May 2010 Archives

Today's Standard column contains a couple of items of interest: first, further details of the 50:50 JV between Lend Lease and London & Continental Railways to build a huge new commercial centre at the Stratford entrance to the Olympic Park: second, the news that the new government will publish a planning green paper within the next couple of weeks - and space for legislation later this year.

The scope of the £1.3b Stratford development isn't quite as big as first disclosed on EGi on April 10th. But 4m sq ft of space over 22 acres straddling the international rail station is quite big enough. Work cannot start on site until March 2013, after temporary Olympic buildings are torn down. But the partners want to appoint agents and other consultants straightaway to help draw up a vision that will be published early next year: Hence the publicity now.

The coalition government seems to be in a tearing rush to publish a planning green paper. The reason is that the "localism" beloved of both the Tories and the Lib-Dems is going to be included. Government sources say that pretty much all the promised policies of the Conservatives will be in the Green Paper - including the highly contentious "third party" right of appeal. They also say if enough pressure is applied, the idea will be quietly junked.

But the bit that is causing real despair among the house building fraternity is the junking of the regional bodies which ensured local authorities delivered on housing targets. Both the regional bodies and the targets are certain to go. Despite new housing minister Grant Shapps promise to let councils keep tax revenues from new developments for six years, it is now grimly accepted that housing starts in the south east are set to crash as rich-enough NIMBY councils say no.

Ballymore is generally seen as the over-confident Irish developer which bought a great deal of off-pitch land in the UK earlier this decade - and so is consequently in deep hock to the Irish bad bank, NAMA. To some extent that is true. An EGi story this week confirmed that the business 98% owned by the media-shy Sean Mulryan made a £115m loss in the year to March 2009 in the UK and had towering debts of £1.7b.

But that was 14 months ago. The firm seems to be recovering from that near-death experience and is now showing signs of life as the decision to press ahead with a £160m joint venture in Liverpool this week shows. What happened? A very long and serious conversation with the pre-cursor to NAMA is what happened in the second half of 2009: A conversation that persuaded Irish banking officials to back rather than bankrupt Ballymore's UK operations.

That life-saving decision was of course aided greatly by the American decision to relocate their embassy to Nine Elms, where Ballymore own 23-acres of cheaply acquired land. Who knows what Ballymore paid? £25m? £50m? But the US deal to buy 4.5 acres has just gone unconditional at a price of around £90 million, according to two sources. This makes Ballymore's surrounding 18-acres worth a huge amount more than they paid. 

A NAMA-backed decision to push on with the creation of what will be called "The Embassy Quarter" has been made. The masterplan by Terry Farrell has received approval of CABE. In a few weeks time the drawings will be made public. Ballymore has of course got extensive land holdings in East London as well as an interest in the giant Wood Wharf scheme at the eastern end of Canary Wharf. 

It will be quite a while before that one gets started. But just over the river lies a good deal of Ballymore-owned land on which it was generally supposed nothing would ever happen. Apparently this is not the case. Plans for more than 1300 new homes are being revived at New Providence Wharf thanks to the providence of NAMA.

"You will see development that outstrips anything seen to date" said shadow housing minister Grant Shapps before the election. "We will build more homes than the average trend of this government. We will be unremittingly pro-development." Well, the shadow has gone: the MP for Welwyn and Hatfield is now housing minister. Can the boyish 41-year-old deliver on these promises? Who knows? But there should be some relief that Shapps has got the job he was tipped not to get.

Shapps is an able and articulate man who has read himself into the topic over the past couple of years. He is the author of the idea that councils should be able to keep six years of council tax on new development. That will make him popular in Labour Tower Hamlets, if not in Tory Kensington & Chelsea or the shires. He has also not said very much about the NIMBY litmus test issue; the right for unrelated third parties to object to planning applications.

This was not going to happen under a pure Tory government, despite what has been said. Lord knows how the Lib Dems feel. Let's hope someone asks soon: But a big issue facing Shapps is how to make good on his promise to build more homes. First of all he has to deliver the promised land to housebuilders. Not easy in the south at least. Second he has to figure a way to replace all the new homes that will not be built by the Homes & Communities Agency whose billions run dry next year. 

 
Those in the social housing community say the solution is to introduce far more flexibility into the rigid subsidy system. So, expect immediate pressure here. Most private developers have given up on building homes for rent. They can afford not to bother. But Housing Associations face a grim future from savage HCA cuts. What do they do? Run to the big pension and life funds and beg them to invest in new homes for private rent. That rush will start in the next month or so, says one involved.

Despite the political confusion the great sell-off of government property will begin this summer. The UK Shareholder Executive has been quietly putting together a team of property experts under the leadership of John McCready, who joined the organisation which manages government assets in December. The former Ernst & Young Partner, whose also spent some time at Goldman Sachs, has been asked to "maximise the value" of the government's £370b property portfolio. This has been widely taken as meaning "flog off as much as this stuff as you can to help reduce government debt."

