Copyright: David Lawson - Property Week Feb 2001
‘Only about four schemes,’ insists Sir Stuart, who is more concerned with showing off the glossy new buildings on Chiswick Business Park than macho posturing. As ever, he is frothing over about cutting-edge architecture, dropped like a diamond into the gloomy chaos of west London. This is the passion which made the government pick him out as its ‘design tsar’ but it has overshadowed the fact that he remains one of the country’s busiest developers.
He is referring to schemes currently under way, as giants like a business park north of London and remodelling Selfridges will not start for a year or two. That reduces Stanhope’s workload to a ‘mere’ 2.5m sq ft or so, which is not bad for a small private company growing from the ashes of the biggest victim of the last recession. This tiddler, with a mere 42 staff, is one of the few names pencilled in whenever a major redevelopment prospect emerges around London. The Dome, King’s Cross, Paddington and London Bridge have all passed across Sir Stuart’s desk. It has all happened before, of course. Commonly considered the most influential developer of the late 20th century, he had a hand in creating Sterling Land, Stockley, Greycoat and Broadgate. So is another giant company in its birth pangs?
No chance. Big is still beautiful in glass and steel, as sheer scale is crucial to indulge a passion for creating integrated ‘communities’ like Chiswick Park. But Sir Stuart has learned a bitter lesson from the spectacular failures of the recession: giant public companies could be as obsolete as the rubbish thrown up by some of their predecessors during post-war booms.
Despite his love affair with buildings, Sir Stuart has learned one enduring truth: you have to let go. He will never be tempted again to become a big landlord ‘The lesson of the Eighties and Nineties was that a big portfolio can drag you down if things go wrong. We should have financed out or sold assets like Broadgate. But at the time, that would have tarred us as traders – the bad boys.’
Specialists are the future. Retail developers who know about shopping; office developers with close ties to occupiers. When these combine, joint ventures are the solution, such as Stanhope’s link with Chelsfield for the Stratford regeneration.‘When you get too big, you can take your eye off the ball,’ he says.
Nor is a market listing necessary to entice funding. CGNU, Schroder, Equitable and Clerical Medical have all beaten down Stanhope’s doors in the last few years, desperate to back schemes like Chiswick. The secret is an old-fashioned approach: find sites where you know you can add value; work through the complexities of planning; and prove they are what occupiers want – in other words, swift lettings.
Stanhope never lost the finance community’s trust, despite the spectacular crash. A highly respected and tightly-knit team including David Camp, Peter Rodgers, Paul Lewis and Aldous Hodgkinson remained in place with no shadow on their reputations. ‘Every building we have ever done has made money,’ he says, pointing out that the 1970s Cutlers Gardens, which cost £75m to build, has just been snapped up by a US vulture fund for £350m.
Even potential ego clashes are subsumed. Fellow veteran John Ritblat snatched prime assets like Broadgate but the 9% yield was enough to persuade him that British Land still wants the firm as development partner on schemes like the old Stock Exchange building and Selfridges.
New Stanhope is a very different animal, however. It takes equity stakes, much like that other market leader Helical Bar. ‘The difference is that we don’t buy sites,’ says Sir Stuart. He finds opportunities and packages them for investors, who are usually long-term contacts. Old heads like William Hill of Schroder and David Hunter, now at Aberdeen Asset Managers, for instance, who slotted their talents together for the first off-shore property trust to back Chiswick Park. The agreement to redevelop Sainsbury’s HQ on the South Bank came from similar personal connections.
Pre-funding enables a small outfit to compete with the big boys but there are still times when Stanhope has to dip into its own pockets. Selfridges, for instance, will cost millions before it is ready for funding. Strong cashflow keeps the firm in the running for such large schemes. The firm made pre-tax profits of £6.7m last year on turnover of £12.7m. ‘We are essentially a cash generator, ‘ says Sir Stuart. That cash is ploughed back into the huge amount of research and preparation for new developments.
A reputation for finding deals is not the only key to the firm’s recovery. Stanhope is an unusual hybrid that combines construction with sophisticated property finance like no other big name. Obsession with efficiency dates back to the pioneering fast-track methods introduced from the US on Broadgate, which Sir Stuart says still rates among the best buildings produced today.
