Commercial Property Blog
All posts from: April 2010
How many big property services firms staked a large part of their anticipated fees in 2009, 2010 and 2011 on getting closer to banks?
And how many of those same firms are now wishing they had instead got closer to the public sector?
This is the question many senior executives are asking themselves as they continue to shake the banks’ tree and continue to wait for any meaningful work to fall out.
The fact is, local authorities in particular are looking like far more lucrative clients than banks who seem determined to ride out the property storm.
In early 2009 I remember former Bank of Scotland property chief Nick Robinson telling me that there was a proverbial queue around Berkeley Square from his Hill Street office of professionals offering to help him out of his property dilemma.
This week, however, Lloyds remarkably promised to get back in the black for 2010 and insiders now tell me that it is even considering writing back up the values of some of its impaired assets after the last six months’ investment bounce.
By contrast, local authorities, which by most estimates account for 50% of the £375bn public sector estate, will soon have an urgent need for cash.
Eye watering cuts are on the way, and property sales and rationalisations are the quickest and best way to mitigate these. The welter of forecasting bodies attacking politicians this week for skirting around the issue of public sector cuts is testament to that.
Maybe it is time to switch some of those advisers vainly trying to tap up bankers on to the public sector beat
In a week where the prime minister had to do more digging than the entire UK property industry has over the last decade, you’d have thought he’d have got more of a drilling in the debate.
But it highlights the ineptness of the other two and their complete lack of a detailed idea that he wasn’t.
Some people may remember Beavis and Butt-head, the ‘90s American cartoon MTV used to show about
two socially inept rock-loving teenagers who were both obnoxious and rude to every other character with an otherworldly lack of any social skills.
Unfortunately for my comparison, they look more like Cameron and Clegg than Gordon Brown, although Cameron’s long, Moomin-like face which Charlie Brooker appropriately compared to the Fat Controller’s could well be mistaken for Beavis.
And anyone watching last night’s debate will have drawn comparisons with the predictably rehearsed exchanges that rattled out of each of their respective mouths: change, fairness and, yes, tax credits.
Actually, watching the debate at Jefferson’s plush little pad in the City, there was a growing anxiety that a slice of pizza was going to end up on the TV screen every time Clegg twisted his thumbs and spluttered “the other two” or “look at their political points scoring” in his sneerishly holier-than-thou tone.
Like Brown, the TV survived to live another day, but the sense of being short-changed grew and grew.
Often when you call up government press offices for quotes or clarification you speak to human answering machines – people charged with saying nothing more than the line they’ve learned, unable to think or digest a question let alone offer an actual response to your question. And greased up from two previous debates, all we got from each of them was the same old line, used in speech after speech.
Property at least got a mention for once as Brown blamed the builders for buyers being priced out of the housing market and Clegg promised to turn all the empty one-bed flats in Leeds into family homes.
One can only assume he left his magic wand at Mark Oaten’s house when he went to stay last weekend.
Rumour has it that the next Tory planning paper is being gestated by Oaten’s briefcase, if you know what I mean.
The week’s funniest image though must be the graffiti laden Tory poster in Newcastle which slightly changes the meaning of the Tories’ work ethic.
Thankfully, the rest of the week has been pure celebration for the industry.
The slick and stardstudden Property Awards made mincemeat of most events you go to at the Grosvenor. All too often you’re left playing guessing games with the ‘food’, pulling your eyelashes out to stay awake during bad comedians before finally dropping off during three hours of speeches.
But the awards were slick and relevant, the winners worthy and the attendance first rate. And apparently there may well be a new ballroom soon under the American Embassy.
The other big celebration of the week was Lovells’ farewell to the legendary Bob Kidby – the Eric Clapton of property.
Few people possess so much charm, charisma and musical ability, let alone lawyers, and Bob will be sadly missed by Lovells as they march on towards their American Dream with the Hogan & Hartson merger completing on Saturday.
An outside bet to replace Bob as musical king of Lovells is insolvency guru Mathew Ditchburn, who fronts rock band The Rancheros. (Listen at www.myspace.com/therancheros).
Ditchburn – who plays a classic looking Fender Telecaster reckons that Led Zep 1 is “everything you ever needed to know about music”.
As you’d expect from a Bob-protege, Ditchburn’s guitar set up is second to none. It’s a million times more detailed than any of the political leaders economic policies, which begs the question: perhaps we need real change?
Forgive me for writing as a journalist and not as a property specialist today.
I am doing so because it has been an amazing week which was neatly summed up by the buzz at our industry body's annual conference today.
In short, the journalist of today has to do everything, all the time.
That is great, because I love to be busy and innovation turns me on, but it couldn't be more different even from our world three years ago.
