Commercial Property Blog
All posts from: October 2009
To House of Commons Dining Room B on Wednesday lunchtime to hear the latest on the property industry’s continuing battle to reinstate empty rate relief.
The big guns led by the British Property Federation appear to have given up the ghost, but the Business Centres Association, fights on.
It was hosting a reception for MPs as a key part of its efforts to retain the £15,000 Rateable Value threshold on Empty Property Rates which was introduced in last year’s Pre-Budget report, for at least another year.
Westminster sources put the business centre lobby’s chances at 50:50.
The argument for keeping the threshold is that it helps the business centre world to keep empty space available in support of the 700,000 small businesses that use it.
The argument against is that this was only a temporary measure introduced in the teeth of the recession, and that bringing the threshold back down to the previous £2,200 Rateable Value could earn the Treasury a much-needed £185m a year.
There is another view over empty rates developing: that cutting the relief has driven landlords to agree a slew of cut-price leasing deals across the UK.
That, though, is only part of the story.
As Workplace chief executive Harry Platt points out, those landlords would have been desperate to do deals anyway in a recession.
And the biggest irony of all?
Why has the Government been exempting properties below the £15,000 rateable value threshold from empty rates if, as it has always argued, re-introducing empty rates does no harm at all?
Last Wednesday night before setting off for a couple of days `r and r’ with Mrs Barrie in Madrid I was reminded of just how lucky most of people in property and media are.
The occasion? The launch of LandAid’s `Foundation Partners’ scheme, through which 25 of the biggest company names in property have committed money, advice and training to the industry charity for the homeless.
Land Securities’ – one of the partners – hosted the reception at its Cardinal Place development in Victoria, and it was attended by a number of industry heavyweights including Prupim chief Martin Moore, Helical Bar chief executive and LandAid president Mike Slade and Derwent London chief executive John Burns
Among the other foundation partners are Grosvenor, Hammerson, British Land, Frogmore and SEGRO, with the idea that the partners each donate £10,000 a year for three years.
At this point it is worth recalling why LandAid was set up not long after Live Aid in the 1980s – because people in property make a lot of money out of the built environment while others struggle to even get a roof over their heads.
It is also worth remembering that most younger people are not homeless because they are lazy, drunk or drug addicts – it’s most often because they have had an incredibly tough start in life.
To find out more about LandAid go to www.landaid.org, or e-mail its chief executive Jon Siddall at email@example.com, and look out for more on the evening in Property Week.
I had a nightmare moment last night.
Having enjoyed the challenge of chairing Offices 09, checked proofs and laid out next week’s Occupiers section with Hardeep I enjoyed a chilled glass of white at the CoreNet Stand.
Fifteen minutes later I was back on stage in front of 600 property people throwing themselves into a rare night out.
Bounding on stage, I was ready to go. Then…
No autocue – and strange panic sensation.
Go back stage and get it fixed or make it up as you go along? I opted for the latter, bumbling my way through some made up mumbo jumbo about Gerald Ronson, John Richards, CoreNet etc etc.
To his credit Fidelity’s Richard Watton, who followed me, carried it off with true aplomb.
My advice? Always take hand-written notes.
Overall, though, we loved Offices 09 – and thanks to everyone who attended and took part.
And if anyone is interested, here is what I was going to say….
When we last held the Office Development Awards, at the Brewery in Chiswell Street in the City, we all felt like we needed a stiff drink.
But one year on, although these are still tough times for property, we must all be grateful that this is a market clambering back on to its feet.
At today’s Offices 09 Conference we have heard about soaring values and occupiers scrambling to sign up to once-in-a-generation deals.
What a relief those strong signs of recovery are for anyone in the London, regional and business park markets we have covered in depth today.
At Property Week we too have moved with the times, moving to London for Offices 09, combining our conference and awards and most importantly teaming up with our valued partner CoreNet Global UK for the whole day
Occupiers, alongside more on banks, the public sector and increased analysis form the big new sections in the September 25 re-design of Property Week.
[CoreNet, WEAS, OAS, CAC logos to appear on screen]
But back to tonight: this event also wouldn’t have been possible as I said without the support of CoreNet Global UK, the Office Agents Society, the City Agents Club and the West End Office Agents Society.
