It has been a very good month for Max James.
In May, the 45-year-old architecture graduate and former investment banker was promoted to chief executive of regeneration specialist Quintain. His aim: to continue the revival of the debt-ridden developer and fund manager.
Less than four weeks later, James clinched a deal with prolific Hong Kong investor Dr Henry Cheng, who is set to invest £380m to unlock Quintain’s 190-acre Greenwich development site.
The deal, which follows a nine-month search for the “right” partner, and which originally took in 10 possible global investors, sees Cheng’s Knight Dragon vehicle acquire a 60% stake in the £5bn south London project (see below).
And, importantly for James, it was well received by analysts, who hailed it as putting the developer “back in the game”. More importantly, investors were also impressed. On the announcement of the deal, the company’s woeful share price shot up 12% from 32p to 41p before settling at around 37p.
Standing on the roof of the marketing suite at the vast riverside project, looking out on Canary Wharf and the O2 Arena, James enthuses about the deal, codenamed Emerald, which passes majority control for the massive site to Cheng, whose £4.6bn empire spans everything from real estate to jewellery.
“I think the deal is an amazing way to use our interest in Greenwich to get as much profit as we can and get as much capital growth to ourselves as possible,” he says.
The agreement also marks a clear watershed in Quintain’s fortunes, from the regime of James’s predecessors, enigmatic co-founder Adrian Wyatt and his sidekick Nick Shattock. The pair saw the company through the boom of the noughties to a position in 2009 where its very future was uncertain. Gearing of 94% led Quintain to announce an emergency £183m rights issue.
Instead, the new management team has been put together by chairman William Rucker, chief executive of Lazard London and the go-to company director for corporates in need of a turnaround.
He is also chairman of housebuilder Crest Nicholson, which has been forced to restructure debts of nearly £1bn since the credit crunch.
Rucker leads the new Quintain management team, spearheaded by James, with whom he worked at Lazard in the 1990s, along with 40-year-old Becky Worthington.
She was promoted from finance director to deputy chiefexecutive at the same time as James took over, having devoted much of her attention to refinancing the firm’s debt pile, which now stands at £535m – a gearing of 87%.
James says the deal enables a move away from the previous company structure, once wryly described by an employee as being “a bit like Wyatt’s brain”.
“This transaction enables us to much more clearly define the way in which the business will be structured,” James says. “You wouldn’t be surprised to hear that someone who turns up and puts as much capital as that into a business wants clear alignment and responsibility.”
James, who joined the group a year ago, is clear where Quintain is heading next. “The company I think has been very good in acquiring two large interests in London and clearly it has done a very good job in terms of planning – we have 22m sq ft of consented potential development space in London and, in terms of residential, we think we are probably the second-largest residential land bank after the Berkeley Group.
“That creates certain value, but it is only when you begin to develop and deliver on that and get some of the profits back that you begin to extract the value you have invested.
“And that’s the next phase for Quintain. In a sense, we have gone through two phases and now we are on to the delivery phase, and we are doing that around a commercial hub.”
But the former banker, who did stints at Baring Brothers, HSBC and Lazard before co-founding Lowndes Partners, agrees that there is still much more to be done.
Quintain’s pre-deal share price of around 32p was a great improvement on its April 2009 price of 7.5p.
However, even at today’s 37p, it still stands at a 68% discount to the company’s 116p net asset value per share.
To further ignite investor confidence in Quintain, James wants to bring some of the lessons learned from investment banking to the company.
“I think we have some real talent. Quintain has always been a place for – I was going to say interesting people, but I will say thoughtful people,” says James.
“One of the things I am hoping not to do is kill some of that entrepreneurial spirit – I love it – but to be slightly more focused in terms of creating value, bringing in some of the structure and techniques that you find in opportunity funds or indeed syndications – that is banking structures that you can then apply to property,” he says.
James plans to create a clear distinction between Quintain’s two key projects – Greenwich and its 85-acre Wembley site in north-west London (see below).
He also has big plans for the group’s growing £2.2bn fund management division.
In February, the firm spent £5.8m buying Nigel Kempner’s Grafton Advisers to add to the £872m West End of London Property Unit Trust to its now five-strong stable of property funds.
The Welput deal, through which 55-year old Kempner has joined the board as a director, forms part of a new “capital-light” strategy for the division.
Reducing Quintain’s investment in its funds, but preserving or adding to fees by acquiring more management streams, gives shareholders “much more bang for their buck”, says James.
With non-core disposals and deleveraging still on the short-term agenda, what of the long-term future? Where does James see the company then?
London clearly has been and will continue to be at the centre of the business plan, he says. “Looking really far ahead, the desire is to focus on London now, not just because it is fashionable at the moment, but because we think there will be really good long-term trends,” he says.
“We have clearly already got a huge exposure to London, so no-one would expect us to switch that off and go somewhere else.
“We think we are well positioned to create another very interesting London specialist company, but one where we can begin to move the needle in terms of the value we can create through the development process.”
Knight Dragon has taken a 60% holding in the Greenwich project, replacing previous joint venture partner Lend Lease. The Hong Kong vehicle is paying development and project manager Quintain around £150m over six years, before any additional development profits, and, crucially, pledging a £300m revolving facility to bring forward the scheme.
London calling – grandstanding at Wembley and making Greenwich bloom around the Dome
Quintain is making its presence felt in Wembley, north-west London, with a £2.5bn project. Here the group has a leisure attraction in the form of the Arena, and is building a Hilton hotel, student accommodation and the 350,000 sq ft London Designer Outlet, where it is still keen to bring in a partner.
“We are about 60% let ahead of opening in October next year. It is at that point that we think Wembley becomes a place where people really want to live,” James says.
“What we have been endeavouring to do is provide sufficient infrastructure and, more importantly, exciting leisure and things that people want to live around. We then have the ability to bring residential development forward, attract people who want to buy and want to rent, but, critically, to secure the sort of prices we think the units should demand and therefore the profits for Quintain.”
At Greenwich, in the short term the team will focus on the delivery of 611 homes at Peninsula Quays, with work expected to start next spring. In the longer term, the 14m sq ft masterplan includes 10,000 homes, a 3.5m sq ft commercial district, shops, hotels, schools and public facilities along 1.4 miles of Thames river frontage.
“We have to put Greenwich on the map in a sense. A lot of work has been done, but this has not projected Greenwich as a residential location,” he says.