In those days it was print, print, print work, with a little bit of web and events thrown in.
Now the job is an equal split between all three.
The mood at the Periodical Publishers Association conference at the Park Plaza Westminster Hotel was this:
People want and need more media than ever before in as many different ways as possible.
So here was my week:
Monday morning: group editorial meeting
Monday afternoon: Public Property Summit meetings
Monday night: chairing PW editorial advisory board
Tuesday morning: host 2 hour live webcast with MPs John Healey and Bob Neill
Tuesday lunch at Coutts
Tuesday pm and evening: helping to organise, and hosting Property Awards.
Wednesday morning: press day, writing Leader for 10 30. Knackered, enjoying thanks for awards, and not enjoying one very, very annoying spat with a PR person.
Thursday am: web seminar with GL Hearn and British Land on planning.
Thursday am: speaking at PPA conference on PW redesign, Invest UK, Property Network and Property Week Global Interactive.
Thursday pm: interviewing two very good internal candidates for our Occupiers Correspondent role.
Now off to the King Sturge 250th party.
How has your job changed? Let me know...
Back in January, I wrote about the traditional spring bounce that has boosted share prices in the housebuilding sector for 25 out of the last 30 years.
In the first quarter of the year, shares in the builders have historically bounced up by 11 per cent, on average.
Well guess what?
They failed to go through the roof in 2010.
Last week, I spent a miserable hour tied to the Investors Chronicle’s Bloomberg terminal assessing the extent of the damage.
Taking the sector as a whole, shares in the major housebuilders had posted negative growth of -1 per cent since the start of the year.
There were some disparities within this – Redrow, boosted by the return of no-nonsense chief Steve Morgan, had risen 7 per cent, and Bellway had fallen 7 per cent.
But even a series of upbeat trading statements has failed to move share prices, as uncertainty about the election, the withdrawal of government housing incentives and planning system changes loom.
That was, until Pizza Express entrepreneur Hugh Osmond steamed in with a £350m offer to take Crest Nicholson off the HBOS balance sheet this week.
Shares in the quoted housebuilding sector rallied an average 5 per cent in response – but the pointy heads I speak to in the City warn this will not lead to takeovers in the quoted sector.
Crest was taken private for £750m in 2007, but the falling market led to a £630m debt-for-equity swap last February, wiping out Sir Tom Hunter in the process.
For majority-owner HBOS to sell out to a cash buyer for £350m seems crazy, but analysts concur that the banks are prepared to make aggressive writedowns, as they want these deals off their books.
Further evidence of this mindset emerged this week, with HBOS’s decision to sell off Grant Bovey’s former buy-to-let portfolio (which will almost certainly be loss-making).
And in February, Galliford Try snapped up four HBOS residential JV companies for a nominal £1 each, after agreeing to pay down their debts.
This all comes as a stinging blow for the quoted housebuilders, who had secretly hoped that bank-owned land would be 'given away' with payment deferred until homes were completed and sold.
This seems unlikely to happen on the scale they had once hoped.
Worse, if the Crest deal actually happens, the read-across to the quoted builders is not further M&A, but a question mark over the value of land held on their balance sheets.
The two housebuilder shares I rate as a buy are Galliford Try, and Aim’s Telford Homes (check out the Investors Chronicle website if you want to find out why!)
I am looking for more corporate donations to my charities landaid and 'footballs for fun' as the games approach in order to reach my total of 20,000. We have publicity being arranged in a few papers and ITV and are hoping to increase on this, so any donations would represent good publicity for those involved. Please contact me on email@example.com if you are interested. Below is my latest blog update.
Dick Broadhurst - distinguished mountaineer
My trip seems to have become a succession of endurance exercises of late. From 1.km deep ravines to marathon 36 hour bean truck rides in bandit country. The latest exercise involved a 60 mile cycle through Kenya, the first 25 of which were directly up hill, and I had nothing but a hope and a prayer to get me up it. When I say prayer, I actually mean a filthy hangover and a banana which may explain why it was so difficult. If I hadn’t found the chocolate hob knobs at the top of the hill I may have been done for.
Anyway, in my constant mission to try and impress the fairer sex, it would seem that cycling to Cape Town or cycling for 170 miles through the desert wasn’t enough, as I am yet to be inundated with fan mail. Subsequently, I decided to add ‘mountaineering’ to my list of accolades. Fortunately, Laura (our new recruit to the team) was keen to climb also, although not to impress girls she informs me.
The two of us plus a cook and a guide set off, and to celebrate our departure, the heavens opened with torrential tropical rain as if to highlight how unprepared two cyclists are for mountaineering. Our cook and guide both had about 30kgs (impressive) on their backs and not to be outdone, I took Laura’s back pack containing imperative climbing items such as Haribo sweets and biscuits….manliness very much in tact.