[All category sponsors’ logos on screen]
And thank you to all of our category sponsors, whose names you will see projected on the giant screens throughout this evening.
[Judges’ names appear on screen]
The judging this year was more rigorous and testing than ever. There were no easy deals, straightforward developments or simple choices to assess – out panels of judges all had to find winners working under very tricky conditions.
So, we have a fantastic evening planned for you. After dinner comedian Jimmy Carr will be performing and the BBC’s Louisa Preston will be joining Jimmy to present the awards.
Right, that’s enough from me for now. We are going to show a short sequence showing the fantastic finalists for the awards tonight. I hope you enjoy dinner and the rest of the celebrations and I will see you at the awards presentation.
Friday’s Leader Column on whether now is the right time to start up a new agency has generated a fair degree of comment.
My old sparring partner Peter Bill took up the same argument in his weekly column in Estates Gazette, too, which shows what a big talking point this currently is.
So what else did I hear while researching this piece?
Most intriguingly of all, from the head of one of Britain’s biggest property companies and a noted reader of the market, that `I believe that property firms will be net recruiter during 2010’.
I almost fell off my chair, but then again, why shouldn’t people start hiring again? Natural wastage started in early 2007, followed by a brutal series of cuts at most firms.
Developers now considering getting on site in the City have stripped right back, and agencies that savaged their transactional teams must currently be stretched in the mini-boom.
The big cutters in 2010? Public sector property people, of course, although there is a strong argument that advisers serving government, councils and agencies will also undergo a mini-boom of their own as ministers desperately look for the best advisers to help them squeeze value out of the national estate.
The rollercoaster ride of our new company continues. IT rather than cash-flow still remains the scourge of our start-up agency, Paul’s laptop crashed terminally the week before, followed by my Blackberry the night before we were flying out to Spain for 2 days ‘bonding and brainstroming’. Luckily a rather nice cafe had a wireless network so I had to carry my laptop around and reverted to my trusty old Nokia phone. We should all leave the country more often as we had a nice call to say a lease regear on a chunky business park building had exchanged for one of our fund clients. I also managed to organise an inspection on our Harp View disposal at Staples Corner from the cafe. Do we really need the office in Mount Street?
Normal service was resumed last week with all the IT working. Refreshed from the tapas and cerveza we had a week of productive meetings on a number of development and investment scenarios we are advising on. Luckily our clients are still in a buying mood so some more reporting to do on those. A day out in the Cotswolds with a high profile residential developer restored my faith in their market so all we need to do now is find the sites for them that are good enough to get the funding nod from the bank. The inevitable question arose at dinner of what shape everyone thought the economic recovery would be. As we were all agents and developers the answer was a resounding ‘U’ shape. Not a ‘W’ in sight!
The final meeting of the week is with an old college mate who has a couple of nice assets to sell in central London, unfortunately no income on either so time to get imaginative on finding a home for them. All that thinking requires some sustenance and lubrication and as luck would have it one of our developer friends is launching his new speculative office scheme in Ealing with a lunch on the top floor for the agency community. My wife and non-property friends find it very strange that I frequently have a 3 course silver service lunch and fine wines in an empty office building. Steak & chips and a very well chosen red wine does the trick though. Thank you Stoods, good luck with the scheme it looks very good.
Down to earth with a bump on Monday as I have to go to a rather unsavoury spot up the M1 to look at an office building, the best days of which are far behind it. The fund that owns it wants an honest opinion of its value and an alternative use for a redevelopment. En route I picked the dog up from home to keep me company. As we walk around the town I’m not sure who’s more scared, me or the dog, some fairly fierce looking rottweillers and their owners eyeing us suspiciously. Back in the car for a ‘2nd gear’ inspection instead. My verdict: knock it down, follow a cunning planning strategy and future inspections with a bigger dog!
The sale of Silverburn is getting me excited. Lloyds (now it has taken over HBOS) is the lender to the centre’s owner, Retail Property Holdings. It has pulled the plug, but this appears to be the exception rather than the rule. In this case, Lloyds has taken the opportunity to return some cash to the government quickly by selling a prime asset while the market is strong, rather than taking the usual "extend and pretend" stance. In itself it could suggest that Lloyds might not think that the "mini-boom" is sustainable. (Cue double dip/www/w/l/saxophone shape theories). See
If the deal does gets done, (and I stress if), it could give us a true indication of shopping centre values and give a boost to the Scottish property market.
