Commercial Property Blog
All posts from: November 2009
I don't normally spend Saturday lunchtime loitering underneath the famous clock at Waterloo station - but this weekend I was there, in my football kit.
Because I was due to meet the Sunday Times to hand over documents relating to one of the property stories of the year.
This, of course, was the news that Christian Candy's CPC Group had named the Prince of Wales as a key player in its quest for tens of millions of pounds of deferred payment over Chelsea Barracks.
We broke this story at propertyweek.com early on Friday evening and my phone had been humming ever since - check out today's Telegraph and Evening Standard for further news on the row.
We got plenty of credit, from the FT, Sunday Times and Telegraph, but of, course, no cash for supplying details of the CPC claim, in case any of you are wondering how this all works.
And we are also totally unbiased in this affair: the CPC claim is a rattling good story, but let's wait to see what the Qataris have to say, too.
I will be happy to meet anywhere, anytime to discuss!
I am sitting on the train back from Brighton - but judging by one of the big themes at the year's biggest investment market gathering I should be on the Eurostar.
One of the repeated messages to the 350 fund managers and advisers at the IPD/IPF conference was 'Go Global.'
UBS asset allocator David Buckle set the ball rolling by suggesting that most funds should increase their overseas holdings from 15% to 30% plus.
Then Invesco Real Estate's Simon Redman, in a talk entitled 'what new investment products can we expect?' went further still.
He caused some uncomfortable shuffling in the audience by revealing that most funds would have seen their portfolios fall in value by a mere 11% rather than the 40% they suffered if they had diversified globally more.
'Diversification abroad will be a big trend post recession,' he said.
There were two other big talking points: the market first.
REEEF's highly respected research expert Peter Hobbs spoke the unspoken: that perhaps property is entering another boom rather than a bubble.
He was, of course, cautious, but in outlining a 'high liquidity' scenario that well regarded research group PMA has also outlined in recent weeks he showed how returns could top 15% next year.
And finally, tax. I had a chat with Deloitte partner David Brown after his talk, and we agreed that there are major issues facing Jersey and Guernsey once new European regulations on fund management come in.
Basically, it is looking tricky for funds in these juridistictions to sell to investors in the EU, although lobbying continues.
Brown is also expecting new REITs with bundles of assets to be spun out of the banks.
The one bloke I could not agree with was Conor Downey, a partner from the law firm Paul Hastings.
He spoke of the dangers of regulating rating agencies.
Eh? These were the muppets assigning triple A ratings to Lehman CDOs in 2007, weeks before the whole deck of cards collapsed.
Paul, read the excellent piece by the Edinburgh professor Donald MacKenzie on p 36 of today's FT as he explains how the agencies got it all wrong.
Now we are getting near East Croydon. I hear that last year several fund managers ended up in the sea at 4 am.
Now where's that Eurostar timetable....
Apologies for not blogging on Friday afternoon - I was celebrating with my team.
I took a rare, impromptu half day after one of the best days in the journalism calendar the Periodicals Training Council Awards, where the best young business and consumer magazine journalists are honoured.
The reason for the visit to The Anchor at Bankside?
Our own Occupiers Correspondent Hardeep Sandher was not only named New Business Features Journalist of the Year, but also New Journalist of the Year overall.
This is an amazing feat, given that Hardeep was up against the best young talent from BBC magazines, Elle, Wallpaper*, Shortlist, The Times magazine, Company, New Scientist and our own sister title `Building'.
I was also with Jenny Rigby, our highly talented news correspondent, who was Highly Commended in both the New News Journalist and the New Features Journalist categories.
So forgive me, because Hardeep, Jenny, Lucy, Shep and I were otherwise engaged before I tottered off home to Mrs Barrie and the kids at 6.30pm.
Normal service will be resumed this week.
David Harper is director of consultancy Leisure Property Services and was previously head of international hotel brokerage and hotel valuations with CB Richard Ellis.
David is taking part in the Round the World Clipper Race 2009-2010. A complete sailing novice, he will take part in the 5,100+ mile (8,200kms) leg from Australia to China via Indonesia, through tropical heat and near arctic conditions. The six week race will start on 2nd January 2010. You can follow his preparations and follow him in the race right here.
However as we signed off for sleep at midnight the weather took a turn for the worse. Conditions deteriorated and the weather we had been forecast came upon us. The wind was gusting at force 10, the highest I had experienced. We shook out to a third reef in the main sail and changed the yankee for the storm gib (this is the sail with an unhappy face drawn on the bag to signify that the weather was against us – I loved this small bit of graffiti) and we sailed true and hard – down below it felt as though we were rushing headlong into a traffic accident. I was regularly lifted out of my bunk but thankfully the angle I had my bunk on and the lee clothe saved me from being hurled out of bed.