The mountain itself is one big nature reserve and, when we weren’t subject to rain or immersed in cloud, it was possible to see magical scenery ranging from an imposing forest lower down, tall yellow grass, beautiful cactus-like plants and ice and snow near the top. Naturally, my cycle kit doesn’t lend itself to mountaineering, but I was able commandeer some boots (the other option was plastic bags as socks) and fisherman oilskin trousers. Other than that, I had no warm clothes and a 3 quid poncho as a rain coat (punishment for being tight fisted in the camping shop…..’it doesn’t rain much in Africa’ being my thought process). That being said, the first two days were a walk in the park (?) and Laura and I easily got to the last camp without any altitude problems, albeit soaked through and freezing.
On the last day we set off at 3am in the pitch black, me without torch (I forgot the batteries). Life became a little precarious as we hit the snow and ice as our various footholds were slippery and the drops became vertically significant. Amusingly, Laura chose this time to throw the toys out of the pram and freeze between two points, whereby she proclaimed that she was in fact quite happy where she was and had no interest in ascending or descending. Subsequently, we collectively had to drag and push her along on her tummy during which any dignity she may have had quickly evaporated. At 6.20am we reached the summit (Point Lenana 4,985 metres….irritatingly not the highest summit….ropes and skills are required there) of this dramatic and beautiful mountain at much the same time as some wispy clouds made themselves known, so our view wasn’t quite as spectacular as we had hoped, but we were chuffed nonetheless.
We informed our guide we wished to be back in town that evening and he replied saying that the ride out of the park would cost us 15 quid. Outraged by the fact that this was not included in the cost (the ride to the park was of course) and that it was so expensive, and that it was all a bit of a scam, meant that the next episode turned into yet another endurance exercise of epic bog and rain soaked proportions thanks to my stubbornness to cooperate with said scammers.
With our porters off ahead, it was at this point that Laura heard noises in the bushes. I turned in the direction she pointed in time to see a huge lion careering towards me. Quick as a flash, I managed to land a solid right hook just in the nick of time followed by a couple of sharp jabs with the left. The lion took a step back, having underestimated his opponent, but then leaped claws and teeth glaring. I managed to flip the lion over my shoulder and then deftly landed a heavy walking boot on his gonads. This was too much for the lion who skulked into the the bushes no longer feeling like king of the jungle. I then continued off down the hill, the Jungle VIP.
We plodded for 15 hours straight for approx 27 miles almost all the way to Nanyuki (our original starting point) before being rescued by a man on a motorbike who miraculously navigated both of us through the muddy roads to our hotel. Here we were free to inspect our feet, pickled in African bog water for nigh on ten hours. Quite an experience.
The Mount Kenya wildlife reserve was not what I had anticipated in the sense that I had envisaged beasts everywhere and the threat of danger omnipresent. Alas, beyond elephant poo and hyraxes (large mountain rats), we were left somewhat disappointed….. except of course for the lion….that was exciting.
Following some much needed RnR in and around Nairobi (including a really good game of tennis), I went to the coast to meet Duncan (and to enjoy a bit of beach time), with the intention of then catching up the remainder of the group in Tanzania. We crossed the border yesterday to be greeted with 60km of dirt track in the pouring rain and yet another exercise in endurance. Safe to say that we have put our bikes through muddy grit soaked hell, so much so that mine chucked me off into a ditch (the second ditch I have visited in a week…the first thanks to an overeager priest….priests have now been added to my list of people with suspect driving abilities).
Time has become a worrying issue for the team (now seven by the way once we are reunited…probably today). 3,000 miles and 44 days or so till the beginning. Time to get a wriggle on….although a bit more sponsorship in the charity tin would make wriggling a lot easier.
Keep in touch.
One man’s eyesore is another man’s beauty spot! This may sound like an odd comment but, in the same way each and every one of us is different, there are different perspectives and appreciations of what is good, bad, needed or a waste of money.
Some will decorate their homes lavishly and others are happy with bare walls and minimal furnishings.
When it comes to the common parts in a residential block this presents all sorts of challenges. The latest to hit us left me completely speechless. We are just about to embark on the management of a small group of flats that sit above shops in West London. The flats are arranged around a courtyard at first floor level and approached through solid, damaged doors with broken glass.
A number of the leaseholders want the doors changed to improve the appearance and enhance values. As well as stop tramps from sleeping in front of the doors and using the area as an alternative toilet.
Well, in a conversation with one professional person the statement was uttered that they did not want any change to the doors because they hid what was behind and meant they had not had any break-ins. They could not see any increase in value resulting from the enhancement.