As the Scottish Markets writer for Property Week, I am sure everyone in my office, as well as half the people in the Scottish property market are sick of me talking about it… but for those of you have half as much enthusiasm I thought I would try and give a few more insights.
BUCKING THE TREND
this article for Property Week’s take on the UK’s mini-boom.
Lloyds (now it has taken over HBOS) is the lender to the centre’s owner, Retail Property Holdings. It has pulled the plug, but this appears to be the exception rather than the rule.
In this case, Lloyds has taken the opportunity to return some cash to the government quickly by selling a prime asset while the market is strong, rather than taking the usual "extend and pretend" stance.
In itself it could suggest that Lloyds might not think that the "mini-boom" is sustainable. (Cue double dip/www/w/l/saxophone shape theories).
THE SAD TRUTH
What is less obvious, and has not been noted about the sale is one simple and sad fact: the owner of Retail Property Holdings, Paul Green, is unwell.
Described to me as “one of the good guys” by, amongst others, Glasgow nightclub and property mogul, Stefan King , whether Green is physically capable of being as hands on as the banks now demand from borrowers is unclear.
Perhaps a sale was simply the most practical solution.
What is certain about the whole sale is that a lot of people are going to end up having wasted a lot of time. Nearly every prospective buyer being advised by every prospective agent has been linked to the centre (London and Stamford, USS, Grosvenor, Capital and Regional, Orion, British Land, Hammerson, Deka, Meyer Bergman, AEW, Area…) and I hear there have been several embarrassing “So what could you be doing here?” moments at the centre while the number of business people walking round in suits with cameras and clipboards has increased ten fold.
For those who don’t end up as part of the winning bid, there will be little consolation.
But what will really smart more than anything is if the bank chooses not to sell at all. Given the debt on the centre is as much as £300m, dependent on the bids that come in, and the amount the bank might or might not be prepared to lose if bids are below that, then this scenario should not be ruled out.
THE MAGIC NUMBERS
If Silverburn sold for £300m it would reflect a breathtakingly low yield of 6%, (the operating income stands at £18m). Bids have been invited at £250m or above, and that figure would reflect a 7.2% yield.
The most recent yardstick in the shopping centre market is the one third sale of the Bullring in Birmingham by Land Securities to Australia’s Future Fund in September for £210m at a yield of 6.85%.
Many will tell you that the famous Midlands shopping centre is a more prestigious asset and that values in that part of the world will far exceed that of the Glasgow area. Personally, as I fly the flag for Scotland, despite being a wee southerner, I’m not going along with that theory.
I say that the Glasgow catchment is mad for shopping, Glasgow is the best retail destination outside of London, it’s a much newer centre, the market has possibly picked up further since that sale and when I was there on a Wednesday afternoon earlier this month it was simply packed with people with carrier bags.
GAZING IN TO THE CRYSTAL BALL
For what it is worth I am going to go against my better wisdom and make a wild guess at the conclusion of the sale:
Deka buys the centre for about £270m, which would reflect a 6.67% yield. The bank looks at things pragmatically, takes a small hit, grabs the money and runs but the sale stretches well in to 2010.
The German open ended funds are bristling with cash and looking to spend in the UK, as outlined by my editor Giles Barrie in his leader last week following his return from Expo.
Having been offered Silverburn on the quiet last year, when the price must have been distinctly lower, it will hurt Deka to buy at a higher level. However, it is just the sort of chunky prime asset they will be after.
That’s that off my chest. But if you ever want to discuss with me my new favourite subject feel free to drop me a line at firstname.lastname@example.org
Bailiffs were the biggest talking point at last night’s Mishcon de Reya/Property Week `Landlord’s Masterclass’.
A collection of 100 of Britain’s most prominent landlords bared their teeth by revealing that sending the boys round is still the most effective means of collecting late rent.
Actually, `sending the boys round’ might be harsh, but it is clear that in these straitened times every means necessary is needed to get tenants to pay on time.
Mishcon partner Daniel Levy revealed that one of his property company clients manages to collect all but 3% of its rent on time – with the implied threat of bailiffs going in.
