's always a time when everyone looks at each other and thinks this is really hard work, why are we doing this? And it's just helpful to have that sort of golden thread of remember why we're doing this. Remember what we said that we would do, which I think is really valuable. And it sort of provides the theme.

David: Is that intended to be on a project by project basis or is that really it's about the relationship hence the reason why it's called relational development agreement?

Sophie: Yeah, so where we've used it and I was with James Scott at Stories yesterday and I think, know, like all of this stuff, it will continue to grow and morph and be adjusted and polished as we go along. So we've used it now with Stories on the project that we've just signed. And I think, so I think it's a sort of opportunity by opportunity because it's for all partners on the project. It's not a Stories ACP piece.

So we have a Londoner, so you've got JV Londoner and it's that that has the relational agreement which is saying this was our intent for the project, this is how we're going to take it forward, is how we're going to go. Stories and us, you know, that's all fine, we know exactly what we're doing in terms of how we treat each other, mainly well, but yeah, no, so it's a project level.

David: I mean, it's going to be interesting to see how Paul and Richard and James take that further. If they do, whether it's a thing that is caught on by the market. I mean, I know on advisor side, there is a lot of chat about it at the moment. I am hearing from other people with them saying “have you seen what Paul Clark is doing for Stories?” and that's an interesting thing, isn't it? Because ultimately, what everybody seems to be talking about at the moment is partnership, collaboration, ways of working is just fundamental to be able to get these schemes away. And if this is one way of doing that, then, you know, all fair credit to him and all fair credit to people who want to adapt it and use it for their own benefit.

Sophie: And I think it is just that we talk endlessly about how important trust is. And it's really interesting how, you know, like I said earlier, the market could do with helping us out a little bit here. And in these kind of environments, when the market's tricky and things are changing, it's easy to look around the table and think, well, hang on a minute, are you doing better than I'm doing? And are you making good decisions? And protecting that trust and keeping the communication open for me is super important. And the relational contract just sets out some of the parameters that you can almost go back and remind yourself of, no, no, this is why, this is what we said we would do. And it's a little bit of a roadmap, I suppose, to just check back about are we doing what we said we would do in the way that we said we would do it?

David: And remembering that it's on everybody's part, it's not just on one part or another, because I think, you know, certainly on some of the schemes that I've advised on in the past, where you're talking about being in collaboration or you're being or you're working in partnership with another party, but the reality is that it's being treated very much as a landowner and a counterparty type relationship. And, you know, you can dress it up and call it whatever you like. But if the reality is that the parties who are sitting around the table and the organisations who are sitting around the table don't believe in that collaboration truly, then it's not really going to work.

Sophie: And I think, particularly where you have sort of public private partnerships, you can end up with different entities having very different pressures and protecting that trust. And sometimes that might be this is not working. So, interestingly, I was at an event with CBRE last year and again, talking about these partnerships and someone was asking me about, you know, so we talk about procurement and if you feel like you're not getting the messages across early on, what would you do? And I was saying, wouldn't, at that point, you'd stop the project before you've committed to each other. Because if you can't get on at the beginning, there's no way it's going to get better. But I think so it's being able to build that trust and understand when one partner is saying, I can't do this for X, Y, and Z reason, to be able to have that benefit of relationship that you can understand it even if it's not your environment I think is really important because sometimes it might be something that's very specific to a public sector partner or very specific to a private sector partner that just means this is not going to work and being able to do that without anyone else feeling like they've been left bereft and they don't really understand why I think is really important.

David: And being able to acknowledge the fact that everyone is trying and everyone has tried and I think that there are a couple of follow-on thoughts from that which is one around the procurement well that's a whole other world and you know I personally sometimes find it frustrating on procurement processes that it's always perceived that it is a beauty parade on one way only and the reality is it isn't, it's everybody is on display to the other side.

I suppose the other thing is that actually there's nothing wrong with either party or both parties or all the parties acknowledging the fact that they have different drivers, objectives, rationales, justifications as to why they might be entering into, let's say a relational agreement. Because no party is going to have the same set of objectives as another one. there is nothing that should stop both parties being open and honest with each other to say your objective, Mr. Public Sector Landowner, is to achieve ABC. Our objective as Mr. Private Sector Partner is to achieve XYZ.

Sophie: And then it's about how do those two bits join? Where are the points of meet? Because if you've got objectives which are diametrically opposed. Then that's not going to work, but recognising that different entities have different pressures and recognising where you come together for a joint benefit is absolutely right, and it's really important to recognise that there's different pressures on different partners coming from all different areas and being able to be open and communicate around those I think is critical to successful partnerships.

