L&G pours £400m into Cardiff project

They will effectively have the lease at cost (of acquiring from the developer) rather than a landlord adding a mark up. If they were going to move then it makes sense to keep the rent down

I'm not sure it really works that way because you need to think of the opportunity cost. If they can lease it out to someone else, they presumably will get a market rent. So if they let it to themselves, in effect, they are forgoing a market rent... the fact that they own it doesn't change that.

Moreover, when insurance or pension firms own assets, they like to diversify risk. Not own too many assets let to one client (in case that client goes bust). And if possible, let to clients who have different profiles of risk from each other (so, e.g. a mix of public and private sector). Owning an asset let to yourself.. you aren't really diversifying your risk. Suppose L&G get into some financial difficulty and want to sell some assets.. well the asset that L&G is also a tenant of will be worth less because its covenant is now less good because the tenant (L&G) is in trouble.

So from a financial fundamentals perspective, probably doesn't make much sense to rent to themselves, right? You forgo a market rent (so don't avoid a 'mark up' as you suggest).. and your asset risk is less diversified...

Now there may be other benefits from being your own landlord.. more flexibility... fewer cashflow issues... And perhaps an accountant can think of others? How does it interact with the tax system?

Now there may be other benefits from being your own landlord.. more flexibility... fewer cashflow issues... And perhaps an accountant can think of others? How does it interact with the tax system?

Well it's not as straightforward as L&G being their own landlord. L&G is made out of so many different divisions and many of those could even be separate limited companies (I'm not familiar with the structure).

For instance, the investment is being made by Legal & General Capital, which will be working with Legal & General Property which is part of "LGIM Real Assets", LGIM being Legal & General Investment Management. I'd imagine they have a separate division which would rent any office space needed.

There are very few less risky businesses than pension funds owning property. L & G may forgo rental income but they also don't have to pay rental cost to a third party.

It's a close one and something that you could argue for and against until the cows come home

I can see tax implications such as the avoidance of stamp on the lease and not charging VAT on any quarterly rental charge.

Now there may be other benefits from being your own landlord.. more flexibility... fewer cashflow issues... And perhaps an accountant can think of others? How does it interact with the tax system?

Well it's not as straightforward as L&G being their own landlord. L&G is made out of so many different divisions and many of those could even be separate limited companies (I'm not familiar with the structure).

For instance, the investment is being made by Legal & General Capital, which will be working with Legal & General Property which is part of "LGIM Real Assets", LGIM being Legal & General Investment Management. I'd imagine they have a separate division which would rent any office space needed.

The beneficial landlord and owner will ultimately be the same legal entity even if different parts of the group are doing the buying and selling

Sounds like a lot. What are we talking about here? A new purpose built facility for people already here a la Admiral or new jobs? And what sort of jobs?

Sounds like a lot. What are we talking about here? A new purpose built facility for people already here a la Admiral or new jobs? And what sort of jobs?

I think L&G are buying the buildings that rightacre are building as long term investments. Initially this will create construction jobs and supply chain jobs and then longer term when tenants move in we should see professional services jobs and such like

In terms of where the jobs will "come from", I expect we'll see a bit of the following:
- relocation from elsewhere in Cardiff
- expansion of occupiers already in Cardiff
- relocation of jobs from outside Cardiff via inward investment projects

Hard to say just what the ratios will be at this stage. But new developments are often a catalyst for each of these. If Legal and General were to locate there, they'd be relocating some staff from elsewhere and some staff from their soon-to-close operations in Surrey (or Sussex?). Blake Morgan will move its staff and has (some) space to grow.

Not sure what the big investment projects are. We lost out with HSBC to Birmingham (although we never seemed likely for that one, I must admit). The MoJ is one big potential occupier, moving jobs out from London and the S. East. I'm guessing they are getting pretty positive soundings from other occupiers for L&G to be involved.

In terms of where the jobs will "come from", I expect we'll see a bit of the following:
- relocation from elsewhere in Cardiff
- expansion of occupiers already in Cardiff
- relocation of jobs from outside Cardiff via inward investment projects

Hard to say just what the ratios will be at this stage. But new developments are often a catalyst for each of these. If Legal and General were to locate there, they'd be relocating some staff from elsewhere and some staff from their soon-to-close operations in Surrey (or Sussex?). Blake Morgan will move its staff and has (some) space to grow.

Not sure what the big investment projects are. We lost out with HSBC to Birmingham (although we never seemed likely for that one, I must admit). The MoJ is one big potential occupier, moving jobs out from London and the S. East. I'm guessing they are getting pretty positive soundings from other occupiers for L&G to be involved.

Whatever happened to that rumour about PwC back-office jobs?

In terms of where the jobs will "come from", I expect we'll see a bit of the following:
- relocation from elsewhere in Cardiff
- expansion of occupiers already in Cardiff
- relocation of jobs from outside Cardiff via inward investment projects

Hard to say just what the ratios will be at this stage. But new developments are often a catalyst for each of these. If Legal and General were to locate there, they'd be relocating some staff from elsewhere and some staff from their soon-to-close operations in Surrey (or Sussex?). Blake Morgan will move its staff and has (some) space to grow.

Not sure what the big investment projects are. We lost out with HSBC to Birmingham (although we never seemed likely for that one, I must admit). The MoJ is one big potential occupier, moving jobs out from London and the S. East. I'm guessing they are getting pretty positive soundings from other occupiers for L&G to be involved.

I read somewhere that L&G will be bringing 800 jobs to Cardiff when they reorganise - these won't be call centre roles either so its definitely good news for the local economy.

As you say, a development area with high vis occupiers such as L&G, BBC and hopefully MoJ will make this the business destination in Cardiff.

whilst not wanting to run before we can walk, this is certainly the start we could have hoped for in terms of setting up the Cardiff CBD, which when finished could stretch from Capital Square, south to the redeveloped station, along Callaghan Square and up to Capital Quarter. For a city our size that would be mightily impressive

At the very least, this will bring attention to Cardiff. Businesses will be adding the city to their shortlists, like what seems to be happening in the retail and restaurant sectors. Up until now Cardiff has been an underdog in the world of Big Business. But now, possibly with the help of companies such as Admiral, it is on its way to cementing its place among the core cities of the UK.

You'd think that there are some solid deals currently being done if L&G is willing to plough £400m into the scheme. Along with the sudden acceleration of JR Smart's scheme, this is really promising. I'm looking forward to hearing more! It would be great for the city to land the MoJ. I hope private sector companies jump on the bandwagon too!