Bill Blogs

Few hearts will bleed at the news in the Telegraph this morning that Vincent Tchenguiz has been forced to sell his Lamborghini after his management company made a £38m loss. But that loss is minuscule compared to the billions squandered on real estate by Citibank during the boom. The giant US Bank has been so sickened by the losses that it has signed over its 60 strong property team and $12.5b of gross assets to a private equity firm called Apollo Management. Nobody wants to tell the FT the net asset value - or how little Apollo paid.

This side of the pond the big news is of course the split of Liberty International into Capital Shopping Centres, a £4.6b investment REIT, run by the current Liberty chief David Fischel and Capital & Counties, a brand-new development business with a very old name to be run by Ian Hawksworth. The story is extremely well covered in The Times, which also carries a profile of Donald Gordon, the 79-year-old South African who founded the business. 

The only point left uncovered by the all the papers is the non-financial reason why this split was a) inevitable and b) likely to work: the completely differing personalities involved on each side of the business and the waning influence of Gordon. David Fischel is a roundhead and Ian Hawksworth a cavalier, and "Donnie" now only has 15% of both businesses and is getting on a bit. Agreeing to split will probably be a slight relief to both parties.

Fischel is a slight, self-effacing, careful character who has run Liberty under the stern direction of Donald Gordon since the early nineties from a modest, if slightly shabby HQ in Victoria. Ian Hawksworth is a large and very confident man who came over from Hong Kong in 2006 and joined Liberty after a plan to head up Grosvenor's development business went awry. His sidekick Gary Yardley is of similar stamp. There will soon be no mistake that two very different businesses have been hiding under one roof, one bursting to get out.

Is the City in for a fresh crop of office developments to add to the stunted shoots left over from the last boom? Toby Courtauld of Great Portland tells Bloomberg today that he quite fancies starting an 810 000 sq ft development on land the company owns on Bishopsgate. Veteran property man James Tuckey hints at developments yet unknown.

The former chief executive of MEPC, who was shot by a mugger in Dallas in 1990, is now chairman of Brookfield Europe. This is the giant Canadian Fund which swallowed up Aussie builder Multiplex, which is building the footings for the Pinnacle, the tallest tower in the City.  Brookfield is building a humongous real estate fund and is looking for spend its money.

Tuckey talks about the "interesting opportunities" he has seen. What could they be? Well, there is still one UBS-owned chunk of land next to Broadgate - and then there is the 2.8 acre site put together painstakingly by Mark Morris and Morris Golker in EC3: That was going to be the site of a new 1.32m sq ft HQ for Deutche Bank, before the bank got cold feet.

No doubt City agents could come up with a few more examples, including what was going to be the new HQ for JP Morgan on London Wall. They are of course off to Canary Wharf and into a purpose build new HQ - or are they? City folk are still hoping to persuade them to stay. Wharf folk are saying why bother with a new HQ? After all, what is left of Lehman Brothers will be off to the City next year under the Nomura flag. That leaves a lovely 1m sq ft building empty, apart from lonely Jones Lang on one floor. Why build another tower?

Two strong stories this morning. Former British Land director, Andrew Jones, has got it together six months after quitting as head of retail, and leaks his plans to raise £150m on the stock market to the FT. The disastrous cost of buying Foxtons finally leaks out in the Telegraph - and confirms a valuation made by Savills at the time of the sale in May 2007.

Jones is to set up a new listed company called Metric Property. His fellow directors are to be Valentine Beresford and Mark Stirling, two senior BL colleagues, who left at the same time. The trio, who used to work together at Pillar Properties, are following in the footsteps of their mentors Patrick Vaughan and Raymond Mould, who floated London & Stamford in late 2007 - and have done very well since.

The only mild surprise is the cautious initial ambition: raising just £150m and indicating gearing will be no more than 50%, by suggesting that they will have £300m to spend. That is only enough to buy a handful of small shopping centres or one big one. There is also the issue of vanishing bargains. Prices have risen considerably in six months since they quit. But this well-connected trio have presumably earmarked some deals.

BC Partners got the non-bargain of the decade when they paid Jon Hunt £360m for Foxtons in May 2007. A £218m write down is revealed in the long-delayed accounts for 2008. Take that from the £360m purchase price and you get £142m: a figure the top end of what Savills reckoned Foxtons was worth in 2007, when they were asked to name their price. Hunt is now spending some of his millions building up a commercial property empire. Much wiser.

There are no property stories worth reading in the UK national press this weekend, unless you count the dismal forecast in the Guardian about Britain's homeowners facing "10 years of stagnation," according to a not terribly well-known economist. So, let's turn to the Irish Sunday Independent instead, and "Glenda and Johnny; a magnificent obsession:" as this much more entertaining story is billed on the front page of the paper.

The Johnny in question is John Ronan, who jointly runs the biggest property company in Ireland, Treasury Holdings. A company which controls the stalled  £3b development of Battersea Power Station. Glenda is Glenda Gilson, a former model and former girlfriend of Ronan.The pair had a row-by-text over her continued use of his Range Rover while watching the England v Ireland Rugby match in separate spots last weekend. It ended with him coming to her hotel bar and the pair getting into a scrum says the paper.

