Guestblogger Bruce Dear, Head of London Real Estate, Eversheds meets Rob Noel for a pre-Christmas lunch.
A renowned London real estate expert, Rob is Managing Director of Land Securities' London Portfolio. Although born in Yorkshire and educated at Marlborough, he is a Londoner by adoption and long commitment.
Rob started work in 1986 at Kemsley, Whitely & Ferris, before Big Bang blew away the Bowlers, and when faxes were high tech. "You'll get £5,850 a year and must take your secretary for lunch once a month out of that - any questions?". A move to Nelson Bakewell followed, where he started on Black Monday, 1987.
Specialising in investment agency, Rob built a track record of high profile, complex deals, culminating in one of the leading and most debated deals of the turn of the Millennium, the purchase of MEPC by Hermes and long term client, GE Capital. During the transaction Rob developed a close working relationship with a charismatic Young Turk, Toby Courtauld, then a senior MEPC executive.
Rob was settled in agency, but friendships are fate. Both took a hand when Toby Courtauld, now ensconced at Great Portland as Chief Executive at just 33, asked him to join. "I took to the client side straightaway. Agents can walk away from properties and onto the next deal. The principal has ownership and responsibility and must live with the asset for its whole life cycle. Agents are deal midwives. Clients do the longer term parenting. I enjoy that discipline, even under the magnifying glass of a public REIT - showing conviction, standing by your decisions. Toby and Great Portland gave me the chance to discover that."
Rob was Property Director at Great Portland from 2002 to 2009. On his watch, Great Portland became a nimble central London specialist and Rob built what Francis Salway, Chief Executive of Land Securities, has called his, "outstanding track record in central London transactions and investment performance." Long an admirer, Francis persuaded Rob to leave Great Portland and join Land Securities as Board Director and Managing Director of the London Portfolio in January 2010.
Sixty per cent of Land Securities' portfolio is in London. It is the apex of their strategy. Property markets are still relatively opaque and powered by information. This puts a premium on focused local knowledge and Rob knows London better than Peter Ackroyd: "London is the pre-eminent City in Europe. It's one of fewer than a dozen truly global cities that will be central to the 21st century. Neck and neck with New York, London has all the features a city needs to thrive economically: liveability, business infrastructure, a concentration of global HQs, a virtually unparalleled financial services and banking sector, access to markets, and a flexible and competitive labour market with a phenomenal talent pool. Hong Kong and Singapore are challengers to London, of course, but try and find a flexible labour market in Paris, or a million square feet in Frankfurt, or flush your loo after 10pm in Zurich, and you'll soon wish you were in London."
Land Securities is central to the London economy as developer, employer and provider of some of central London's premier space for offices, retail and residential. They create the spaces where Londoners live, work and shop; housing hundreds of businesses and tens of thousands of London's workforce on a daily basis. As committed early cycle players, Land Securities are, in a real sense, leading London into its property future. Development prospects make up over a quarter of its London portfolio. Following Rob's arrival, the company committed to building an ambitious 1.6 million sq ft of space in central London, including the commitment to develop 20 Fenchurch Street (the Walkie Talkie) in an imaginative JV with Canary Wharf Limited to share cost, risk and expertise.
Rob is clear, "We were the first property company to commit to major London developments and indeed to retail developments outside London, in this cycle, choosing to allocate capital to development rather than to buying in a competitive market. Look at the very limited supply of new office space coming through, the high number of lease expiries in 2013, and the rapidly tiring existing stock. The opportunity, in a supply constrained market, is evident. The key point is that our strong balance sheet, high quality portfolio and focused strategic plan allowed us to take the opportunity."
The visible impact of Land Securities' business is all around us. They are remodelling central London, revolutionising Victoria for example. Their highly successful mixed use scheme at Cardinal Place (with occupiers like Microsoft and P & O) is being followed by a constellation of Victoria focused schemes: 123 Victoria Street, (230,000 sq ft of mixed use - due to complete in June 2012); Buckingham Gate (270,000 sq ft of mixed use-due to complete April 2013); and Wellington House (a residential scheme of 59 high quality apartments). "Government downsizing has given us a once in a lifetime opportunity to rejuvenate Victoria completely for residents, businesses and visitors. Our approach there shows our commitment to mixed use developments. They create more cohesive and vibrant environments and provide sector diversification."
I ask Rob about the twin risks to any development strategy: what if rental growth doesn't come and what if occupiers decide not to re-locate, even though their premises may be tired and their leases expired? These are questions he's heard before, but that's because they are about the salient risks: "Each scheme is built to a prudently set rental target. All the market's features indicate that we will hit those targets: constrained supply, long range average take up statistics, the fact that rents as against total business costs are as low in real terms as they have ever been, and the quality and location of the mixed use assets that we are building. Businesses have two choices: either to move to newly created fit for purpose space at much the same rent as they're paying now, or to refurbish round their people, with all the inconvenience and trouble that entails, and then to stay where they are in tired, even if improved, space. We expect that enough (admittedly not all) business leaders will take the opportunity to move their people, for all the right reasons, when the expiry bulge comes."
A good slug of Land Securities' London portfolio is retail. Their shops have seen strong rental growth and appear to be an essential part of Land Securities' London picture. "Every global retailer of significance wants space in London, particularly the West End. The demand and the rents reflect that. Don't forget, the world economy, particularly in retail, is bigger than it used to be. Pre - 1989 the world behind the Iron Curtain was absent both as retailer and consumer. Now look at the West End retail scene-it's plugged into the consumer desires of the whole world."
Land Securities' decisive and full scale commitment to its strategy echoes Rob's attitude to business, "Don't dither, if it works after rigorous analysis push on. The glass really is half full, if the analysis says it is. Equally, listen to your instincts and the data if things appear to be turning down. At Great Portland in early 2007, we had a "Hello!" moment and began selling, when others were still blazing away with the buying bazookas. If you are disciplined, skilled and analytical in hard times, then those times will work for you."
The times will work for Land Securities and Rob. This is an extremely well disciplined business, with a coherent, clearly articulated and well defined strategy. Rob, with his encyclopaedic knowledge of the London market, fits smoothly into the Land Securities' approach. Skilled operators thrive, even in difficult markets.
Photo by Yun753 via Flickr.