Rock on a roll
Entrepreneur Paul Kemsley talks about football, one of 2006’s deals of the year, and being Sir Alan Sugar’s rottweiler on The Apprentice.
‘No, I’m not buying him from Man U. I don’t care if you heard it in the gym.’ Clunk.
Paul Kemsley’s telephone manner will come as no surprise to viewers of The Apprentice. Last year Sir Alan Sugar called on the vice-chairman of Tottenham Hotspur and co-founder of Rock Investment Holdings to tear apart the semi-finalists in TV’s ‘job interview from hell’.
Kemsley branded the over-enthusiastic Paul Tulip as a ‘door-to-door salesman’, and on Wednesday night he was back on the show to ruffle a few more feathers.
Not that Kemsley lacks a softer, more philanthropic, side. He devotes a part of each working day to good causes, and on Tuesday was the lead sponsor for the 2007 Norwood Property Lunch charity event.
In a rare interview Kemsley discusses his property strategy, his plans to invest in the US and the story behind his spectacular Poultry deal in the City of London.
The Manchester United phone conversation occurs amid a flurry of activity in his plush Soho offices. Huge photographic images of Sammy Davis Jnr and Frank Sinatra line the wall behind his desk. ‘Frankie, Sammy and me we’re the Rat Pack,’ grins Kemsley, as he settles down for a chat and sparks up his first Marlboro Light.
And it is quite a pack that Kemsley operates in. Along with Sugar, retail entrepreneurs Mike Ashley and Sir Philip Green are two of his closest confidants. Also in the crowd are Structadene’s David Pearl and Marcus Cooper, the north London-based investor who has a major stake in Mattherhorn Capital.
Kemsley describes himself as an entrepreneur: ‘A property-based one. I also deal in equity markets.’ He established Rock in 1995 with the £1,800 he had left in his pocket. Today, the company has a £750m property portfolio and is hungry for expansion.
‘People come to us with anything they think we could improve the value on,’ he says. ‘We are a deal-oriented firm and we go where the deal is. We don’t buy property because we want to own it, we buy it because it makes us money. There are no limits and we are totally movable.’
Cheques and balances
Unsurprisingly, Kemsley’s bidding tactics are aggressive. If he wants something, he sends a cheque with the agent delivering the bid.
‘I think we have a reputation for being performers. If I want it, I will buy it.’
Rock has a property investment arm and a trading arm. There is also the joint venture with HBOS, where Kemsley wants to build a £1bn portfolio in the next two years.
It has now been four months since the venture was set up and the spending has begun. Kemsley has bought a parade of shops in Islington, north London, for £30m and £12m of offices at Limehouse Court in Wapping, east London.
Rock does some development, and has a joint venture with Crest Nicholson on the Western Riverside residential-led regeneration scheme in Bath.
‘We’re not really developers, though,’ he adds. ‘We develop if it’s local and if we can handle it. But we’re mainly land traders and investors.’
Kemsley left school at 17 and began working at surveyor Gross Fine as a junior.
Can I have a cheap flat, Nick? No, seriously, the Candys have enormous balls and what they’re doing is the way forward in this business. They’re ahead of their time.
‘In my 22 years in property, I’ve seen lots of different market conditions. I’ve seen stores go for £1m, then go into reverse premium, back to premium and back to reverse.
‘The British property market has seen an amazing rise in the past few years. Office rents have been fuelled by hedge funds, but we shouldn’t get lulled into a false sense of security.’
Kemsley says he will still invest in the UK, but selectively in city centres. At the start of the year, Rock bought Glasgow’s Forge retail park from Hermes for £113m.
‘The rents were £17/sq ft,’ he says. ‘We’ve just achieved £22/sq ft already. We want to improve the parking, rebrand it and encourage new tenants.’
Almost all of Kemsley’s properties are in the UK, but he believes the opportunities in the US far outweigh those in Britain. ‘The US is the land of the free – and the brave. It is better because it’s a faster moving market and their ethos in life is better than here.
‘Here we have local authorities who like to find a way to say no. In the US, they want to say yes. They don’t go around getting consent from the Queen Mother, the Queen and the Duke of Westminster.’
Kemsley plans to spend at least $500m (£250m) in the US in the next three years, concentrating on Manhattan. The Rock-HBOS joint venture has spent $100m (£50m) on
183 Madison Avenue, a property comprising 250,000 sq ft of offices and 27,000 sq ft of retail. Rock New York is now opening in the building, and two senior brokers in the city have been headhunted and will make the transition to principals. The outfit will run in a similar way to the that of UK, buying in Manhattan and across the US.
Rock has also bought a 90,000 sq ft loft-style warehouse conversion block in downtown Los Angeles. ‘That’s the difference between me and Nick Candy,’ he says of the upmarket residential developer. ‘He buys in Beverly Hills, I buy in downtown LA.’
And London? ‘I love it, I love the city, but the prices are extortionate. I’d still buy if we found the right commodity.’
Which, it seems, was just last week. Kemsley paid around £28m for Burberry’s former headquarters in the West End, and it is understood that he plans to put a restaurant on the site. He was also an underbidder on the controversial portfolio of retail properties being sold by Islington Council last month.