"Eye-witnesses say Gilson kicked her ex-lover twice 'He buckled over the minute she kicked him, and he was shouting 'my f****** balls'. It was madness. As she turned to leave, Johnny then took a swing at her and made contact with her backside." She told friends afterwards: 'I'm f****** sick of this. All my friends are telling me you're f*****.' "

Not quite. That night same night our man jets off to Marrakesh with former Miss World Rosanna Davidson - a friend of Glenda. Ms Davidson explains in an accompanying article that she was unable to raise her own boyfriend (it was, after all, 2.30am by then) and ask him to join the flight. "In the cold, sober light of day we just thought, what on earth have we done?" she laughed. "But then we said let's enjoy it. And we'll be home by tomorrow."

No doubt a 1000 times the fun of jetting around, trying to find a co- investor for Battersea.

The only new-ish story today comes from the FT, which details Gerald Ronson's plans to build a hotel and apartments next door to his just-about-to-be-topped-out tower in Bishopsgate. EG disclosed these plans in late 2008, but the FT goes into greater detail, as Heron has now submitted the drawings to the City for approval.

It says something for Ronson's powers of persuasion that he has managed to get a City Corporation always bitterly opposed to residential development to agree not just to one block of flats, but two. Contractors are currently tendering to build a 36-storey block of 295 flats next door to the Barbican, on which marketing began this week with adverts in City AM.

In Bishopsgate there will be a 190-bedroom hotel and 120 apartments. The £500m scheme was originally planned as a "baby" Heron office tower, next to its 800-ft tall dad. Talking of the tower, Ronson discloses they are talking to four potential occupiers. You can almost feel an announcement coming on, timed perhaps for the annual Heron lunch on April 13th.

The serviced apartments "will be among the most expensive in London." This news should interest Nick and Christian Candy, who have about 40-hyper luxury flats coming on the market shortly in Knightsbridge at about £4000 sq ft. Ronson reconnoitred Knightsbridge about the time he was planning Bishopsgate. How much will he charge in the City: guesses between £2000 and £3000 only please.

Today's most interesting news is the appointment of Rob Bould as chief executive of GVA Grimley - the firm's third new boss in as many years. The announcement betrays the sound of jostling among what is called "the leadership team" at the top of a 1000-strong firm which sold 22.5% of its equity to the venture capital arm of Lloyds TSB in 2007.

About a year after chief executive Bob Barnett sealed that well-timed deal, he stepped aside in favour of Malcolm Whetstone, who we are told today "continues" as managing director. But over his head comes in a new chief executive in the familiar shape of Rob Bould, head of capital markets and the man not given the top job in 2005, when the Birmingham faction voted in favour of Barnett.

Over Bould's head comes in Stephen Brown, head of planning and regeneration. He is now "executive chairman". Brown - who seems to have orchestrated the shuffle - takes his place at the head of the boardroom table in favour of the ex-KPMG man Steve Halbert. He has been demoted from chairman to deputy chairman. Halbert was a Lloyds-inspired appointee, who took over from another Lloyds choice, former Atkins boss Mike Jeffries, who barely lasted nine months before resigning in December 2008.

Who knows what the employees think of all this milling around on a crowded top deck? But the 165 associate partners who did not benefit from the part-sale to Lloyds must be getting restive. They were given 15% of the business in shares, which are only redeemable once GVA Grimley float: for understandable reasons the 2007 half-promise to do so in 3 years has not been met. But when? "When market conditions dictate" says a spokesman.

Good news today. This morning  Reuters have broadcast a Cushman & Wakefield report showing the volume of global real estate deals is forecast to surge by 30% in 2010 to $478b, led by China, where transaction levels have already doubled in 12 months. But the figures need to be put in perspective. In 2007 the figure was more than double the 2010 forecast.

Meta-forecasts like this can also feel pretty meaningless to the agent in Market Harborough trying to sell a secondary retail unit. But they do have effect of cheering everyone up for a bit and nudging those who are sitting on top of the mountains of cash into action. C&W reckon volumes in the US will jump 48%. In the Emea region (which includes Market Harborough) the number of deals done in 2010 will rise by 43%, led by the UK.

The European edition of the Wall Street Journal reaches much  the same conclusion, without, it seems, talking to Cushman & Wakefield. The paper has looked at some of the big deals done in January and February and those that might be done in March and reached this sunny deduction - before suggesting it could all change if the economy stalls. Well, yes, of course.

One deal that finally does look like it is going ahead is the sale of the NOHO site in central London by Kaupthing. The FT reports that the bust bank is now going to sell the empty three acres on which more than £200m in loans were advanced to fund a scheme by the Candy Brothers that foundered. Kaupthing was thinking about entering into a development JV with Stanhope who have drawn up new plans.But it now looks like they just want out. So, one more deal to be done - at about half the level of the debt if they are very lucky.