When we came up at 4am visibility was much reduced and things were much colder. We also had winds gusting up to 62 knots – a force 11. To set this into context Force 12 “Hurricane” (and the highest the chart goes to) starts at 63 knots. Despite the cold however I still only had a tee shirt under my wet weather gear as I had suffered from the heat in the galley too much the day before. Apart from watching out for obstacles and getting very wet - it wasn’t raining but the action of the boat through the waves ensured lots of sea spray - we did not have much to do. Our shift was soon over and we were back in our bunks trying to get some sleep.
I awoke about 11am to the noise of the engine. I assumed we must be approaching Grimsby – we had been making excellent time – at one stage we touched 22 knots over the ground (wave assisted) but was told that with the weather conditions as they were we would never make Grimsby before they shut the tidal lock without the added help of the engine. We were also told that all of the boats had been ordered to do this. We were extremely disappointed as we were doing well…as far as we could tell we were making the quickest time across the ground except for Finland, who were sure to be disqualified as they chose to ignore direct instructions from Clipper and not go into port but just to plough straight up to Grimsby.
On the way into Grimsby we passed Edinburgh (the boat not the city due to bad navigation) and it looked battered – the rigging looked all broken and they had no sails up except the fully reefed out main. We learned later they were not the only boat to sustain some serious damage. We got into Grimsby at 8.30pm, 2 minutes after Hull & Humber (for whom the lock had stayed open later than usual for), and a boat 5 minutes behind us was refused entry. We had all been praying we would get to Grimsby as quickly as possible – which is not a phrase that usually trips off the tongue.
We put the boat to bed – lines out, rigging and sails away, mainsail flaked and covers on, and then headed off for a shower and a beer. We were absolutely shattered. The Yacht club looked after us brilliantly – they had hot pies ready for everyone, and beer at £1.60 a pint. The friendliness of the welcome was excellent. About two pints later however it was time for my bed…
The following morning we learnt of the friendliness of Grimsby in spades. I went to the local greasy spoon to get breakfast for the boat. The poor lady was overrun with Clipper orders and was running out of provisions. One of her customers stopped having their food and went out to the local supermarket and came back with more bacon and sausages so she could keep serving. I was speaking with one chap about how to get to town and he pointed the way – but within 2 minutes another chap came in with google maps showing where we were and how to get around – he must have printed off about twenty copies for us all.
Other stories that came back were people asking how to get somewhere and the person saying “jump in, it will be quicker for me to take you there rather than explain it”. My favourite though came from Margo who told me she took a taxi from the railway station and when she got to the boats the cabbie waved the fare saying “have this as a present from Grimsby – we are all really pleased you are here.”
The race day started early, getting all the rigging done, getting our kit sorted, bunks arranged and finishing off the last minute things.
A party was being held at Royal Clarence Marina and many people were coming down to wave us all off. A BBQ was on offer for all crew, followed by bands and speeches. Then each crew was called up on stage, introduced and then sent off to their boats, to leave the Marina as their boat songs were played. It was quite emotional watching all the crew leave but soon it was our turn (we were second last) and then we were all getting ready for the trip out of the Marina.
We pulled out and then went into reverse to get closer to the harbour wall where everyone was watching and then started dancing to One Love – anyone who has seen me dance can imagine what a sight this was. We all also stopped in unison and did the Usain Bolt pose…we had rehearsed that bit!
The main channel into Portsmouth had been closed for two hours for us to leave (even cancelling ferries!) so the boats with a small armada of auxiliary support vessels so we could start the race.
We even had our own supporter vessel – a small two person dingy was following the race with a Jamaica flag at the bow and a very vocal dog on board – we were absolutely thrilled.
The race from Gosport to Grimsby was scheduled to take until Thursday – we had to get in Thursday afternoon between 4pm and 7.30pm – although to travel that far would only take two days – so the plan was to run across to the coast off Norway and then head back to make that window. However things changed – a weather forecast came in offering a poor outlook – Force 10 winds were expected in the next 12 hours. As it was important not to start the race proper with broken boats Clipper told all the boats to anchor at Brighton or Dover for the first night to wait and see what happened with the weather. The race would now take the form of a time trial over a set course.
