Commercial Property Blog
All posts from: December 2010
As ever, as we teeter on the brink of a new year, my mind goes back over the past year’s events. My personal review will not be of interest to you, dear reader, but suffice to say, the thing that is upper most in my mind is that it has been a year full of great potential and even greater people.
Property is full of talented and committed individuals and on the day of the New Year’s Honours I raise my glass – metaphorically speaking – to the people who work hard to provide something that the average Joe takes for granted.
There’s great satisfaction to be gained from playing some part in shaping a city; to see things go from a gleam in the eye to a reality, especially when that city is London.
But providing people with places to work, live and have fun takes hard work and risk. Doing it in this climate is tough.
As Gerald Ronson said at last month’s Westminster Property Association lunch, ‘Between 1997 and 2007 anyone with a pulse could have made money from property’. Those days are over was his message.
Staying power, skill and a long view remain the order of the day on London’s large developments, such as King’s Cross.
I ran my first King’s Cross event in 1999, where LCR set out the process that saw the then Argent St George selected soon after as the preferred developer for its 67 acre site.
And while Ronson’s fifty years in the business make Argent’s Roger Madelin look like a relative newcomer, a recent tour with Roger reminded me yet again of his sheer grit.
Despite the challenges of the current market, and the protracted planning process, Argent remains true to its vision of delivering a new bit of central London. Its future shape is already emerging, with roads that will link new homes, shops, offices, leisure and cultural space, all sitting within a public realm commanding over one third of the total site.
At its heart sits the University of the Arts Granary building. I was particularly pleased to see this taking shape, for it was on a CLP tour that I played match maker, when Don Gratton murmured interest in it as the university’s new location.
I grabbed Roger, made introductions, and the rest, as they say, is history.
Meanwhile, Roger and his team have ploughed on, outlasting Camden officers, politicians and governments. That’s staying power.
So if 2010 was deemed by Ronson as the year of the Heron, I hope that 2011 is the year that Argent turns gold.
Readers may have choked on their breakfast this morning as they read the Daily Telegraph front page headline `Brace yourself for a 5% interest rate’.
I will therefore try to cheer you up with my awards for the year.
First, the news on interest rates, courtesy of an interview with Monetary Policy Committee executive director of markets Paul Fisher.
With inflation set to hit 4% in 2011, Fisher warns that rates will inevitably return to more `normalised’ rates of around 5%, which would be far from comfortable for most property concerns.
The property industry has been saved from further carnage by the low interest rates of the last two years, but rates at 5% could start to topple the whole deck of cards.
All of a sudden all those properties and companies that are just covering their interest payments with income start to see their sums come apart – a few voids and they are up the creek.
It adds up to an unappetising economic picture: the MPC will have to raise interest rates to get inflation back to its target of 2% - but at the same time unemployment is on the rise.
So, to cheer you up as you head off for your Christmas break, here are my gongs for 2010:
Property Company of the Year: Hammerson – a blizzard of activity under new boss David Atkins, very much the modern, considered face of REITs.
Best Agencies (Small): H2SO and GM Real Estate – Paul Smith’s H2SO has thrown itself into a recovering West End market. Gibbon and McCurley’s GM has proved that you don’t have to be huge to make real waves in the London investment scene.
Best Agency (Big): CB Richard Ellis – after Jones Lang LaSalle stormed back to lead the investment league tables in 2009, the Green Machine cleaned up in 2010, dwarfing rivals’ activity levels.
Good Bank/Bad Bank: Lloyds Banking Group stepped up a gear in 2010, making some bold calls. But where was Royal Bank of Scotland? You feel its problems are so huge it still doesn’t know where to start.
Enterpreneur of the Year: So far – the prize has to go to Peel boss John Whittaker. He arrived on the world stage in recent weeks by agreeing to sell the Trafford Centre to Capital Shopping Centres, triggering Simon’s bid.
And don’t forget that he is also ushering in a new era for the North-West at Media City with the arrival of the BBC and ITV.
Developer of the Year: Tony Pidgley: the Berkeley boss cleaned up in London, where so many still feared to tread.
I am manning propertyweek.com on Christmas Eve, with my colleagues James Whitmore and Kat Baker on duty on December 29, 30 and 31.
Look out for a `Location, Location, Location’ noughties special at 19.55 on December 30, though, where I have my say on the decade’s amazing property boom.
I know an awful lot of MAMILs. That was my conclusion when given the opportunity to take a small group around the Velo in the Olympic Park, and I started to speculate on who to invite.
