Forth Ports is Scotland’s largest ports operator. Although firmly rooted in the transport business, it is also sitting on what has been described as a “goldmine” in the Leith waterfront; and although the company and its shareholders will benefit from a property redevelopment valued at £200m-£300m, its chief executive is adamant that, with the help of its lawyers, ethical issues will be as much to the fore as profits.
Around 40 per cent of Forth Ports’ business is in property. It owns more than a third of Edinburgh’s waterfront and has been heavily engaged in the area’s regeneration for several years. The company’s main external legal adviser, McGrigors, has advised on the bulk of the deals relating to the redevelopment.
As group chief executive Charles Hammond explains, Forth Ports has a “very limited” in-house capability, primarily provided by its own company secretary John Tothill, a dual Scottish and English-qualified lawyer, and his assistant.
“But we tend to outsource most of the pure legal work,” adds Hammond. “A transaction of any size tends to be outsourced to a firm like McGrigors. That includes major port investment contracts, supply chain contracts and property-related work.”
McGrigors, which has advised the company since its flotation in 1992, is the primary firm for corporate and property matters in both Scotland and England. The company also has relationships with Shepherd + Wedderburn and Halliwell Landau. “But I’d say that over 90 per cent of the work is McGrigors’,” says Hammond.
There is no doubt that, commercially and legally, the redevelopment of the Leith waterfront is the main challenge facing Forth Ports. It is likely to remain that way for the next 10-15 years. The scheme includes plans for the 40-storey Leith Tower in Edinburgh Harbour, which if built would be the tallest building in Scotland and could host 200 residential units and a 200-bedroom hotel.
Hammond says the company has already taken a variety of approaches to redeveloping the area, all of which have kept its external lawyers busy.
“We’ve developed some buildings as a joint venture partner, for example the Scottish office of Victoria Quay and also the Ocean Terminal Shopping Centre,” says Hammond. “In those kinds of situations, the legal issues have been about blending corporate structures with property development objectives.” Two years ago the company also restructured its property division, bringing in an outside equity partner, Bellhouse Joseph, which took a 10 per cent equity stake in the overall development side.
“Our development plans will ultimately culminate in 50,000-60,000 people living in a whole new community,” says Hammond. “What you’re talking about is a long-term plan to produce a very significant community living in a new area. So planning is an important issue, [along with] land ownership and title issues, all the usual things, as well as being able to adapt to changing corporate requirements.”
Heading the corporate requirement list are social responsibility issues. Hammond is palpably proud of the tangible benefits the scheme has so far produced. “If I said to you that what we’ve done over the last five years has probably reduced unemployment in the Leith area by over 50 per cent, it would show you how important this kind of development is. Compliance and ethical issues are crucial,” he says.
Hammond’s comments, set against the profits his company will make from the redevelopment, could invite some healthy cynicism. But Forth Ports is in Standard Life Investments’ tipped ethical investment portfolio (along with Royal Bank of Scotland and Johnston Press). This lends some weight to his comments on corporate responsibility.
“I think ethics is increasingly a part of corporate life,” he argues.
“It’s important not just from a legal perspective, but also from a moral perspective. It’s a case of balancing that with the fundamental purpose, which is to grow the business for the benefit of our shareholders. Obviously, the legal advice we get helps us to maintain that balance.”
With the ever-increasing regulatory requirements to which companies such as Forth Ports are being subjected, the complexity of that balance only looks like being more difficult to achieve.
|Head of legal and company secretary||John Tothill|
|Legal spend||Minimum £250,000|
|Reporting to||Charles Hammond|
|Main law firms||Halliwell Landau, McGrigors and Shepherd + Wedderburn|