So the race started and we were directed to Brighton – we must have sailed for around 4 hours and were then back in Port! Unfortunately the weather worsened the next day and we remained in port for two days…until a decision was taken that we needed to get to Grimsby whatever Mother nature may throw at us. So on Wednesday morning we all left the Marina, proceeded to the time trial line and started our race.
Initially the weather was not too bad at around force 8 (note I was not saying that when I started sailing!) but unfortunately I had drawn Motherwatch which involved being below decks to make the food and drinks. When I was below with my wet weather gear on it was too hot and I felt extremely ill. I soon learned to be only partly dressed if I was too avoid sea sickness (though I am not sure the site of me half naked did much to avoid the others on the boat feeling sick!)
Two of the people on my boat offered to take my place in the galley but I figured I just needed time to acclimatise to the conditions – and if I went up on deck I would have the same problem next time I was on motherwatch.
We cooked some super food and it was not long before I could get up on deck – after lunch (Hotdogs) and dinner (pasta bake) we had the nightshift 8.00pm to midnight and then the 4.00am to 8.00am shift. The midnight shift was excellent – we adopted a sail plan of a two reef mainsail and the number two yankee which was OK for the conditions and we literally flew past a number of boats including Cork and California – this had not happened to us before as we were usually slower than the other boats (on the Round the island race that I had not been part of we were last by a long way and morale was down to such an extent that a lot of the crew ere talking about us coming last all the time). Morale certainly improved (we had always been happy, now we knew we going to be competitive on the racing side of things) as we flew past these boats, and all sightings led us to know we would chase the others down.
The Clarence was putting on a weekend of events for Clipper Crew to say goodbye, as the boats were leaving on Monday to race up to Grimsby in the Pilgrims Cup. Friday evening’s entertainment was a Karaoke night with a bucking bronco outside. Unfortunately Matt and Belinda (both round the worlders) seemed unduly interested in the Karaoke, and as such Jamaica kept getting called up to sing – which really was not very clever. We sang a massive selection of songs, from American Pie to Dreadlock Holiday. We also committed to singing the Jamaica boat song “One Love”.
The boat song had taken on a life of its own when it was first spoken about – in the first week there were over 350 emails amongst the crew with suggestions. We even had an offer of help from Christian O’ Connell from Absolute Radio to try and help us get the perfect boat song. The boat song is the tune that is played as you leave each port and as you arrive at the next port, and becomes the song that everyone associates with the whole trip. It is therefore essential that a good song is chosen.
Just before the boat was given a name we had over 100 songs up for “election” – we were going with a simple one person one vote route. However as soon as Jamaica were named as sponsor our skipper – now called Captain Rasta – vetoed all previous votes and called for new voting, with only Bob Marley allowed to be chosen. I personally went for Redemption Song (my favourite Marley recording) but the popular vote was for One Love.
Other boats went down different routes – Cape Breton wrote their own song, California ditched all those great California options (Girls, Dreaming etc ) to go for Don’t stop me now by Queen and Finland stole our discarded Blues Brother idea (Everybody needs somebody). I was most disappointed when ‘Ull n’ ‘Umber did not go for the classic Meatloaf track “Boat out of Hull”.
Anyway we got called up to sing One Love and it soon became evident that we needed to do some serious work learning the song – we appeared to have no idea how it went!”
The following day was a final day of boat prep followed by an evening of schoolgirls in the Clarence and then we were preparing for the start of the Pilgrims Cup race – a little race from Gosport to Grimsby – it was our intention to use the race as additional training time as the outcome would not affect the main race.
Schoolgirls night in the Clarence
I was back down for Prep week on Thursday, with yet more gifts for the boat – I had picked up the Helming Gloves and also had the boat computer (a donation from Leisure Property Services) reconfigured by a good friend Nick Werba, and along with shower curtains and other such items I waddled my way down to the boat carrying way too much stuff!
The shower curtains were a special addition to our boat to try and stop a number of the bunks from getting too wet – eight of the bunks are very close to the main hatch down which the sails are transferred and any wetness on the sails (and indeed waves and rain during the actual change) are likely to make the bunks and sleeping bags (and therefore all our kit) very wet – the shower curtains are to try and stop such an issue!
That Thursday night I talked a few people into coming down the Clarence for a swift beer or two and before I knew it we were all having a bit of a session. I got back to the boat about 4am…I had been meeting a few of the Edinburgh and California teams.
Friday started with a few sore heads- and instructions to take all the winches apart and to store all the food. It is amazing to see exactly how much food is needed for one boat for one leg. The task was to separate it all into day bags, so only one new bag was needed per day, with the rest all stored in the various cupboards around the boat.