But you have to be able to winkle civil servants out of their offices first before they can be sold. And by far the most valuable offices are those that hold more than 15 000 civil servants in central London. There have been of course been countless attempts to pack them off to all points north and west, which have been met with dogged resistance over the years. The latest in a long line of reviews came from former Reed Elsevier boss, Ian Smith in March. They all come to the same unsurprising conclusion: lots of money can be saved by moving civil servants out of central London.

The only question is how? Well, here is a four-step plan, which will no doubt have occurred to McCready. First, get the Chancellor to impose a gradually reducing real estate budget for each department: not hard. Second,get the senior civil servants in each department to tell him how they propose to attain these savings: a bit harder. Third, figure out which departments could most easily work together if they were combined in the one place; quite hard. Fourth, the easy bit: tell the civil servants that they will not be consigned to Lancashire or Strathclyde - by providing them with what might be called "The 21st Century Croydon Solution."

"How do you fancy a nice new campus at Stratford, just minutes down the line from St Pancras? There is permission for millions of square feet. The Olympic Legacy Authority would give us a great deal on that white elephant of a media shed. Or how about Ebbsfleet in Kent, just a few minutes further down the line. Land Securities would love us. We will save millions on relocation expenses. They staff will just about wear it." If that fails to convince the permanent secretaries, then a leaked paper to the Chancellor showing how many billions that can be raised by selling freeholds in central London just might.

Ardeshir Naghshineh is an enthusiastic, charming and highly intelligent man. But these gifts do not disguise the fact that his dreams of becoming a big-time City developer are over: But they help explain why the FT was kind enough on Saturday to gift-wrap the unpleasant fact that it is Lloyds, not Naghshineh, which is driving the sale of a package of properties, including Centre Point. Why: to salvage £500m from £700m of HBOS-originated loans. 

Centre Point has space behind for another mini-tower - after a few hold-out flat owners are bought out. Naghshineh's plans at one time included a tower with a windmill at the top. That dizzy idea has gone, to be replaced by more a restrained design from Nicholas Grimshaw. The "Can of Ham" plans for another City site are also rather elegant, but once again, part of the site is said to be owned by another - an owner who knows the value of a ransom plot.

These difficulties and the loss of £10m in a quixotic bid for Woolworths in 2008 will have counted against the Iranian-born civil engineer when the bankers were weighing up whether or not to extend loans, which are due to mature this year. The answer appears to be no and they have chosen instead to take a £200m hit by selling the portfolio, which makes up two-thirds of  the property assets of Naghshineh's Norwich-based company, Targetfollow, says the FT.

The question now turns to who is going to buy? What ham there is in "The Can" can be easily sold. But Centre Point is not just listed - it is an ageing icon, a bit like Tower 42 in the City which has just been put up for sale by Hermes. Neither deal is for the faint hearted. But, lo! The US developer who has just finished refurbishing the Empire State building in New York is in London next week. Tony Malkin is here for a seminar on how to bring old icons back to life. Have Lloyds and/or Hermes thought of giving him a call?

Don't give your laptop to the children if you split from your partner. That is the lesson learned by Scot Young yesterday. He is the property "fixer" embroiled  with his estranged wife Michelle in very public divorce battle. She says he is worth millions. He says he is worth nothing. The laptop he gave to his teenage daughters, Scarlett and Sasha, says Young made a few million, but seemingly a lot less than the £400m he was purported to be worth.

This news emerges, almost accidently, from the Mail on Sunday tale, which details the transactions which took place on 27 &28 Eaton Square, at what the paper says is "way below market price." Well, yes, 27 Eaton Square may have been worth £4m when it was sold to Russian oligarch, Boris Beresovsky for £350 000 in 2004. The house next door may have been worth the same amount when it was sold to an associate of Scot's for £360 000 in 2005. 

But it is far more likely that the money Scot received was his cut from buying the place for company X and selling it to company Y - both X & Y being owned by the buyer. Why else sell  for £350 000?  Almost exactly this amount seems to have been taken from the sale of 39, Chester Terrace for £3.1m in March 2007 to an offshore company called Balymena Equities, no doubt owned by someone from Northern Ireland who can't quite spell the name of their home town of Ballymena.

"Scot's a fixer. He helps wealthy people. His main business was peddling expensive properties. He would live in them and then sell them on." That quote from millionaire friend last year sort of sums up Young's business. But not quite. Young says he is now £27.5m in debt. This is bitterly disputed by Michelle, who thinks he has squirrelled away millions. Young now has to explain at next month's full divorce hearing how easy it was to become poor in 2007/8, especially if you had drifted from acting as a simple middle-man to geared-up principal.