In the 1980s the County Bank was one of the pioneers of property finance. Lydia Stockdale spoke to members of the ultimate City finishing school
The 1980s: A decade of power dressing, CITY slickers, the Big Bang and hedonistic lifestyles.
A decade when the property market was booming and the investment bank was created after deregulation of the banking sector.
One organisation that encapsulated the era was County Bank, the merchant then investment banking arm of NatWest.
Described by one former employee as ‘aggressive, smart and agile’, between 1984 and 1994, County Bank, later renamed County NatWest and then NatWest Markets, was at the cutting edge of the property market. It was behind some of the most revolutionary deals of the day, including the financing of Billingsgate Fish Market, Broadgate and Ludgate Circus in the City of London, and the MetroCentre in Gateshead.
It was also one of the companies that created property income certificates (PINCs), the first securitised property product.
County’s legacy remains, not just in these schemes, but in the people who once worked there. Some of the most influential figures in today’s property market either started at County, or passed through at one time or another. The list includes such luminaries as Marc Gilbard and Graham Stanley of Moorfield Group, Ian Marcus of Credit Suisse, David Church of the Bank of America, Paul Rivlin of Eurohypo and Richard Mully of Grove International.
Property Week tracked down some of the County Bank alumni to find out more about those heady early days, how the bank produced so much talent and how their experience in the 1980s and 1990s will help steer property industry through its latest crisis.
Richard Mully joined County NatWest in 1986. ‘The glory days were reminiscent of the market we’ve been in,’ he recalls. ‘Then County was at the epicentre at the turn of the market of the early 1990s.’
‘The market had gone from huge boom to huge bust, and we were in a prime position to see all aspects of it,’ adds Marc Gilbard. ‘It was very broad experience jammed into a very small amount of time. It was a huge learning curve.
‘We had access to all of the NatWest’s property activities: equities, corporate finance, structured funds, asset management, lending. It was an exceptional training ground,’ he adds.
Gilbard believes that it was this varied exposure to the property market over such a short period of time that enabled the County alumni to ‘take that experience forward’.
‘It set us up to be able to go into different real estate and related areas,’ he says.
From 1984, the property and finance teams began working together. This partnership led to County specialising in property and, as a result, they were always at the forefront of the market.
The exposure to both investment and property gave the employees knowledge and confidence. ‘The thing that differentiates these people is that they were versatile,’ says Michael Sherley-Dale, who was at County NatWest and NatWest Markets between 1987 and 1995.
‘One of the keys to the success of all those people is that they understood the crossover between the City and the property world,’ he adds. ‘Investment banking provided them with inside knowledge of the financial basis for property transactions. They learned to evaluate objectives and understand investors’ needs.’
They were also given a large amount of autonomy from NatWest. ‘You had this massive bank, but because [County] was slightly divorced, there was some autonomy and it felt like there was some ownership,’ explains David Church.
‘The most conservative bank [NatWest] owned the most aggressive merchant bank in arranging property finance,’ says John Fender, who joined the bank in 1980 and went on to become chairman of Newcastle United plc.
When the banking system was deregulated in 1987, County NatWest grew, but the ethos stayed the same. As an investment bank, County became even more ambitious.
‘County had a reputation for being slightly maverick,’ says one former employee who wished to remain anonymous.
There was great entrepreneurial flair to be found within County’s offices, says Ian Marcus, who joined in 1990. ‘It was very creative. There were lots of guys coming from different backgrounds at the right place at the right time,’ he adds.
Paul Rivlin, who joined in 1984, also recalls the inventive atmosphere. ‘There was a style of working that was open to new ideas,’ he says.
Rather than imposing a rigid management structure, as many of County’s contemporaries did, the ‘maverick’ investment bank had a relatively flat and fluid structure.
Very quickly, we became the dominant property bank in london
‘You would put teams together for deals, where you thought there was the best skill mix,’ explains Robin Caven, chief commercial officer for Europe at Lend Lease, who started working at County in 1985.
Another factor that set the bank apart from its rivals was was the age of the team members. One former employee remembers the days when Japanese investors – of which there were many in the late 1980s – came to London and were intrigued by the authority given to relative youngsters. ‘Occasionally they would ask me how old Richard Mully [who was a director in his late 20s] was,’ he says.
While the bank’s ‘maverick’ approach allowed it to break the mould when it came to doing deals, it also led to problems. Some believe its ‘freewheeling’ attitude was what led to the Blue Arrow affair of 1987, which ‘nearly blew County out of the water’, according to one former employee. County was accused of misleading the City into believing that the employment agency’s rights issue was more successful than it was.