My specific job was to grease and oil all the working parts of the winches after cleaning all the salt and grime from throughout the machinery
Each winch was made of three or four spindles of cogs, and each winch was slightly different in layout and design. The first winch we attempted (there were three of us working on it) took two hours as we learned how to strip and then reassemble the pieces – it was like a very complex three dimensional jigsaw puzzle and almost every piece had two or more possible ways it could be put back together…and I think we found every way!
The winches nearest the snake pit , closest to the bow and therefore closest to most of the breaking waves, were in the worst condition and were thoroughly encrusted in salt and grime – they had not been serviced for over 8 months – it is usual to service each winch at the end of every leg during the race.
By the end of the day I was completely soaked in diesel (we had been cleaning all the parts in diesel) and got myself ready for a long shower, in preparation for the evening outing.
With the race due to start in less than three weeks time an army of volunteers had been asked to come down to Gosport to help get their boats ready for the race. Everyone offered up whatever time they could spare and I had been warned by my friend Charlie (who had done the race last time) that being overly generous with your time was essential as the amount of work needed on each boat was huge.
The basic concept of the race is that the challenge comprises 10 identical boats with only the skippers and the crews being the difference between the boats. However after all the part Cs were finished each Skipper had the chance to make whatever changes they wanted to the boats, using their crews to make whatever modifications were required.
On the last Saturday of C4 – just days before boat prep week started we heard the announcement we were waiting for – we finally had a boat name! Our sponsor had come forward and agreed terms and we at last knew who we would be. I cannot stress how important this was to everyone on the boat. Originally I was told it was likely it would be Liverpool – which had made my son Matthew very happy as a keen follower of the exploits at Anfield. However this was ruled out, and rumours of Cardiff were raised, followed by one or two places that were less well received! However as a sponsor last time round, and with a stop over planned for this race the favourite amongst most of the C” crew was Jamaica…and lo and behold at 4.20pm we were told Jamaica were to be the sponsors! I am told racing on our boat stopped immediately; the boat came in and went straight to the local off licence to pick up a bottle of Jamaican Rum. The full name would be Jamaica – Lightning Bolt, after Usain Bolt – and he had just shattered both the 100m and 200m world records yet again at the Athletics World Championships just the week before!
On the Monday of boat prep week I was scheduled for a VHF training course being taught by Jimbo, the first mate on my Part A (and to think I thought the hotel world was incestuous …it’s got nothing on the sailing world!)
On the course were about twenty other Clipperites, including Ron, Mark and Pavlo from Jamaica – I had never met Mark and Pavlo and it was great to get to know them. One of the other attendees was a chap called Mike from Spirit of Australia who seemed game for a laugh. There were also two people from CV5 – the last remaining boat without a name…which was widely expected to be named after a northern European location.
On the course we were learning how to transmit on the VHF radio – the training would give us a lifetime qualification to transmit on the radio, providing us with the necessary training to speak effectively from boat to boat and boat to shore.
The main problem with the radios used on boats is that they can only receive or transmit at any one time and so it is essential that you let the person you are talking to that you have finished speaking – hence the use of Over or Out. I think most people will be aware that the Hollywood fiction of “Over and Out” is complete horlicks, and that you either use one of the other and never a combination of both. Over effectively means you speak now and Out means we have nothing more to say! It is also a compulsory beer fine in Clipper for anyone saying “Over and Out” on the radio.
Another key thing we learnt was the format of a Mayday. There is universal format that is used so that even when a Mayday is broadcast in a foreign language other people who do not understand the spoken language can still pull out the salient information and be of help to the stricken vessel.
As a general exercise we had to create our own Maydays and Pan Pan messages. It must be said that we quite enjoyed ourselves…Jamaica requested an emergency delivery of Ice to go with the Rum we had on board…Cork requested more Guinness…and we asked for some spare letter “H”s for ‘Ull n’ ‘Umber, and help finding a name for poor old CV5. My favourite however came when we asked for help finding the Ashes that Spirit of Australia seemed to have lost just the day before!
At the end of the day we sat the exam – which Jimbo was confident no-one would fail! I can say it was not the toughest exam I had ever faced…I think I got 98% of so…I misread one of the questions stupidly!
As readers of this blog will know one of the key reasons I have undertaken this extreme sailing challenge is to raise £10,000 for Cancer Research and I have been using a “Just giving” webpage to collect donations. The main way I have been letting people know about the project is through direct emails to people I know, and as part of this program I sent out an email to everyone who had not already donated.