Today's Times carries a short account of the charging of Achilleas Kallakis on a £61m commercial property fraud. A more thorough account of the story broken on EGi yesterday appears in the Daily Telegraph. But English reporting restrictions being what they are, not much more can be said before May 4th when the trial opens at Southwark Crown Court.

These restrictions do not apply in America. So, if you want to indulge in a moment of schadenfreude at the fate of a cocky, cocaine-snorting, 38-year old property "tycoon," turn to today's New York Times. The paper carries a wonderfully detailed account by Christine Haughney of the high life and subsequent bad times of Adam B Hochfelder.

This son of a New York garment manufacturer built up stakes in 8m sq ft of commercial properties during the 2002-2007 gold rush. He ran a business called Max Capital and was seen at all the best real estate parties. Everyone loved Adam: until 2008, when he was indicted on a $17m property-related forgery and deceit charge. Now a further charge of swindling investors out of $2.5m has been added.

Hochfelder quickly embraced the role of real estate mogul, says the paper. "He hired a driver, flew on private jets and spent lavishly on building his company's image, focusing on details as small as the design of Max Capital mints." 

"He had a winning personality," said Barry M. Gosin, chief executive of the real estate brokerage firm Newmark Knight Frank, where Mr. Hochfelder briefly worked and which later negotiated leasing deals at Mr. Hochfelder's buildings. "He always wanted to be liked, and he always wanted to accommodate people."

"Last month's indictment charged that he stole $2.5 million from investors, including a member of his wedding party and Jason Hirschhorn, a co-president of MySpace, who thought they were buying a stake in the Sagamore Hotel on Lake George in upstate New York."

Hochfelder has pleaded his innocence. But a lack of reporting restrictions in America means he has been found guilty by the New York Times.

Drivers Jonas won't be going to MIPIM in two weeks time: Last week the French courts fined them 100 000 Euros for "parasitical" behaviour for operating out of a branded café on the Croisette, rather than take a stand in the Palais des Festivals. MIPIM organisers Reed Midem tell the Daily Telegraph today that "while this judgment vindicates Reed Midem's decision to go to court, it primarily protects our Mipim clients who register and operate in good faith within the show venue."

What DJ will say is probably unprintable. The firm may be too busy today to say anything, as this is the day of the formal marriage with Deliotte. But they and their lawyers Herbert Smith will have been shocked to have lost the case. It will presumably now be up to the senior partner of Deloitte, rather Nick Shepherd of DJ, to decide upon an appeal.

The firm has only been fined one-third of the original damages sought, as you will see in the original report of the case in my Standard column last October. There will be plenty of others who have operated like DJ for years, and would like them to appeal. But it is understood that the costs are to be split. With that, and the relatively small fine, it feels like DJ will swallow hard and get on with life - and never darken the doors of MIPIM again. But, let's see.

Three stories of interest from Saturday and Sunday: The first is Rightmove's perhaps mistaken optimism in the FT on Saturday. The second is the sale, for what appears to be not very much, of Liberty's by Marylebone Warwick Balfour in EG on Saturday, which was picked up by the Telegraph. Third, is another Candy Brothers stab at wounding Prince Charles in the battle of Chelsea Barracks, relayed by the Sunday Times.

Residential Web site Rightmove produced humongous profits of £37.8m on turnover of just £64.9m in 2009. Chief executive Ed Williams said that future profits were based on the "willingness of advertisers to pay more." Well, good luck Mr Williams. The fact that your margins are so high and you want them to go higher reinforces the point made in my EG column on Saturday that Google may destroy your business model with a free offering.

MWB is one of those property businesses that makes your head hurt. Its CEO Richard Balfour Lynn is so clever and has his fingers in so many complicated deals it is very hard to work out if the company is doing well or badly. Well, it would appear today. Badly in 2002, when he promised to wind down the business. This was a couple of years after MWB paid £73.5m for the Liberty store group. Now EG says the store itself is to be sold for £40m. Will that be at a profit or a loss? Who knows?

On Friday the Candy brothers finally lost control of that $500m development in Los Angeles when the banks foreclosed on a $365m loan. But Nick and Christian are nothing if not resilient. There is a tale of them being "poised to bid" for the Grosvenor House in the Sunday Times. Another part of the paper contains chunks of the complaints made by Prince Charles to the Emir of Qatar  over Chelsea Barracks, where once the Candy's were their development partners, before a terrible falling out.

The brothers are pretty much guaranteed an £80m payout when planning is granted. But they would quite like the money now - or a £67m "p-off" sum stipulated in the contract. This latest salvo brings closer the link HRH to London Mayor Boris Johnson, and thus increases the embarrassment for Charles for interfering with the democratic process, rather than just moaning to a fellow royal.

The key sentence in the story reads: "documents released under the Freedom of Information Act also show that a meeting took place between Sir Simon Milton, head of planning for the mayor of London, representatives of Westminster council and Sir Michael Peat, private secretary to the prince." Will this be enough to embarrass the Qatari's to settle? No idea.