With a Department of Trade and Industry report criticising the conduct of NatWest directors, chairman Lord Boardman felt obliged to shoulder the responsibility for the mess and resign himself.
Under new chairman Lord Alexander of Weedon, NatWest tightened the reins on its wayward child. For a year or so County was ‘rather looked down upon by the big banking powers. It could be described as second or third division’, recalls one former employee.
For some though, the period of recovery that followed the Blue Arrow affair presented an opportunity. Philip Augar was given the job of heading up and re-establishing the equities business under the wing of NatWest’s investment bank.
‘We were told that he had two years to make it successful,’ says Gilbard, who was Augar’s chosen property specialist. ‘He had a fairly big chequebook to help him recruit people in each of the specialist areas’
By the early 1990s County’s reputation and market presence had been restored. ‘We became the top-ranked equities investment bank over a number of years,’ recalls Gilbard.
County’s focus on the property market had begun in 1982 when Robert John, who had joined the bank four years before, was approached by commodities trader S&W Berisford to help fund a joint venture with John (now Sir John) and his brother Peter Beckwith’s London & Edinburgh Trust to redevelop Billingsgate Fish Market in the City of London.
Robert John, who was used to dealing in oil and had no property experience, applied what he knew of non-recourse finance. ‘It was only after we shook hands on the deal that I found out there was no such thing as a non-recourse property arrangement,’ he admits.
The first deal was a tough one, but it created a model for non-recourse funding. John knew he needed a property man in his team. It was at this point that he thought of John Fender, a surveyor who had been hired to look after the property assets of NatWest’s pension fund, among other things. The two bumped into each other in County Bank’s office in Old Broad Street, recalls Fender, and the rest is history.
‘We had a team comprising both property people and bankers,’ says John. ‘It was the first combined team. Very quickly, we became the dominant property bank in London.’
Between 1984 and 1987, John and Fender became involved in projects such as Rosehaugh and Stanhope’s Broadgate and Sir John Hall’s MetroCentre in Gateshead.
‘We helped create a market,’ says John. ‘The knowledge that the team gained because of that is hard to come by.’
Members of the team were so busy during this period that they missed big events in the wider world. Richard Mully recalls the day in October 1987 when he and Johnny Cameron, now of the Royal Bank of Scotland, were so wrapped up in a deal with clients in Sweden that they missed the news that a hurricane had hit the south-east of England. They flew home overnight, rolled off the plane and into work, and were shocked discover it empty. The following Monday they were to receive a greater shock: the stock market crash.
‘The recession came along in 1989 and that is arguably where we are now,’ says Simon Radford, who joined County in 1986. ‘Interest rates went up and property companies started going bust. Banks started to withdraw loans.’
In the 1990s, County NatWest continued to help create property investment models. In 1990 it worked with developer Rosehaugh on one of the first property securitisation deals. ‘It felt cutting edge,’ recalls Caroline Philips, who joined County in 1987 as a graduate trainee and went on to specialise in securitisation.
But as the property and finance markets changed, so County Bank’s star began to fade and it was gradually split up and sold off from the mid-1990s onwards.
But the work it did in the glory days during the 1980s and early 1990s established the models of property investment we know today. And it set a precedent for hiring the best brains in the land who have shaped the property market over the past 20 years. As Robin Caven concludes: ‘Success breeds success.’
County bank alumni
1 Ian Marcus, chairman of European real estate at Credit Suisse and current British Property Federation president
2 Simon Radford, chief executive, KBC Asset Management
3 Richard Mully, managing partner, Grove International
4 Robert John was development director for Olympia & York and played a significant role in arguably the defining development of the 1980s, Canary Wharf. Now non-executive director at First Base and an adviser to private equity company Actis
5 Michael Sherley-Dale, started listed residential property company, City North Group. Now managing director, Hydra Bay and the Clocktower Group
6 David Church, managing director and senior adviser in real estate investment banking, Bank of America
Newcastle United plc
County Bank history
1969-87 County Bank
1987-92 Renamed County NatWest
1992-96 Merged with part of NatWest Corporate to form NatWest Markets
1996-97 NatWest Markets buys Greenwich Capital and is renamed Greenwich NatWest
1997-98 NatWest Securities, the equities business, is sold to Bankers Trust, which is bought by Deutsche Bank in 1999
2002 Greenwich NatWest bought by the Royal Bank of Scotland along with rest of NatWest Group