Cycling fanatic men, especially middle age men, in lycra – AKA MAMILs – are in abundant supply in my life so it was easy to fill up my dance card and get a waiting list.
The invitation came from Mike Taylor, Senior Partner of Hopkins, Velo’s designers. And since on each of my recent visits it was the Velo that appealed the most, it was great to get up close and personal.
It’s a classic Hopkins’ building, understated but detailed perfection, and its timber clad curvaceous exterior was framed brilliantly by a snowy backdrop and blue sky.
The tour started well with a chance for the boys to sit on Chris Hoy’s track bike left in the site office after inaugurating the building.
Igloo’s Chris Brown, a principal MAMIL and regener-ista, has captured his thoughts on his blog, so I’ll avoid repetition.
Mike explained the philosophy of the design, including taking inspiration from the ‘spareness’ of a cyclist and competition bikes – everything about the structure is pared down and snug fit.
The site is close to practical completion, and the track was under wraps, but that didn’t stop us lining up to peek and take photos of the finishing line, ready for corny jokes in 2012.
The trip reinforced the sense of excitement about the Olympic Park I’d felt on previous visits. It’s great seeing this former waste land teeming with workers, building infrastructure and sporting pavilions.
It is just months away from being handed over to LOCOG, a whole year ahead of the Games, for testing and preparation. Not for London that mad scramble for completion.
I wish everybody could get round the site to see the scale of the work, and hear just some of the stories about the design, planning and preparation.
Not to mention the team work that has made this a fatality free site.
It’s a testament to the UK’s ability to manage large projects, even though we like to pretend we can’t.
Not all the venues are as sexy as Velo, but majority hold their own, especially its immediate neighbour, Wilkinson Eyre’s Basketball Arena, with a white skin that will glow with changing colours at night.
But it was hearing first hand from Mike on the philosophy, aspirations, technical challenges and solutions, coupled with the sheer beauty of the Velo that filled us all with a rush of pride for the UK’s design and construction talent.
A thank you text from one of the group – a self confessed Olympic-sceptic – said it all. ‘…Amazing visit. I have changed my mind about the 2012 Olympics’. That’s a result.
Now, let’s hope 2011 brings lots of exciting commercial work to keep that talent employed
It is often said that timing is everything. This is certainly true in sport, politics, property and retailing. The evidence is there to see, particularly over the last few days.
At the weekend, some were describing Mitchell Johnson’s four hour-spell of bowling in Perth as one of the finest ever seen in an Ashes series. And, in the blink of an eye on Sunday evening, David Beckham lifted the Sports Personality Lifetime Achievement award.
Turning to politics, in one short interview, Vince Cable changes from hero to villain and a man with the capability to bring the party down.
The run up to Christmas is of course a critical period of time for retailers, and five hours of snowfall on Saturday morning has wreaked huge problems.
Brent Cross shopping centre was closed for a period of time, John Lewis estimate they lost £5m of sales and many high streets around the country have been inaccessible. You can go onto YouTube and see a clip of someone skiing down Princes Street in Edinburgh!
If a week in politics is considered a long time, then many retailers must be thinking the current week in the retail industry seems like a lifetime.
So let’s hope the Christmas spending keeps going and the retailers’ delivery trucks keep rolling. The retail industry deserves every second of time off it gets at Christmas.
I hope everyone has a great break, but one thing is certain and that is timing will continue to remain everything in the property industry in 2011.
Justin Taylor is Head of UK Retail at Cushman & Wakefield
What should Capital Shopping Centres’ directors do as they head off for their meeting to consider US group Simon’s £2.9bn indicative bid this afternoon? Read on to find out.
The argument in favour of agreeing to the bid is straightforward: the UK economy is facing a very choppy next two years, and retail spending will remain under stress.
Retail rents are bound to fall in real terms, and Capital Shopping Centres’ assets will need heavy capital expenditure to keep them ahead of the pack.
In the long term those centres will look tired as a new wave of development from the likes of Westfield, Land Securities and Hammerson sees the light of day.
And Simon may never come back with a bid of this scale if it wakes up to the fact that American shopping centres at 7-8% tend to yield far more than Capital Shopping Centres’ estate.
And yet there are far more arguments for Capital Shopping Centres’ board and its directors to say no to the Simon bid.
Property is a long term game, and while the outlook for UK shopping centres right now looks dull, to real experts like Sir John Ritblat or Capital Shopping Centres’ founder Sir Donald Gordon selling at 425p or even 450p would be mad.
Investors need to look at yields and rents across a property cycle – not between, say, 2007 and 2012.
Net Asset Value is, of course, calculated after debt, meaning that a small improvement in Capital Shopping Centres’ valuations would lead to a disproportionate rise in the NAV.
