Next month will mark Rob Noel’s first anniversary as chief executive of Land Securities. It has been a busy first 11 months – confirmed by the transformation of London’s Victoria, the arresting Walkie Talkie in the City, and the futuristic Trinity Leeds shopping centre – but he is keen to emphasise a sense of continuity since the Francis Salway era came to an end last March.
Plus ça change, as the French-speaking, iPad-wielding, Twitter-dabbling Noel might say.
It is understandable why he wants to plead evolution rather than revolution. After all, it was Salway who hired him to run LandSec’s London portfolio in 2010 and help steer what Noel describes as the REIT’s post-downturn “balance sheet repair”.
All change?
Of his first year’s performance he says: “It shouldn’t have come as any great surprise to the market that there was going to be no real change. Land Securities is in delivery mode. We’re on a clear path, with a clear plan.”
Internally, though, things have changed. Noel has sought to end the top-down approach that LandSec has always had.
He has created executive committees to steer LandSec’s two main markets: London and retail. They are no longer simply MDs’ toys.
“It gives those people the experience in developing and running a business in their own right,” he says.
Noel likes to challenge colleagues and likes to be challenged himself. You can see that when asked whether REITs have been too timid, too boring, or, dare we say it, bland.
He says: “It’s the perennial question. There is this feeling that REITs are rent collectors and high distributors of income.
“What we all need to just stand back and think about before anything is that we are real estate operators, and we operate in what has historically been a cyclical market. And it’s absolutely no good just sitting down and collecting rent because at some stage the rent will run out.”
Stirred, he continues: ” Land Securities has the largest development pipeline in the UK. In 2010 we were the first to start large-scale development in London. We started in London with Park House on Oxford Street, Wellington House in Victoria, and also 62 Buckingham Gate. We then followed that up with Cannon Street, 20 Fenchurch Street.
“We’ve now started Kingsgate House and we’re demolishing at Victoria Circle. This is the best part of 3m sq ft of speculative development. That’s not bland.
“And if you look at our retail business in 2010, we started a 1m sq ft regeneration of Leeds city centre, as well as retail developments in Glasgow, and out-of-town schemes in Wandsworth and Crawley. We’re just about to start Taplow. You know, that’s not bland.”
Rejuvenating the regions
And Noel has no plans to slow down, though he will not pursue scale for scale’s sake.
Trinity Leeds opens on 21 March; 24 hours later the ribbon is cut on his Glasgow retail extension, 185-221 Buchanan Street. The former is 90% let or in solicitors’ hands, which Noel hopes will rise to 100% by the end of the year, or certainly within a year of opening. The latter, the smaller, is further advanced.
“Leeds will be a third retailing town in the country after London and Glasgow when Trinity opens,” he says. “Glasgow is the second retailing town in the country. It was always a no-brainer for us. Buchanan Street is the prime stretch.
“We’ve bought the prime stretch up towards Buchanan Galleries, which we already own with Henderson, and retailer interest in that scheme was very strong very early on. And the fact that we’ve let it all, and we’ve got one tiny coffee unit left to go with 99.4% let, comes as absolutely no surprise to us.”
Noel believes there is further scope to grow in Glasgow. LandSec is soon to submit plans to the city council to extend Buchanan Galleries to around 1m sq ft, which will include building over the railway tracks by the station.
The REIT is also working up plans with the Crown Estate for the Westgate Centre in Oxford, with a start on site slated for a couple of years’ time.
Life of leisure
Noel is not alone in seeing an arresting leisure offer as key to the survival of bricks and mortar, destination shopping venues in a convenience-led, multichannel world. But he is one of the few to have really put quite so much money where his mouth is.
Last December LandSec took its stake in the X Leisure fund to 54%, equating to £320m of gross assets. It also owns 100% of the management company. With the colourful PY Gerbau now out of the business, it is led by Polly Troughton, who has joined the retail team.
Then there is the Walkie Talkie, or 20 Fenchurch Street, EC3, which is proving to be the right product at the right time. Crucially, it is in the right location for insurers, perhaps the only tentacle of the financial service industry in expansionary mode.
Its proximity to Lloyds of London means it is an easier sell than Heron Tower or The Shard. And it is now more than 50% let or in solicitors’ hands, predominantly to Royal Sun Alliance.
A couple of miles away, in Victoria, LandSec’s delivery is even more marked. “We are transforming what is, what has been, a rather grey civil servant alley into being a vibrant, living central London hub, which is exactly what it should be. And it is a mix of retail and offices and residential.”
Square footage in the area under development will increase from 1.4m sq ft of offices to 2.2m. “We are only increasing the office universe by about 150,000 sq ft. All of the remainder is residential space, both private and affordable, and retail space. So we’re creating a community from a civil servant monotone land.”
Faith in capital
So how would Noel like to be judged in five years’ time?
“I’m not that convinced that Land Securities should be bigger,” he says. “I don’t mind if we’re that much bigger or that much smaller. I have no prescription. The only thing I have a complete and utter religion about is guarding shareholders’ capital.
“If we see a deal that will be accretive to our shareholders and it makes us bigger, we’ll do it; if we see a deal that would be demonstratively beneficial to our shareholders and makes us smaller, we’ll do it.”
Land Securities enters London residential market but ‘we are not a housebuilder’, says Noel
Central London residential is seducing the REITs right now, but Noel plays down Land Securities’ ambitions.
He says: “If you are going to build in central London you are required, outside the City of London, to provide an equivalency of residential space for every incremental square foot of commercial space that you build.
“We took the view when I joined the business in 2010, we had a whole lot of development coming up and a whole lot of residential development coming up. We could have done one of a number of things. We could have sold the land for the residential development. We could have passed the residential stuff over to a residential development partner on a joint venture basis and say, you do it, we’ll share the profits. Or, as we have decided to do, we turn the necessity into a virtue and do it well.’
His first two schemes were Park House on Oxford Street (“where we then actually ended up pre-selling the whole shebang to the Qataris a couple of months after we started construction”) and Wellington House, a 59-flat building on Buckingham Gate, which completed last summer.
Transport is the key to two other schemes. “One is the building on the Oxford Street, Newman Street junction by the Crossrail station. The other is a building in Eastbourne Terrace at Paddington, which is currently a tall 1950s office building, which we believe would make excellent residential living.
“They’re both on Crossrail nodes, they don’t really have the scale for being fit-for-purpose office buildings and they will make excellent residential locations.”
He could be more interested in the private rented sector if the government were to change its approach. He says: “In order for that sector to really lift off there will need to be some sort of state intervention to ensure that the product that we’re producing stays within rental use because that will drive land values.
“I can see a future where rather than developers having to provide affordable housing – such as social housing, which is great stuff but is in fact a tax on development – they have to provide private-rented housing. I could see that market having some real legs, and we’d be very interested in playing in it.”
But just to be clear he adds: “We are not a housebuilder. We are providing city centre apartments, urban living in London. We are not providing houses elsewhere around the country.
“The extent of our residential development is going to be around 500 units or so over the next five years, pretty well concentrated between Eaton Square and St James’ Park. We’re very happy with that location.”
