This week M7 Real Estate and Regus, Nick Leslau and Mike Brown all showed their ability to navigate through the current unease with dynamism.
The specialist asset manager and the serviced offices provider have struck a deal that will see Regus share profits with M7 rather than pay rent through a traditional lease structure.
The entrepreneurial pair have agreed on six sites in the UK and will look to replicate the arrangement in others across continental Europe. It reduces risk and fixed costs for Regus and gives the business access to new markets. It heightens potential returns for M7 and cuts vacancy rates and associated costs. It strengthens the relationship between landlord and tenant and, like all the best deals, offers considerable benefits to both parties. Clever.
Writing for Estates Gazette in January, Nick Leslau, chairman of Prestbury Investments and one of the industry’s most closely watched investors, said: “The peak is some way behind us.” Since then turmoil in the stock market, China’s slowdown, the threat of Brexit and the oil price collapse have only driven contagion of that view.
This week Leslau – who is less a “bull-market, spreadsheet-junkie MBA” and every inch an investor with “the property skills for the next much more demanding stretch of the cycle” (to borrow his own phrase) – primed his business to take advantage of the situation.
He and Brown have sold £282.4m of ordinary shares in their vehicle Secure Income REIT. It is a testament to the reputations of the team they have put together (Ian Marcus, Martin Moore et al) that despite stock market uncertainty, the placing was oversubscribed. The fundraising broadens the company’s shareholder base and adds to its war chest. It offers, to use the jargon corporate governance rules demand of company statements, “improved flexibility as we begin to put into action the board’s ambitious plans for growth by targeting significant value-accretive acquisition opportunities”.
In other words, Leslau and Brown are ready to pounce.
We will watch their next move – experience-led, not spreadsheet-driven – with interest.
ν The Berkeley hotel in Knightsbridge, SW1, is up for sale for those with £750m to invest. Alongside the Connaught and Claridge’s, the Berkeley was bought by Qatar Holdings last spring. The Connaught could follow the Berkeley out the door; no surprise really as Claridge’s was seen as the main draw for Qatar.
What’s next for the Berkeley is the most interesting question. A full scale demolition and rebuilding is one option, with preliminary plans already drawn up by Sir Terry Farrell. Under this scenario the hotel would almost double in size to a gross internal area of 600,000 sq ft, with half the property designated as 70 luxury flats valued at up to £15m each. Refurbishment is also an option – including one consented proposal that would also add flats to the hotel offer.
This merging of leisure and resi – already on the cards under the Park Lane Hilton’s refurbishment plan – reinforces a strategy that is becoming more prevalent. From care homes to student housing, hotels to resi, lines are becoming increasingly blurred. “Invest in beds” is fast emerging as an investment strategy in its own right.
ν Speaking of luxury hotels, here’s a quick reminder: the 2016 Estates Gazette Awards are moving the Grosvenor House on London’s Park Lane. They will be bigger, better and bolder – more on which in the weeks ahead. More pressingly, the date is changing – from December to September. So we need your entries now. The deadline is next Friday but with Easter falling early this year we promise not to be unsympathetic if you need a few extra days. Go to www.estatesgazette.com/awards for details of the categories – old and new – and e-mail carly.mcgowan@rbi.co.uk if you do need a little more time.
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