Morning:
8°c
There will soon be more vultures in the sky than turkeys on the ground if this week's spate of pledges to buy distressed property is anything to go by.
Between Monday and yesterday, there were half a dozen declarations of intent to raise capital or set up opportunity funds. And today there is news of one fund that has actually raised £300 million.
The Mountgrange Real Estate Opportunity Fund is the brainchild of two well-seasoned property entrepreneurs, Manish Chande and Martin Myers.
The pair are looking to add £550 million of debt to the pledged equity and then spend £850 million on behalf of 30 investors from around the globe who have been promised a return of 20%.
This is quite a vote of confidence in Chande and Myers.
In late March HBOS called in a £60million loan, forcing the pair's main company Mountgrange Capital into receivership.
A £300 million scheme in Edinburgh is now in the hands of the bank - who also raised £700,000 by selling 21 racehorses owned by the duo in a Tattersall's sale.
"We got the final £80 million of the £300 million after that event" says Chande. "That is testament to investor belief in the strength of our team.
"We have the money; many others are still raising cash or are at the drawing-board stage."
But first off the drawing-board was Nick Leslau. Last week the 49-year-old Mill Hill School and Warwick University dropout announced he was raising £200 million on AIM to set up Max Properties - a business keen to buy offices and shops at a 40% discount to summer 2007 prices from those who have maxed out their overdrafts.
And this week the Wasp establishment of the property world joined the rush. Toby Courtauld of Great Portland Estates (Eton and Cambridge) along with property's grandest grandee, Paul Orchard-Lisle, (Marlborough and Cambridge) both announced their intentions to start spending.
Courtauld is looking to raise £166million via a rights issue and spend much of the money in the West End where more than 80% of Great Portland's existing assets lie.
"This is a once-in-a-lifetime opportunity to buy prime assets in the best locations," says the usually cautious 40-year old whose family money was woven from textiles.
Orchard-Lisle was weaned on bricks and mortar. The 70-year-old TA Brigadier now lives in a pink-washed house complete with shutters and window boxes in Mount Row, Mayfair. He joined property agents Healey & Baker in 1961 (now Cushman & Wakefield) and rose to become a rather terrifying senior partner in 1988 before retiring in 1999. "You were never late for a meeting, not twice, anyway" testifies a trembling H&B minion.
The former president of the Royal Institution of Chartered Surveyors and chairman of Slough Estates (now Segro) has now lent his name and reputation to Apache Capital which aims to raise £400 million. He echoes Courtauld. "It is nearing the perfect time for the counter-cyclical buying opportunity".
Our final opportunist Leo Noe will agree. Noe is a publicity-shy Arsenal supporter who heads a huge property business called F&C Reit and he has announced his intention to launch a £300 million opportunity fund which will invest in assets which are available, "via distressed situations".
Like Chande and Myers, Noe has just passed through a distressing patch. Last week an investment vehicle called Pinton Estates, which is managed by Noe, was forced into receivership by the Prudential. The lead bondholder called in Deloitte after Pinton failed to make a half-yearly interest payment on a £70million loan.
Is all this allowed? Of course. Many entrepreneurs parcel up groups of properties into stand-alone assets to guard against the very events that are happening. In the world of property, it is perfectly acceptable to shoot a turkey and then breed a vulture.
Less well-off can forget Kingston but the capital is full of eastern premises
Half the homes built in London this year may be occupied by poorer folk. That is not the conclusion of a comprehensive report published by London Residential Research this week.
That study of housebuilding across all 33 London boroughs simply shows that 38% of the 25,800 homes finished in 2008 were built for part-sale or rent by government-funded housing associations.
What LRR obviously can't do is add up how many of the 18,500 part-completed private homes at the end of 2008 will end up as "social housing" by the end of 2009. But it will be plenty. That is because the government's Homes and Communities Agency is pouring hundreds of millions into stalled developments across the capital.
That process involves the conversion of many unsold private units into affordable homes managed by housing associations. So it is not hard to imagine the result of the HCA's efforts pushing that 38% figure close to 50%.
Not that the City of London and the Royal Borough of Kingston upon Thames need worry about an influx of the less well-off. The City will view with quiet pride the LRR figure showing that not a single fresh application to build new homes has been received in four years. It is a matter of policy not to add to the 7000 troublesome voters already on the electoral roll.
But this does not explain the reluctance of Kingston, with its population 147,000. Just 14 new units were finished in 2008, says LRR, and just over 50 are being built today. Why?
The silver trowel goes to the Olympic boroughs of Tower Hamlets, Newham and Hackney, where 7100 new homes were finished last year, nearly 40% of them social. But this is of course where the HCA is most active today, reviving dozens of dead-in-the-water developments. So, expect more than half the units in the east to go "social" when LRR reports next May.
Pundits struggle to build up hopes
Robert Peston took yesterday morning off work for a private engagement in Edinburgh.
The BBC's business editor was lecturing 400 architects, surveyors and developers up for a two-day jamboree organised by the British Council for Offices.
The 49-year old author and journalist's strangely compelling see-saw delivery did not offer much solace to a sector levelled to its foundations by the recession. So, to cheer the troops before they go home, property agent CB Richard Ellis were today presenting a report called Beyond The Crunch. This short document surveys the prospects for anyone who makes their livelihood building new offices in London.
Not much cheer here either. Digby Flower, CBRE's man in charge of leasing office space in London for the 29,000-strong global agents, will reveal that 2.2 million square feet of previously jam-packed office space is now lying fallow, thanks to 20,000 job losses.
But Flower will look optimistically into the more distant future. "Although London is particularly exposed to the current large-scale restructuring of the financial sector, evidence from past downturns shows that London typically recovers quite quickly." But not even he is optimistic enough to put a date on when developers will dare start building offices in London again.
What do you think: three years, five years, or 10?
