In less than a fortnight, Toby Courtauld takes over as president of the British Property Federation. And he is worried: worried that the public does not appreciate the role real estate plays in the economy; worried that the government will see property as an easy target for a tax raid; and worried that the industry is not up to the job of convincing others of its worth.
But he is ready for the fight, should it come. “The commercial real estate industry alone accounts for something like 5.9-6% of UK GDP,” he says, preparing to flex his statistical muscles.
“The banking industry is only about 5%, agriculture is 1%. And that’s before you consider residential, which is £4trn worth of invested capital.
“The entirety of the equity market – all of it – is about £1.7trn. So what we’ve got here is a massive industry. And we need to get better at getting the point across to government in particular, that this is not an industry that can take a lot more regulation or tax, nor should take a lot more regulation or tax.”
He rises to his theme. “We’re not very good at selling ourselves outside the industry. We are brilliant at communicating with each other – I think it’s an extraordinarily communicative industry. We all know each other, we all get on and most people recognise that life’s too short to piss off this guy over there because you’ll be needing to deal with him over here in three years’ time. It’s got a great camaraderie. But outside the industry, I’m not sure we’re very good at selling ourselves.”
The industry needs to get better at it, he believes. And fast. “We’ve got some big challenges over the next few years, not just the next 12 months, with a government that has put out a series of complicated, quite radical proposals, often not particularly well thought through, or rather, needing more thinking. It is a very interesting time to be involved in the BPF.”
Delivering success
Given Courtauld’s recent track record, the industry will hope he can continue to deliver success – be it delivering growth or defining localism – on a bigger stage.
As chief executive of Great Portland Estates for the past nine years, he has acquired an enviable reputation among his peers. Like many of the larger REITs, the company has bounced back in the past 12 months. But it stands out. Its reported rise in net asset value – more than 27% – puts its performance ahead of the likes of British Land, Hammerson and Land Securities.
And it has outperformed the IPD index in both good times and bad.
But it has not all been plain sailing during Courtauld’s time at the top. In 2004, he came under fire from City analysts for not exploiting opportunities in the market.
But since then he has acquired a reputation for getting more calls right than wrong. Today, the company’s focus on London looks shrewd. At a time when others have grown and retreated from more varied markets, GPE finds itself with a portfolio that is concentrated where the recovery is real, not imagined.
“We’ve done all right. We’ve done better than many but we haven’t done as well as we should have, I would argue, and we’re going to try and do better next time. But what we did do, through a bit of luck and a bit of judgement in 2007, was become net sellers.
“So, when the recession really hit, we found ourselves with the lowest gearing of any listed property company in Europe, and we had no development risk at all. It meant that when things got really bad, instead of having to worry about diluting the weight of debt on our balance sheet, we could suddenly start to think about expansion when prices were on the floor.”
It is that call that has put the company in a strong development position. “We began in 2009 with the acquisition of Marcol House, just north of Oxford Circus, and today we have something like half a million square feet on site. We’ve got another 1.7m-odd that could start in the next 12 months, and some of it, most of it, probably will. And then there’s another million-and-a-bit of pipeline projects.
“Our development programme is one of the largest in the sector, and I know it will be very important to our returns over the next two years. And if you look at the stock price today, we’re trading at a 20% premium. The reason? The market is saying, big profits to come from developments, so let’s recognise some of that in the current share price. And it feels like a good place to be at the moment.”
Leadership
Still only 43, Courtauld has been running a FTSE 250 company since 2002.
It is tempting, but a little simplistic, to say that his upbringing readied him for leadership. He spent much of his childhood in Asia, where his father worked in the oil industry. And it was his time in Hong Kong that opened his eyes to the importance of real estate to an economy.
A good education (at Eton, where contemporaries included David Cameron; and Robinson College, Cambridge, where Nick Clegg was a year ahead), has given him perspective, he acknowledges, though he is careful to stress plenty of other, less celebrated, institutions do so too. But it was his time at MEPC that was formative.
He joined as a graduate – the only graduate – in 1991. “For the ensuing 12 months all hell broke loose,” he says. “I didn’t do my due diligence very well because the company found itself right in the thick of it with too much development, too much debt, interest rates fixed in double digits, when they were looking to kick off a development programme in the late 1980s, and a proper problem.
“And if ever there was a training ground for what not to do in the volatile central London and retail markets of the UK, that was it.”
Economically, the next 12 months look more stable than that volatile period. Politically, much is up for grabs. And for Courtauld, wearing two hats over the next 12 months is bound to be a stretch. But it is the strength of his colleagues – at the BPF and his home team at GPE – that will make it manageable, he believes.
“I am incredibly fortunate in the way GPE is set up. I can stay out of the detail if I want to, or I can get right into the detail – which I really enjoy doing – if I want to.
“We’re not so big that I have to spend all my time strategising about stuff, neither are we so small that I have to be doing it all myself, and that gives me an enormously interesting role. “
l Toby Courtauld was interviewed for the Profile Network’s Face to Face series, which raises money for LandAid and is sponsored by Estates Gazette. To watch the interview go to www.estatesgazette.com/videos
“The market is saying, big profits to come from developments, so let’s recognise some of that in the current share price. And it feels like a good place to be at the moment”
