Rising to the Challenge at Lancaster

Lancaster University is undergoing a massive £200million accommodation development alongside the introduction of a new academic programme. Andrew Neal, Lancaster's Director of Finance and Resources, gives us an insight into planning and running projects of this scale.

Andrew Neal is Director of Finance and Resources at Lancaster University, where he is overseeing the largest HE development in the country a £200million investment into creating new accommodation and renovating old rooms. Alongside this challenge, he is also managing a £100million programme to progress the university's academic standing by creating several key research centres. University Business asked him how he manages priorities and budgets to successfully deliver these schemes.

How do you budget for an investment of this scale and ensure you manage it successfully?
The two investments operate on separate budgets. UPP (University Partnership Programme see relevant article) are our partner for the residential development and it has been run off balance sheet through a special purpose vehicle, which has allowed us to fund it through external lending. It was important to make this part of the development self-sufficient. The financial obligations are met through rental streams, which pay for the initial investment. Because of this, there's no need to use any resources generated for other purposes to cross-subsidise the residential project it has its own business plan, is run independently and is self-sustaining.

How long has this programme been in place?
It was planned since 2002, but we signed the contract to begin in 2003. The partnership with UPP has delivered 3,385 rooms so far and we've now signed up for a fourth phase, which will deliver a further 962 rooms by September 2008.

How will you capitalise on this investment?
Through the benefits to our recruitment and admissions. Plus, the ability to offer guarantees to overseas students. We're running at 99% occupancy across the estate as close it realistically gets to full occupation.

How did you secure funding for such a large project?
At the time this was done there was a procurement exercise through which we chose to work with UPP, which is part of the Alma Mater Fund a fund established by City institutions to invest in the sector. They provide the equity ownership, but the bulk of the money comes from traditional bank lending.

Is this how you funded your academic programme?
No, the funding for the research centres was driven by the university. We have a financial strategy to produce a surplus of 5% of annual turnover for reinvestment. We've used this money to attract other organisations that wanted to invest. We've also worked very closely with the North West Development Agency and the European Regional Development fund. Some projects have been in conjunction with those organisations because they have related objectives. So, our investment is a mixture of our own money and money that we've received from other organisations.

What were the most important areas and why?
We have prioritised Research investments based on the university's strategy and the availability of external investment. Teaching investment has been driven by the need to improve facilities but prioritised according to logistical factors.

What have been the biggest challenges?
Simply the scale of the developments. There's been a lot going on in a short time so managing the complexity, and then the communication so people know what's happening, hasn't been easy. Also, as we've progressed expectations have risen things improve but then expectations are higher so there's the constant pressure to continue improving. But that's how it should be.

Was the environment a factor in your decisions?
It's been a growing factor as we've developed our plans. We took a decision early on to make sure that all of our new builds met a BREEAM standard of Excellent [The Excellent rating refers to high standards of the re-use of existing materials, responsible sourcing of products such as wood, the use of minimum-energy lighting etc.] and Very Good for our refurbishments. From a pragmatic point of view, environmental policy also ensures that utility and running costs are considered.

How long will the whole project take?
Phase four is the final phase for now and will be completed in September 2008.
At that point we will have redeveloped around 3,500 rooms and we'll have about 2,500 of our retained estate that was built prior to 2003. At some point, we'll take a view of how to manage that stock although it's all in relatively good condition. There are longer-term decisions for us to make to ensure that they remain in good condition.

Following the refurbishment, what are the biggest challenges for Lancaster's future?
We want to avoid a situation where we have done this work and it slips back again. We've got ensure that the investment is sustainable and that we keep it up to a high standard.