In the email I pointed out all the benefits of donating to a cause like Caner Research (it is effectively an investment in your own life, as on average 1 in 3 people will be directly affected by Cancer and so any research they can do to minimise the impact will be personally felt!). I also provided a link to a sailing clip that outlined the sorts of conditions I experienced in my part C training. http://www.youtube.com/watch?v=zXuzy0k9mZQ
This mail-out turned into quite an interesting exercise because when I usually contact everyone in your address book it can usually lead to a few “bounce backs” where people have changed their jobs. In a typical year it can be as high as 5% as I am not always as good as I should be at recording new jobs – however this time 17.2% of people had changed email addresses – either from natural movement or from redundancies coming from the economic climate. It was certainly a staggering amount that confirmed what everyone has been feeling about the property industry in the current market.
I ran a quick straw pole – and I will be the first to say it is not exactly based on rigorous scientific methodology – but as a quick breakdown Bankers had been hit over three times as hard as any other category of contact in my address book. Surprisingly enough architects were the fourth hardest hit group, with valuers the least changed group.
More importantly however, we started the week with around £2,000 of the 310,000 target raised so I was really hoping for a significant response from people. All of the donations were personal donations and I was really surprised by many of the incredibly generous donations that were made to the cause.
As of 15th September we had raised over £5,600 which was excellent – only another £4,400 to go – please feel free to go onto http://www.justgiving.com/davidharper2 to make a donation, thereby effectively saving all my contacts from having another junk mailing in the future!
For most of my adult life any mention of PE brought back the horrors of Physical Education classes of my youth, in particular a lesson in 1977 after my mother had packed me off to primary school without my kit. Having to do a class of musical movement in purple paisley M & S "Y-fronts", with green tubing, has scarred me forever and I will never forgive her.
The current problems in the world of Private Equity are more complex, but no less serious.
A recent article in The Independent was one of the first to highlight the seeming reluctance of some banks to engage with major equity players for fear that the buyers might have the temerity to be better at managing out distressed situations than them and might actually make some money!!!
To highlight a bout of insanity that could only be true of an effectively nationalized organization, it references the recent sale of Insight to New York Mellon. HBoS (nearly 50% owned by you and me), allegedly, sold it at a discount of £15m to the best price bid by a respected PE player, in case they "make huge profit". Am I missing something, but surely NYM will now make a "huge profit" plus a gratuitous £15m!!!
If this is true, the only losers are the beleaguered HBoS shareholders and the even more beleaguered UK tax payers.
Now PE does have serious structural issues, returns on previous funds may have been illusory, driven by leverage rather than stock picking or asset management, and even worse than that the industry has billions of pounds to invest, sometimes with no real idea of how to get to their desired returns.
Let me explain:
- On the back of Fund I, which made phenomenal returns up to 2005, Gear Lots Over Value Everything (GLOVE) Investment Management looked to raise second fund.
- GLOVE II closed in 2006 with £500m of equity pledges. It promised its funders a return of 12%, but charges a 2% asset management fee and 30% of the profit over the priority return. It promised to invest the money within three years and return it within five or six.
- Very excitedly GLOVE announce that they have £2.5bn (geared) to invest, however to make money themselves GLOVE need invest in opportunities that offer a >20% return and this is based on being able to get 80% gearing.
Unfortunately the world as we know it shortly thereafter came to an end. In 2008 GLOVE looked very clever (if you ignore the returns on Fund I) and couldn't wait to buy loads of distressed kit, but like a surfer on The Serpentine, for them the wave never came and now funds and cash buyers have stoked up the prime market to a level which they couldn't justify, even if they could gear at 80%.
But the clock is ticking , they really need to get that money away shortly or the chance to earn lots of lolly in management fees will have passed, does GLOVE:
a) Spend the money anyway as they otherwise won't get paid and hope the market continues to go up
b) Hand the cash back to prove what jolly good eggs they are; as long as they can have it back at a later date
c) Swallow some pride and buy more secondary assets
d) Explain to their investors that there are fantastic opportunities out there, but in this new environment an 8% hurdle rate is more appropriate and that would give them a chance to compete in the market with target returns of, say 15%
e) Engage in some serious PR, drop all mention of "distress" or "opportunity" from their marketing material and look to cosy up in joint ventures
Clearly a combination of the most pragmatic routes would allow them to engage with banks as credible counter parties with realistic return criteria.
It's one of the many interesting conundrums for next year, after all no one wants to be left shivering at the side of a cold assembly hall being called "Skinny Sick Coloured Pants."
I can assure you.
View Mark Robinson's blog at http://www.ellandi.com/blog/