Last week’s Barclays HQ deal highlights Redevco UK’s efforts to diversify. Managing director Andrew Vaughan talks to Adam Coffer about life after C&A
There is one surefire way to annoy the usually composed Andrew Vaughan – introduce him as managing director of the former C&A property company. The initials that until 2000 were almost synonymous with bargains in big stores are now history to Redevco in the UK.
And Vaughan, managing director of the Dutch company’s UK operation, seems determined to vanquish the demons of misassociation. After spending the past two years reletting the chasm in Redevco UK’s £650m portfolio caused by C&A’s UK downfall, what he wants to talk about is the multi-million-pound war chest he has amassed for a diversification programme.
It began last week with the £25m acquisition of Barclays’ private banking HQ in Pall Mall, SW1. The sale and leaseback marked Redevco’s first major investment away from retail since the C&A debacle. Vaughan says the buy represents a great start. “It was such an important deal,” says the baby-faced 36-year-old. “We paid 100% equity initially and will leverage after completion. But that allowed us to get the thing done in less than two weeks. It hopefully shows the market that we are out there in our own right as a dedicated property company. That is what the family wanted two years ago.”
Working for the family
It is the first of many references Vaughan makes over lunch to “the family”.
Rather than showing respect to an army of shiny C&A-suited mafiosi, Vaughan is referring to the elusive Brenninkmeijer family, owners of both C&A and Redevco.
So secretive are they that even Vaughan’s predecessor, Alastair Gordon, who worked for Redevco for 18 years, was not informed of their decision to close the UK stores until three days before the 15 June announcement.
“It was a shock to me too,” Vaughan recalls. “In April 2000, I was offered the job to take over from Alastair, who was due to retire in 2001. I was entirely unaware of the closure plan. They told me the news after I had accepted the job.”
A former fund manager at Friends Provident and an investment and development specialist at Moorfield, Vaughan had been relishing the prospect of managing a hybrid between a corporate real estate company and an autonomous investment firm. “I expected to walk into a similar set-up to Chartwell Land,” he recalls.
Instead, he found his first job was to deal with 109 empty stores which Redevco owned freehold or on long leases, the largest amount of space to be released by a single landlord. He had to oversee the portfolio’s reshaping – from 98% let to C&A, to zero.
Vaughan and Gordon appointed agents Kitchen La Frenais Morgan, Tushingham Moore, and, in Scotland, Culverwell & Co to handle the reconstruction of the Redevco UK empire.
Retail agents were pessimistic about the prospects for quick deals. One agent recalls: “When C&A made the shock announcement we were bloody scared. The last thing we needed in summer 2000 was even more retail on the market – and this was a flood. There just didn’t seem to be the demand for those 35,000-50,000 sq ft stores.”
Bite-sized pieces
Redevco and its agents tackled the problem by dividing the portfolio into bite-sized pieces. The tactic worked. “The major retailers feared that if they didn’t take the stores then their rivals would,” says Vaughan.
Max La Frenais adds: “It was a one-off opportunity for retailers. It was enormously exciting. By the time we had bids back and decided on how best to divide up the portfolio, we were able to tell tenants that if they wanted the best units they would also have to take some of the non-core stores. Any retailer trying to drop a store from one of the mini-portfolios would have lost the whole package.”
They were given a year to relet the portfolio. In the end, Next took 10 stores, Allders six, New Look and Wilkinson nine each. Other multiple occupiers added to the Redevco tenant list included Hennes & Mauritz, Woolworths and Littlewoods. The last deal, to JJBSports at 200 Oxford Street, W1, exchanged in February. In addition, 20 properties were sold, netting Redevco £80m.
Vaughan says he feels more secure with the new tenant mix. “Before I joined, we were in the dangerous position of having one tenant paying most of our £45m in rent.”
Vaughan will not admit to being a ruthless man but he has a reputation for getting his own way. He recently replaced both the architect and one of the agents on the redevelopment of the former C&A head office in North Row, W1, because, according to one agency source, “he didn’t like what he saw. The West End market is tough and lots of schemes are not letting. But he wants results and will do what he can to get people to get them for him.”
He has also worked on making Redevco his own. Gone are most of the team that worked under Gordon, replaced by a group of fellow thirtysomethings. The latest to arrive is financial director Chris Ward, who was previously at Asda Property. Portfolio manager Adam Starr joined this year from Strutt & Parker, and portfolio manager David Smith arrived last year.
“We’ve a new focus now,” Vaughan says, waving at Redevco’s stylish new James Street head office to drum home his point. “You might say it’s a new broom but it’s simpler than that. A corporate real estate firm doesn’t become an investment and development firm without changes to its make-up.”
The new broom may have swept away the remains of C&A, but old associations die hard. Vaughan will cringe, but on hearing of his plan to spend £100m on offices this year, one West End investment agent said: “Oh Redevco, that’s C&A’s property firm, isn’t it?”
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Andrew Vaughan 1992 Joins Friends Provident Life Office as management surveyor 1995 Becomes fund manager for central London, a £340m City and West End portfolio 1997 Joins Moorfield Group, specialising in investment and development 2000 Replaces the retiring Alastair Gordon as managing director of Redevco UK. Before he starts, C&A announces that it is to close its UKoperation 2002 Vaughan completes the reletting of C&A stores and begins diversification strategy Lifestyle Aged 36, single. Interests are squash, classic car restoration, motorbikes, films and architecture |
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Reshaping Redevco ” Currently, 92% of Redevco UK’s property ownership is still in retail, with 7% in offices and 1% in industrial. The object is to reduce retail assets to 75%, with 15-20% in offices and 5-10% in industrial. The diversification plan is intended to spread risk, and has been approved by group chief executive officer Jaap Blokhuis and the Brenninkmeijer family ” When the family closed C&A here in June 2000 after sustaining losses of £250m over five years, UK rental income stood at £45m. Subsequent reletting has restored rental income to around £40m. 20 properties were sold; reversionary rental income is an estimated £52m. ” Around £100m of retail sales are planned this year. Six properties are already under offer for a total of £25m. Sales will be spread throughout the UK, comprising smaller buildings in the £3m-£5m price range. ” UKmanaging director Andrew Vaughan wants to invest a further £100m this year, on top of the £25m spent on the Pall Mall deal (see main story). He aims to buy offices in central London, the Thames Valley and six main regional cities. “We are looking for offices that yield over 7%.” ” The UK portfolio accounts for 20% of Redevco’s European property holdings. Redevco owns €5.3bn of assets. Only 55% of its continental portfolio is now occupied by some of its 500 C&A stores – two years ago, it was almost 100%. ” Redevco is diversifying right across Europe. In August 2001, Redevco made its largest acquisition to date, buying Belgian property firm GIB Immo for over €900m. GIB Immo added 200 retail properties, plus offices and distribution space. |
