Copyright: David Lawson - Property Week 2002
Talking to Jamie Ritblat is hard work. He hasn’t lost that famous garrulous charm, nor an infamous propensity for outrageous honesty. It’s just hard to grab a sliver of his time. Appointments get blown away by other business meetings and when you finally get inside Delancey’s Portman Square headuqarters, there’s always one more phone call to delay the start.
A strange situation for a young hotshot supposedly winding up his company after being chewed up and spat out by the stock market. But like so many rumours that have filled the vacuum since Delancey was delisted last summer, truth is very different. ‘A load of crap,’ is his favourite response to a string of speculative stories ranging from a full merger with Mapeley, the business services giant, to the fact that he is selling out over three years and moving on to take over his dad’s business, British Land.
‘At least the timescale is right,’ he says. But that is only to pay off the £170m borrowed from Royal Bank of Scotland for the management buyout. He would need a dust-up behind the bikesheds with brother Nick for the succession, anyway, but insists it’s not on his agenda. Three times in an hour he repeats his other favourite phrases: ‘I’m not into empire-building. I’m not into ego-building. I just want to make money.’
Far from selling up, Delancey is going like a train. The company is proposing to redevelop its own headquarters and the next door building at Portman Square to provide 15,200 sq m (163,000 sq ft) of office space and two floors of flats. In Holborn, Rolls and Arnold House on Fetter Lane are scheduled for a 34,500 sq ft (370,000 sq ft) development while Another 200,000 sq ft is ticking over at York & Beckett House, near Waterloo.
‘How can that be winding down?’ he asks. ‘Gross assets are still around £500m – the same as when we were public.’ Meanwhile the firm has maintained major shareholdings in companies like Centros Miller, with its £650m development program, and Mapeley, which is planning to expand into mainland Europe.
The only disposals are what he calls ‘normal portfolio management’. The ICI headquarters in Manchester Square, north of Oxford Street, went for more than £45m to Close Brothers, as did 1 New Fetter Lane in Holborn for the same price last year. USS has just paid almost £17m for the Marylebone head office of Colliers CRE, the agency taken over as part of Milner Estates and in which Delancey has kept a share stake after it was floated.
Further disposals are planned as part of a strategic withdrawl from regional shopping. Delancey once had 15 centres such as The Glasshouse in Glasgow, but Ritblat repeats that he is not trapped in a fire sale. Repayment of the MBO loan is ahead of schedule.
A similar laid-back approach is evident for other ‘non-core’ schemes like the 18,580 sq metre (200,000 sq ft) Cardiff Millennium Plaza. Delancey escaped flack when construction partner Brunswick collapsed and is happy with the 80% occupancy. Ritblat will wait until leisure yields harden again before selling.
Retail investment remains attractive in central London, such as the firm’s Victoria, Islington and Clapham Junction schemes. So does regional development through Centros Miller, one of the many pies in which he has fingers through strategic shareholdings and joint ventures.
Has nothing changed since the buyout? ‘We are happier and more relaxed,’ says Ritblat. He makes no secret about hating the distractions of a listing. It was done solely for the paper to make acquisitions. Once funds lost interest in small company paper, there was no reason to continue.
Delancey was caught during a step-change in the market. Ritblat does not agree with the triple-net method of valuation which has crippled property companies with huge discounts to share values but feels there is now room only for large concerns with liquid equity and small specialists. ‘Perhaps they should be separated into the main list and alternative investment market,’ he says.
The alternative of going private may no longer be available. Managers will not see the opportunities to make money in a flat market, nor will banks be willing to fund them.
What about strategic moves like Land Securities’ link with Trillium? Surely an opportunity exists for a merger with Mapeley, in which Delancey has a 15% stake ? Another ‘crap’ rumour, he says. ‘I’m not sure what it would gain for either company. I see a role for an all-embracing services business but that is what Mapeley does anyway. We are an energetic young business in traditional development. We provide the real estate expertise.’
So what is the Big Plan? There isn’t one. No target size; no ‘empire’; just ‘making money the best way conditions allow’. If that means changing course, sobeit. A few years ago ‘traditional’ and ‘development’ would never have passed Ritblat’s lips but in a flat market you have to create opportunities rather than buy mis-priced assets and hope for rent increases or changing interest rates.
He has the youthful drive – and the confidence of big shareholders like George Soros and RBS – to try things. If they don’t work, they get dropped. On-line property services, investment in technology centres and broadband wiring for office blocks have all been jettisoned. ‘Reality didn’t match the theory,’ he says.
Nor is there lack of ambition. A small company can punch above its weight in joint ventures with institutions. Clerical Medical has stakes in two of the big central London office schemes and two German banks back the Victoria retail development. Another approach is buying expertise, like the tie-up with Centros Miller.
But there may be more to come. Remember that cheeky all-paper bid for Greycoat? Ritblat gives no hints, but points out that even with no shares to spend nowadays, he still has the same asset strength. It might be wise for a few drifting property companies to watch their backs. This is no wind-up.