His close friend David Pearl pipped him to the post with a bid of £70m.
Kemsley’s biggest coup was buying 27-35 Poultry in the City with HBOS for £40m in May 2006. It sold the grade I-listed building four months later for £72m, to Vladimir Chernukhin, a former Russian deputy finance minister.
‘I bought the building when it had a market capital value of £180/sq ft. It’s not rocket science it seemed cheap to me and I like buying things that are undervalued.
‘I didn’t expect to make that much, though. Not in four months. This guy came in and bought it and I thought, “thanks very much”. We make money when we buy property. If you buy at the right price and the market knows that, then you will do well.’
Taking the rise
He also notes that office rents continue to rise, despite people saying the market is getting shaky. Kemsley has first-hand experience of this, having just taken expansion space from Morley at 20 North Audley Street in London’s West End at £80/sq ft. ‘We paid £42/sq ft three years ago for an identical building 20 yards away. What kind of schmuck am I?’
I didn’t expect to make that much [from the Poultry sale]. Not in four months. This guy came in and bought it and I thought, ‘thanks very much’
Asked about Europe, he says he is ‘not against it. But we’re not yield players, we’re traders.
If we went to Germany or France, we wouldn’t be the first, and I don’t like buying property and waiting for yields to improve. That’s why I like New York. I wanted to be the first there.’
He wants to expand his holdings in the UK and US. He has also not ruled out corporate acquisitions, and is rumoured to have built up a 12.5% share in Quintain, which would make him the biggest stakeholder by around 6%.
‘The model I have is simple,’ he reiterates. ‘I buy into something if I believe in the underlying business and if I think it is undervalued.’
Rock’s deals in the last six months have exceeded £250m. They range from an office building in Hampstead, north London, to 55 acres in Turkey in a joint venture with Galliard.
Kemsley’s involvement with Tottenham is linked to Rock. Spurs chairman Daniel Levy and currency speculator Joe Lewis were the original investors in Rock back in 1995. ‘I’ve had various investors come and go over the years, but as I speak today it’s Joe, Daniel and banks.’
Some candy talking
Rock clearly has a good relationship with HBOS, but also works closely with Kaupthing Bank, which in turn works closely with Christian Candy’s CPC Group. He knows the Candy brothers well, and praises their ‘sensational’ Bowater House scheme in Knightsbridge.
‘Can I have a cheap flat, Nick? No, seriously, they have enormous balls and what they’re doing is the way forward in this business. They’re ahead of their time.’
Asked about friends such as Sugar, Ashley and Green, he says: ‘They have focus, determination and sheer talent. They are so focused it’s frightening. They’re successful because they stick to the industries they know. That’s what I’m learning I should do with property.
‘I’d like to think I share the same aspirations, desires and work ethic as them. I’m definitely aspiring to achieve the same level of success.’
He describes Green as being ‘like a second father to me. He’s taught me how to deal with bankers and how to operate’.
His relationship with Sports World founder Mike Ashley – ‘one of my greatest friends and business allies’ goes back to their childhood.
‘When I was 15, I was a Saturday boy at this place called John Paul Menswear. Mike’s first sports shop was opposite, and I’d always be in there playing darts. He would beat me every week and I’d usually go home with no money.’
From 1985 to 1992, Kemsley worked as an agent at Ross Jaye, leaving to join Ashley at Sports World. ‘I think he did the right thing floating the company. He’s got amazing talent and will go onwards and upwards.
‘And with Alan [Sugar], if you have talent there, then he’ll find it.’
Kemsley describes his appearance on this week’s Apprentice as ‘even harsher’ than last year’s. His rivals in the world of business expect him to be every bit as aggressive.
Rock was the sponsor of the children and family charity Norwood’s annual Property Lunch on Tuesday.
Paul Kemsley: CV
Born August 1967 in Stanmore, Middlesex
Marital status Married to Loretta, and has three children
Home Radlett, Hertfordshire
School Atholl, Rayners Lane
First job Junior at Gross Fine
Favourite film The Godfather Part II
Last holiday Israel
Interests ‘Football, football, football’
Cars ‘Yes, lots.’
A day in the life of
I get up at 8 am, skip breakfast and take the kids to school. My driver picks me up at 9 am and I arrive at work in Soho at 10 am. I meet with my equity traders and check my emails I get about 50 a day. Lunch is a cup of tea and a sandwich in the office.I don’t do lunches, I do dinners. Lunches cut the day up and I’m never out of the office when the New York stock market opens at 2.30 pm our time.
I spend the afternoon with my property traders, looking at new stock and the deals we’ve just done. I sit for an hour with the finance director, going through banking stuff, and also spend a fair bit of time on Tottenham stuff. I devote around half an hour a day to various charity commitments. I leave the office at 7.30 pm. On Monday nights I have dinner in the West End with Mike Ashley and Philip Green. I dine out Monday to Thursday night with people I work closely with, and my wife often joins me. Most of my socialising is in the evening. My driver, who’s also my security guy, takes me home and I tend to get in between 11.30 pm and midnight, invariably intoxicated.