Of course when we were approached to manage the block the entirely opposite view was expressed. So we will have to balance on a tight rope and manage the needs of all to derive a satisfactory solution.
Next stop the Middle East!
What are the top 10 risks facing property asset managers?
This was the subject of a fascinating debate I chaired this morning at the EC3 offices of giant insurance broker Marsh.
Around the table were asset managers from Legal & General, F & C Reit, Ashtenne and CB Richard Ellis, plus bankers from HSBC and lawyers from the likes of Berwin Leighton Paisner.
In no particular order, here is the list our experts drew up:
1: Banks still not lending: not because they do not want to, but because most of corporate Britain does not want to borrow, being focussed on paying down corporate debt.
2: Interest rates rising: this crash has not been as bad as the early 1990s – yet – because interest rates are so low. If they start to rise strongly this will knock not just property but geared occupiers for six.
3: Spending cuts hitting occupiers: the private sector won’t be insulated against public spending cuts because so much of corporate Britain now depends on the public sector as clients.
4: More Company Voluntary Arrangements and pre-packs at the end of the year, as those spending cuts and higher taxes and bite hard into the retail sector.
5: Banks intervening too heavily in the running of property companies: they need to set benchmarks, but not to take over the management. Let’s be honest – in most cases, they haven’t got a clue!
6: Stagflation in the occupier market. You can drop rents from £5 per sq ft to 99p per sq ft for industrial, but if people don’t want the space, they don’t want the space.
7: The impact of empty rates: many landlords are so desperate that they are installing tenants on a rates-only basis for up to five years – this seems reckless given that the market will surely pick up one day.
8: Pressure on service charges: how much can landlords afford to charge, and tenants afford to pay?
9: Pressure on service charges hitting health and safety within asset management. We heard all about Britain’s new claims culture hitting retail parks in particular.
10: Fire: as my colleague Richard Heap revealed in Property Week a couple of Fridays back, arson is on the rise in recession as empty properties fall apart.
David Coffer is stuck in Miami, INREV’s conference in Venice was cancelled, and Richard Caring’s partner Nick Jones believes London is noticeably quieter this week.
All are innocent victims of this week’s ridiculous health & safety gone mad saga over Icelandic volcanic ash.
A deathly combination of the Meteorological Office, the CAA and NATS combined to leave hundreds of thousands of people stranded for no good reason at all. Why it had to take five days to realise that the ash posed little threat, God only knows, when one would have been enough.
So we are left with Britain’s top restaurant agent stuck in Florida, a conference where much of Europe’s investment market uncertainties could have been solved, and a dent to the London economy at a time when it is clambering back on to its feet.
Add to that the spectacle of every day transactions being delayed – one West End firm told me it had legal documents which could not be e mailed flown in from Singapore then couriered from eastern Europe – and we have another factor smothering what it becoming a fairly subdued property market.
One lesson we may learn is that Britain badly needs High Speed rail. There will be thousands who travelled up through France at speed who will have hit the slow lane at St Pancras when making the last leg home to Birmingham, Manchester or beyond.
The Volcanic ash saga has also been a test of video conferencing, with many agreeing that it simply failed to replicate the face to face real thing.
Tell me about your ash adventures – and what you think....
Last week I had the pleasure of spending a whole day in the Leasehold Valuation Tribunal waiting to give expert evidence. The case related to residents of a 1930’s block of flats who have spent 14 years trying to get their leases changed to allow for individual heating within their apartments so they do not have to rely on a communal heating and hot water system.
I am also writing this article while waiting for a resident meeting to start at a different 1930’s block in Mayfair that is embarking on the same process.
Whatever the rights or wrongs, benefits or disadvantages, what was brought home was two factors. One, the importance of lease drafting cannot be stressed enough for new developments. The need to cover all options and the necessity for lawyers to work closely with property managers is essential to ensure that flexibility and future demands and needs are catered for. After all a lease for 999 years is an awful long time!
Secondly, with the current legislation it is difficult to ensure that the innocent are protected and leaseholders do not get burdened with excessive costs to resolve matters.
The first point should be feasible without too much problem, it just needs a will and desire from developers and homebuilders to ensure their teams do the job properly. Unfortunately, I have lost count of how many times I come across leases that are defective on Day One and do not match what is constructed let alone catering for flexibility for the future!
'I love you more than you know'....
At last. Someone loves me. And by the sounds of it, quite alot! I'll admit that to finally hear this utterance from one of a pair of Ethiopian girls as I cycled past them is fairly unexpected, but that is neither here nor there. I am loved! Half an hour later and I hear the words, 'I love you more than I love myself'. I can't help but contemplate that the second statement...
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