At the same time, the large South African contingent on the Capital Shopping Centres’ share register is in no rush to sell, largely seeing its holding in the company as a hedge against the economy at home.
Capital Shopping Centres could be valued at 600p in three years time. Nobody sells property at the bottom of the market.
Nobody should be surprised at the explosion of activity around Capital Shopping Centres: in August 2008 I said as such after Simon and Westfield had both taken stakes, in Property Week: `What is clear is that this is the end of the beginning in deciding the destiny of Britain’s third biggest REIT.
`[Capital Shopping Centres’ former parent] Liberty has been surrounded by uncertainty since Gordon stepped down as chairman in 2005 – now the jockeying will really begin’.
Verdict: Reject any bid short of 500p.
Yesterday I was crowned, by an adoring throng of my colleagues, as the Good-Looking Champion.
I should, perhaps qualify that statement. Unfortunately my colleagues were not paying homage to looks (I maintain I look like Brad Pitt’s younger, more attractive, brother – no-one else agrees.)
Instead, what was being awarded the “good looking” accolade was a cheesecake, a cherry and almond cheesecake to be precise, that I made for our office bake-off.
The bake-off was being run by myself and my fantastic colleague Rachel Baxter to raise money for my marathon effort.
The irony of cooking massively fattening cakes when I am training for 26 mile run aside, thanks to the kindness of my colleagues I am now off the mark in my fundraising efforts for Shelter with a £131.59 boost.
I also got the lovely crown you can see below.
My thanks to my colleagues for all their baking efforts and a special mention to Ed “I drink testosterone shakes for breakfast” Sexton, winner of the highly-contested Man-Beast category (the best cake by a man) for persuading the happy punters to flock for cakes named after roadkill.
If anyone out there is doing anything interesting to raise money, or has an idea about how I can raise some funds, do let me know below or in the marathon group on the Property Network.
And if you fancy contributing to my marathon cause please go to my justgiving page.
I celebrated the second anniversary of my firm Mark Adams LLB in Fortnum and Mason’s wine bar 1707 with a prospective client and a glass of Pol Roger 2000.
Despite high expectations 2000 was not the best of years for Champagne; however, Pol Roger produced one of the best cuvees.
As I took in the powerful nose, reminiscent of freshly toasted brioche, my client broke my concentration with a question, which has become an annual tradition in itself: what to drink over the Christmas period?
I have broken with my usual advice this year and recommended that anyone interested in enjoying fine wine should try the lottery that is the ‘mixed case’. In addition to offering value for money, much needed in these troubled times, mixed cases are fun.
Waitrose Wines has paired wine and accessories, its Wine Tasting Case & Free Riedel Glasses (10 bottles – 2 glasses - £89.00) is particularly ingenious as it offers drinkers the opportunity to enjoy wine from a glass that has been scientifically designed to maximise the aroma, palate, structure and finish of the glass’ content.
The ‘free’ Riedel glasses may even make Jacob’s Creek Dry Riesling 2008/2009 worth drinking. A safer option in terms of selection is Waitrose’s Fine Wines & Wine Atlas selection (12 bottles - £199.00). The assembled wines include some heavyweight names such as Cune of Spain (Rioja, Gran Reserva 1998) and Trimbach of the Alsace (Riesling Reserve 2007) and the drinker can refer to the included copy of Jancis Robinson and Hugh Johnson’s World Atlas of Wine for further information if sufficiently interested.
Mixed cases also afford the opportunity to sample wines that otherwise would not be a first choice.
Majestic Wine’s Buyer’s Festive Best (12 bottles - £187.89) is the best in class for this type of experience as it combines: Cava (Codorniu Reina Maria Cristina 2007); Champagne (Taittinger Prélude Grands Crus NV); the Alsace (Trimbach Riesling 2008); New Zealand (Jackson Estate Stich Sauvignon Blanc 2009/2010 Marlborough), Napa Valley (Robert Mondavi Chardonnay 2007); red and white Burgundy (Ladoix Rouge 2006/2007 and Pouilly-Fuissé 2008/2009);Left and Right Bank Bordeaux (Château Greysac 2006 Médoc and Château Bourgneuf 2006 Pomerol); Italy and Spain (Vernaccia di San Gimignano 2009 and Rioja Reserva 2006 Muga); and finally a sweet Sherry to drink with pudding (Matusalem 30-Year-Old Oloroso).
I have to admire the thought that Majestic has put into assembling this offering.