Operations director Peter Rodgers must have endured the odd sleepless night after his illustrious brother Richard and fellow architect-peer Norman Foster dropped yet another spectacular product on his desk but he has developed further revolutionary techniques to ensure every project comes in on time and budget. At Mid City Place in Holborn, for instance, three-dimensional computer programs slashed construction times by eliminating bottlenecks and mistakes. Stanhope has even brought in experts from the car industry to eliminate waste in material supplies.
This combination of efficient construction and fast letting is what sells Stanhope to fund managers. Sir Stuart’s track record and impeccable connections are no disadvantage, either. One flickering shadow, however, is whether that celebrity could come back to haunt the resurgent firm. ‘What will he do when one of his flashy schemes comes up before CABE?’ said a rival developer, oozing jealousy.
Sir Stuart shows not a flicker of concern. ‘I don’t sit on the design committee,’ he says. ‘In any case, I was on the Royal Fine Arts Commission for 10 years during a time when Ludgate was heavily criticised.’
He remains proud of that development for overcoming market criticisms about lack of car access – deliberately planned according to green principles Stanhope still espouses. Ironically, Ludgate was the final straw which broke old Stanhope’s back, but not for design reasons.
‘We spent £140m on a tunnel without as tenant in sight,’ he says. It was a mistake Stanhope is determined never to repeat. ‘You never know when things can go wrong,’ says Sir Stuart. ‘ We spent millions on research in the Eighties. So did all the leading consultancies. Yet no-one predicted the crash.’
STANHOPE PLC
Formed in 1995 after the take-over of Stanhope Properties by British Land. The team has created more than 12m sq ft since 1983 including Broadgate (3.5 million sq ft) and Stockley Park (2m sq ft) and won over 60 awards. Pre-tax profits rose to £6.7m on a £12.6m turnover In the year to March 2001. The company has no debt.
Board
Oliver Stocken - Non-Executive Chairman
Keith Way - Non-Executive Directo
Sir Stuart Lipton Chief Executiv
David Camp - Managing Director
Peter Rogers - Operations Directo
Paul Lewis - Projects Director
Aldous Hodgkinson - New Business Directo
Advisors
Herbert Smith - Corporate Lawyer
Ashurst Morris Crisp - Property Lawyer
Linklaters & Alliance - Construction Lawyer
Ernst & Young - Accountant
Selfridges, Oxford St, W1 – 1m sq ft retail, office and hotel development on a 2.5 acre site to the rear. Due to start 2002.
Hemel Hempstead Business Park – 700,000 sq ft backed by Morley Fund Managers for CGNU Pensions. On site July 2001.
Chiswick Park – 1.5m sq ft financed by Chiswick Park Property Unit Trust (SEPUT, Scottish Amicable, Equitable Life and Clerical Medical).
MID City Place, High Holborn – 350,000 sq ft for Matsushita – part prelet to Towers Perrin.
Paternoster, EC4 – 700,000 sq ft office and retail for Mitsubishi Estate
South Kensington Station – 300,000 sq ft mixed use joint venture with London Transport and Hutchison Whampoa. On site 2002
Walker House, Queen Victoria Street, EC4 – 100,000 sq ft. office building for Legal & General. On site July 2001.
Tower Environs – working with Historic Royal Palaces on redevelopment around the Tower of London focused on Stanhope’s Tower Hill Vaults.
Lime Street, EC3 – 400,000 sq ft net headquarters with British Land. On site 2002.
H M Treasury, Whitehall – 1m sq ft PFI. First phase for Treasury occupation. 42.5% shareholder of Exchequer Partnership, the project company.
131 Finsbury Pavement, EC2 – 80,000 sq ft office development financed by Capita Land. Let on completion to OM Group.
31 Gresham Street, EC2 – 160,000 sq ft office let prior to construction as headquarters for Schroder Investment Management. Financed by Legal & General.
59 Gresham Street, EC2 – 300,000 sq ft headquarters pre-let to Flemings. Financed by Legal & General.
Christ Church Court, EC4 – 300,000 sq ft HQ pre-let to J Henry Schroder, developed for Pillar, financed by Prudential, now occupied by Goldman Sachs.
11% interest in PremiSys with an option to increase holding to 25%. Services including facilities, property and estate management, design and e-commerce.
founding partner of Asite, planned to become the leading European construction portal.