Lorenz Consultancy boss and property veteran Tony Lorenz took a slightly more relaxed approach, although not going as far as Land Securities in describing occupiers as tenants – they are more like `paying guests’, according to Tony.
You can read Daniel and Tony’s top tips, plus some invaluable advice from Wilberforce Chambers’ Jonathan Seitler QC, in our newly expanded Professional section in a couple of weeks.
In the meantime, my favourite tip was from Levy: he spoke of the power of publicity in legal cases.
I couldn’t agree more: my direct line is 020 7921 8562!
A relaxing night staying in beach huts on a peninsular just off Dar Es Salaam, where we partied late last night. After all the hard work everyone was relieved and exhausted.
Chilled on the beach all day and then headed back to the airport to fly home. A very tiring flight as we had to fly via Kilimanjaro and Nairobi.
A fantastic trip overall and one I would recommend to anyone. We broke new territory and now all can follow. The kids at the Faruja Project are in good hands and we raised about £160,000 to support them.
If you want to sponsor me go to www.justgiving.com/geoff-egan and if you are interested in International Childcare Trust’s work go to www.ict-uk.org where you can see our next trips trek Nepal and cycle Cambodia.
“ of all the roads you take in life, make sure some of them are dirt "
“This is much more efficient than Mipim. Here, there is no beach and no boats!”
That is how one of my fellow delegates summed up the Expo Real experience.
You see, I am currently stranded out here in Munich, an English émigré in a sea of sausage-munching, beer swilling German real estate professionals.
Now don’t get me wrong.
I have been to Expo once before, and have found my schnitzel and sauerkraut-loving brethren to be quite charming.
What I object to this time around is the distinct feeling that they are rubbing our noses in it.
I believe the appropriate German word is schadenfreude. The Brits – myself included – are generally out here to chum up to the German banks (who happen to be some of the only people silly enough to lend any more money to property companies).
Few have succeeded in getting to the front of what is a very long queue.
As we wait, we are subjected to triumphal reports of what the German funds are buying as the London market weakens (I haven’t met many German fund managers over here; presumably they are all back in London trying to buy Windsor Castle from the Queen).
And to add insult to injury, they are nobbling us on the exchange rate (I have just been robbed of €6 in a restaurant for a glass of what tasted like lukewarm Leibfraumilch).
If anyone else starts telling me how the German funds played the real estate cycle right, I shall scream. So how have I been keeping sane? By watching the crowds, and noting the numerous mistakes that the German real estate world HAS made.
Let’s start with common dilemmas exhibited by the German property man.
Gigantic brown brogues (in the style of Mr Men characters). Shameless wearing of cords in public. Maroon trouser suits.
Navy blue blazers with brass buttons. And, worst of all, bow ties.
As for the real estate frauleins, several have livened up their stands by donning traditional Bavarian dress (puffball skirt and lace-up bodice, perilously restraining bosoms like rugby balls).
The wearing of shorts with boots is another popular trend.
And whilst the French may promenade down the Croisette with a small dog tucked into a bag, the German women accessorize with poodle perms.
At my last meeting, my German host concluded half an hour of good-natured mickey taking by telling me he was bringing his wife to London.
“With the Euro exchange rate, London offers the best value retail in Europe,” he boomed. “She is particularly keen to visit the Ugg boot store in, how you say, Ze White City!”
You know what – if it makes the Germans more fashion conscious, I will stop complaining.
Hold on to your hats – Property Week’s first `virtual’ conference kicked off this morning.
The idea is for people to sit at their computers and learn about property and the market in the UK.
No need to go to an expensive show or more importantly, to have to plead to speak to the property industry’s biggest names on the phone or at a cocktail party.
At `Invest UK’ you just e-mail the questions in and the likes of Lend Lease Europe chief Dan Labbad, Savills investment expert John Rigg or DHL property chief Roger Mann will give you their views.
Will it ever replace MIPIM, BCSC or EXPO Real? Unlikely – because the property industry loves to party, and it’s a little tricky guzzling champagne at your desk.
But judging by this morning, with well over 1,000 registered to take part at the outset, there is a role for `virtual’ events. We have had strong interest from overseas, in particular.
Just as magazines and websites will continue to be produced for years and years, so, it seems, will `live’ conferences and `virtual’ shows.
Go to investukevent.com to take part