For those seeking a gamble over Christmas, Lay & Wheeler’s Mystery Case (12 bottles at £120.00) might be worth considering.
I confess, however, that I am not so brave; instead, I have opted for a tried and tested formula being Berry Bros. & Rudd’s Family Christmas 12 Bottle Pack (£124.00 including home delivery).
There will be no surprises this year and with the armoury of Berry’s reliable back up wines in place I should be able to open my magnum of Rothschild-owned Château D'Armailhac 1989 without worrying about what to drink should it be corked.
My new pastime is Shard Watch. I am fascinated by the speed of its ascent, etching the famous back-of-a-menu sketch on to the sky.
And lo! One late October morning I spied the Shard's concrete core peeking on the skyline at the end of my little Bermondsey road, forever redefining its co-ordinates by tugging it closer to London Bridge.
Views and sight lines can be so powerful, creating a sense of proximity - and with it – ownership. So as a ‘local’ I was chuffed that the Shard made yesterday’s Today Programme.
It was going really well, then Today wheeled out Simon Jenkins to tell us what we should think.
Make no mistake, he’s a very clever man, but yesterday I thought he was simply a bit past his sell by date.
‘Why do this in a poor part of London?’ he asked, questioning the validity of its location.
His assertion is that landing a tower the size of the Shard would be unacceptable in the chi-chi, rich west London enclaves, so why should it be foisted on this part of London, just because it is poor?
It’s time you got out more, Simon.
High time he ventured to the bustling neighbourhood clusters of Bermondsey and Borough restaurants and bars, just some of the Shard’s neighbours.
Oh, and corporate headquarters, a teaching hospital, £1m+ loft apartments and the ever-popular Borough Market. And shops like Holly and Lil, selling bijou accessories for the numerous local ‘man’s best friends’ owned by DINKY couples, with pink pounds.
Yet despite its trendy, affluent incomers, Southwark overall is poor, indeed, very. But the real villains of this part of London were the Victorian railway barons, creating a barrier that has acted as both a physical and economic blight on the area.
Staving off modernity and progress will not help the poor become richer. People need jobs and possibilities, which come through investment and growth.
In that respect, tall buildings at London Bridge are not empty vessels. They present real economic opportunity, and act as a symbol of regeneration and a reorientation of the capital to support a realignment of wealth.
That is Southwark Council's strategy, and the Shard is one plank of that. Its £50m S106 contributions will go towards transport improvements, public realm, art, education, job training and housing.
This should make a dent in reshaping the area and lives for the better. That doesn’t feel like victimisation to me.
I was back on site at Westfield’s (and their new partners) Stratford City development recently which is mightily impressive notwithstanding it was paralysingly cold!
The scheme is going to lease well and that demand reflects a trend we are experiencing across many of the greater suburban London retail locations.
Close proximity to London, positive employment prospects and good disposable income is an attractive environment for retailer expansion. Demand has been heightened with the lack of new development generally.
Previously less glamorous locations such as Wembley, Staines, Bexleyheath and Wandsworth are moving ahead with new occupiers such as TK Maxx, H&M and New Look.
There is a shadow however cast by Stratford City where retailers may continue to wait to see the impact of the scheme on surrounding centres including Romford and Ilford.
We should not however be overly pessimistic as it is clear now that Kensington High Street and Hammersmith are proving to be resilient against Westfield London shopping centre.
Off to Clapham Junction this week where new lettings to L.K.Bennett and L’Occitane prove the point.
Justin Taylor is CEO UK Retail & Leisure Teams at Cushman and Wakefield
‘The law is an ass!’ is not a phrase you hear as often as you should. Generally, I find the Leasehold Valuation Tribunal (LVT) a very good source to resolve issues and problems and I guess my problem is not actually the Tribunal but the lawyers and individuals on the other side who will squirm, weasel and contort their story to suit their own purpose or ends.
Obviously I would not be naïve enough to think that the other sides are thinking the same of me. However, it never ceases to amaze me that a lie ends up being so contorted that it trips them and the inconsistency grows. I recently had a case where a freeholder turned up claiming he had not had any papers and only found out about the case on the Thursday before.
On being challenged if the demands had a wrong address (which would make them all invalid), this changed into ‘of course not’ it was just not his office and yes he had the papers he just did not bring them with him!!!!
Now, far be it from me to insinuate anything at all, but really I thought we left these kinds of homework excuses back in kindergarten. ‘My dog ate my Tribunal papers’ may be next!
Of course from fairness in justice perspective, everything has to be taken seriously but sometimes you just want the world you are in to turn into a comedy sketch.
I almost envisaged Rowan Atkinson bursting in!