David: So taking a bit of a different tack. What inspired you to get into regeneration? What is it that made you take the plunge and go from Deloitte, I think it was, to Homes England, to now Aviva?

Sophie: So, funnily enough, was probably more around, this is going to throw you off, probably more about personal regeneration than necessarily a focus on regeneration of property. I have had absolutely what would be described as a monkey gym of a career. I started out as a Royal Practice Surveyor for Savills valuing manurial value and looking at forestry and going around farms. And so when I passed my ABC, came out, ended up in a brilliant business called Drivers Jonas, did valuation development consultancy, moved into Deloitte through the merger, had two children, being a sort of mid-grade surveyor working with two kids, even with a really hands-on husband was just really tough. And I found working in private sector at that stage incredibly crippling. Got seconded to what was then HCA with Garrett and it was just amazing. And I loved my time at the agency. And I think probably actually. At that point in time, it had capital available to it. It had a very strong relationship with then Secretary of State and a growing build on this. So it was just as what was then called. So the investment team was being born. Andy Rose was chief exec, I just I got lucky. And actually, I went from a private sector that was a bit. We don't really know how to fit you in our world to a public sector was like, we don't care where you work. It's all about your output. And it was incredible, my luckiest sliding door moment was going to Homes England, HCA. Had nine fabulous years there, did great stuff, as you say, ended up with the infrastructure program's big sort of funds. But we talked a lot there about patient capital and this wall of money and then thought I love my time at Homes England and but wanted to keep going and trying different things. an amazing opportunity at Aviva. But I think what it enabled me to do was actually see the incredible impact that Aviva's had through setting up Aviva Capital Partners and bringing that different money to make things happen. And then through my career, I've been lucky enough to be involved in different opportunities. And the one thing I really like Being out with the children who are now teenagers and being like, I had a hand in that. Or, yeah, look at this place. Or, you know, I was talking to Richard Meyer the other week about King's Cross, which everyone talks about as this amazing regen thing. But I was sent, to King's Cross to do some evaluations, which must have been 2000, 2001. It was terrifying.

David: That is absolutely incredible. I it does sound like, I love your idea of it being a personal regeneration story. That is, that is... That is an incredible thing.

Sophie: But actually, I think that the amazing thing about real estate and my property career is that I've just been involved in some really cool things. And I think now I'm a really keen equestrian. I’m lucky enough to live in North Hertfordshire. But, know, there's pressure. need there's pressure on land. And if we can use our brownfield sites with infrastructure already in and we're building on those places that have the opportunity to grow, whether that's around transport hubs and other, then how fabulous is that?

David: And I love the idea of you showing your children. I think that's why a lot of people in real estate get into real estate because it's something tangible and you feel as though you're being involved in the delivery of something and hopefully that something is a good thing.

So taking that thought process about inspiration and your journey, one of the questions that I'm wanting to ask all guests who come on this podcast, who do you think is a real champion of regeneration? Because Nicola Mathers in the opening episode challenged me to find champions of regeneration and just taking it broader. Who do you aspire to be or who was inspirational in getting you to where you are?

Sophie: That's such a tough question. There are so many people, Gareth Blacker, I've talked about already, know, Nick Walkley was amazing to work with, Peter Denton, my Homes England career, like I said, was a really big part. But you've also actually, there were some really amazing people through the Drivers' Jonas/Deloitte days that did some incredible opportunities. Susan Lynch, who I worked with had it for a number of years, you did some incredible early regeneration work and was a huge part of my early career. There are sort of two people particularly that I think have done really dynamic things within public sector, trying to think about people that might not get mentioned all the time. But Cath Shaw at Barnet and also Karen Mercer, who is now the Bristol Temple Quarter lead, was with Cath at Barnet. The work that they did around Brent Cross and the work so really well connected to Richard and to Paul and others.

But actually they are people that just getting stuff done within as being a really good collaborative public sector partner, know, open, communicative, engaging, driving where they can. that's really aspirational and really inspirational in sometimes quite often difficult situations. Like you said earlier, bringing sort of public and private interests together, being brave and confident. I've always found them really impressive.

David: That's really interesting, isn't it? That's the evidencing what good looks like rather than just saying what good looks like.

Sophie: Yeah, there's always challenges from my experience of working in the public sector, there's always other challenges, other pressures on you and being able to have a plan and really drive that forward. So I think it's really good.

David: Well, thank you, I think that wraps us up for today. So thank you very much for joining us. Thanks for listening to The Balancing Act. If you enjoyed this episode, please subscribe on your usual podcast platform. To hear more conversations about shaping next-gen cities, visit TLT.com or follow us on LinkedIn.