Only a courageous councillor takes on the Daily Mail. But last week, Southwark’s Labour leader, Peter John, intruded into a deal by the paper’s owners to sell their 14.5-acre print works in Surrey Quays in Rotherhithe to British Land for £12m-£14m.
Why so little? Why the intrusion? Read on.
The site should be worth a fortune. Wapping’s 15 acres sold for £150m to Berkeley Homes. Here there is a legal snag.
The London Docklands Development Corporation retained the freehold on the Mail‘s 11.6 acres when it granted the paper a 99-year lease in 1986. That freehold passed to Southwark council in 1996.
Land for mid-rise flats in Surrey Quays is obviously worth less than land at Wapping, where Berkeley’s towers may rise to 26 storeys.
But the central reason the price is low is a clause in the lease restricting the use to industrial. That obviously reduces the value by tens of millions of pounds.
A few days after BL announced the Mail deal, Southwark council issued a contrary statement. “The council’s preferred way forward is to acquire the Daily Mail‘s interest in the site with a view to delivering a mixed-use scheme with a significant element of employment and commercial uses.”
In other words, John wants an industrial estate on a good part of the site to replace the jobs lost when the Mail relocates to Thurrock in 2014. BL wants to extend its existing shopping centre and build lots of houses.
The two sides have been talking. There has clearly been no meeting of minds.
John’s intervention is unlikely to stymie the deal with the Daily Mail and General Trust (DMGT), which closes at the end of this month. But it does put BL in an awkward spot.
Southwark is not only the freeholder, but also the planning authority. The council has told BL it won’t sell the freehold.
The lease runs out in 2085. There is no point in building homes that have only 70 or so years left on their leases.
So why did BL unilaterally announce the purchase of DMGT’s leasehold interest without getting the council onside? Why has the Labour council made its opposition public?
Nobody wants to say. But it’s not hard to see a mix of politics and money at work.
Southwark is probably flexing its freehold muscles for two reasons. First, to get part of what it wants in planning terms. Second, to get a decent slice of the equity in an eventual joint venture agreement with BL.
The entire 14.5 acres as freehold is worth closer to £100m than the £12m-£14m leasehold BL is prepared to pay DMGT with that industrial-only use restriction.
There is only one party that can lift that restriction – the freeholder, Southwark council.
Fluttering the CFR flag
It was suggested here on 30 June that the age of moral and financial austerity had arrived. One consequence being that the pay of listed property company bosses might come under fire from those fluttering the new flag of corporate financial responsibility (CFR). Between writing and publication, the Barclays affair exploded.
Last week, shareholder advisory group Pirc challenged chief executive Chris Grigg’s £1.9m pay packet as “excessive”. Here we go So, full marks to Land Securities for anticipating the age of austerity with what it calls a “wholesale review” of boardroom remuneration.
New-ish chief executive Rob Noel is not exactly going to starve on his basic £680,000 a year. His bonuses could take him towards the pay of Chris Grigg. But LandSec’s bonus system has been made far less discretionary than it was, as the 18-page remuneration section of the annual report shows.
The details are a model of transparency, as well as a model for others to follow. They even show the ratio between Noel’s salary and the average employee: 12:1 (What is the ratio in your firm?)
So, welcome to the age of CFR. Well, for a few years, at any rate. Let’s not get too mealy mouthed.
