Property bosses’ pay is plunging. Are they slacking? Or is the rich business of calculating bonuses fundamentally nonsense? • There are 200m more reasons than aesthetics for adding 10 floors to a skyscraper • London house price rises will not bail out those building flats on New Scotland Yard • PS: A few quick tips for commercial investors from Savills.
Has Great Portland boss Toby Courtauld been slacking? Taking long liquid lunches at Wiltons? Bunking off early on Fridays? Happy enough with his £30,000 monthly take-home pay, the bottom line from his basic £700,000 a year?
Is lassitude the reason we found out last week that the board had slashed Courtauld’s overall remuneration from £2.6m to £1.5m. Of course not. The Eton-educated member of the textiles family no doubt worked as diligently and to the same level of good effect as he did the year before. As no doubt did LandSec boss Rob Noel and British Land chief executive, Chris Grigg. Makes no odds.
Last year Noel’s remuneration crashed from £4.7m to £2.1m; Grigg’s fell from £6.5m to £3.7m. Between now and LandSec’s AGM on 13 July, and BL’s on 18 July, both will publish their annual report. Like GPE’s, the document will be filled with the byzantine meanderings of high-price remuneration consultants, rubber-stamped by compliant remuneration committees. Everyone will be trying to justify boardroom bonuses with outcomes that surely prove they are at least 90% subject to the ineluctable tidal flows of property – oh, and having blue-chip stock in the first place.
Looking better – from two angles
“The amount of energy needed to refute bullshit is an order of magnitude bigger than that needed to produce it.” This principle, articulated by Italian IT expert Alberto Brandolini, will raise a rueful smile among journalists.
On 9 May I bumped into Stanhope director Ron German at the top of the Walkie Talkie. News was fresh that Mitsubishi Estate has applied to add 10 floors containing 120,000 sq ft to its 40-floor tower at 6-8 Bishopsgate, on which Stanhope is the development manager. “Ruddy hell, that extra space will add at least £200m to the value. Mitsubishi is going to make a fortune! How much is it going to cost to build? Not even half that figure I bet!”
That, roughly, was my line of questioning. German wisely refused to be drawn. His boss, David Camp, had already given EG his rationale. He said the tower must go higher to look nice, up by 35m to 222m to more closely match the neighbouring Cheesegrater at 225m and the still-under construction 59-floor Bishopsgate tower, at 255m.
“Proportionately it doesn’t seem quite right, so we are looking at whether we can improve that space.” Come on David…
No bailout for New Scotland Yard developer
Bad news yesterday from Savills for the Abu Dhabi Financial Group, which agreed to pay £370m for New Scotland Yard in December 2014. At the time, an amazed underbidder told me they would have to sell the 485,000 sq ft of flats at £3,500 sq ft and rent the 146,000 sq ft of office space at £100 per sq ft to make a 20% profit.
Seemed a bit over the top – and he was miffed. Whatever, property financiers were told yesterday by Savills residential research guru Lucian Cook that “London won’t bail you out over the next five years”.
Things have changed since 2014 on the site to be known as “the Broadway”. ADFG has saved £75m already, as 90% of the cash to complete was paid last November in sterling worth 22% less than it was in 2014. An extra 27 flats have been squeezed on to the same floor area and the four-level basement is now three levels deep. Demolition is underway.
Today only development manager Northacre knows what price the flats will have to be sold in three or four years to turn a profit. But clearly it should not be counting on price inflation.
Get out of jail tips from Savills
PS: A quick précis of the interesting bits scrawled down during the Savills Financing Property breakfast on Tuesday during commercial research director Matt Oakley’s pitch. The presentation took place in the church-like Merchant Taylor’s Hall in the City, allowing the idle to gaze at the Livery company’s motto, concordia parvae res crescunt – in harmony small things grow.
■ Occupiers say they will wait a couple of years after Brexit before deciding on real estate moves.
■ The great Waitrose-to-Lidl switch means secondary malls might be a wise buy – sometime.
■ Bankers should not throw proposals in the bin to turn dreadful retail parks into distribution sheds.
■ “Brinkmanship” is playing a part in the non-cancellation of City office developments.
■ Beware of entering the “alternative asset” sector unless you are expert and can do so on a huge scale. In this sector small things wither.
■ The most interesting thing, but not said, was the last item on Matt’s written list: “go contra-cyclical.” Not yet, surely?
Peter Bill is the author of Planet Property and a former editor of EG. Follow Peter on Twitter
