When The Sunday Times’s new business editor Oliver Shah sits down with EG for its latest Property Podcast, he jokes that he is “battle-hardened” after years of run-ins with the subject of his book, Sir Philip Green.
In his no-holds-barred account of the billionaire’s career and the BHS scandal in 2015, Damaged Goods, which hits the shelves today, Shah outlines how property has factored into his rise and fall.
“Green has always been a real estate guy first and foremost, and a retailer second,” says Shah.
“The family DNA was property and retail, as so often with entrepreneurial families. When he first started out in business, Philip Green would often borrow against the family property portfolio as collateral to fund his early deals.”
His reach clearly extends beyond commercial property, too. Shah notes: “I think his personal property portfolio, which is stuff you wouldn’t see…would be absolutely huge, prime West End locations, and prime regional town locations.
“I imagine the wealth he’s taken out of BHS and Arcadia over the years he would have ploughed back into real estate in the UK.”
On negotiations with Green
As a figure with deep ties to real estate, Green is renowned in the industry as a ruthless dealmaker by those on the other side of the table.
“I’ve heard so many anecdotes over the years about him pushing people for the lowest possible price, leveraging every relationship he has to get hold of deals,” says Shah.
“He is a landlord to many retailers, so he’s tough in that way; he’s also tough on landlords as a tenant, so I think he understands the market both ways.”
There does not appear to be any love lost for property agents in particular. Shah says: “Green is an individual – someone who hates advisers, middlemen. He hates paying fees – he thinks he can do everything better himself.”
In the book Shah retells an incident where, a few days after BHS went into administration in 2016, a retail agent from Savills tasked with reviewing BHS’s portfolio was subjected to an explosive tirade from Green at Arcadia’s headquarters.
According to Shah this was partly down to Green’s predilection for targeting one person at the start of meetings to show other attendees who is in control.
“I think Green had some previous beef with Savills around them not giving him the valuations he thought he deserved on his own portfolio,” he says.
Being cool and collected
As someone who has frequently found himself on the receiving end of such diatribes, Shah says he has found the best approach when negotiating with Green has been to stay cool and collected.
“People who have survived that and lived to tell the story have said they just stayed calm, poker-faced, and didn’t show any distress. This is because he’s a great poker player and he’s looking for weakness.
“With me personally it’s a similar thing – I find whenever he’s on the phone ranting and raving, the worst thing you could do is get involved in a slanging match, or fighting fire with fire. I find being calm, sitting back a bit and letting him say his piece has always been my approach.”
An uncertain future for Arcadia
Notably, the final chapter of the book covers Green’s Arcadia Group retail empire; Topshop – its jewel in the crown; and the rocky path ahead for both.
The total store estate across Arcadia brands as of August 2017, including concessions, tallied around 2,800 worldwide, covering 6.4m sq ft.
And according to Radius Data Exchange, there are more than 600 standalone stores operating under an Arcadia Group brand in the UK, excluding concessions.
“Occupying property is a really hard place to be if you aren’t a specialist with a few stores,” says Shah, pointing to pressure from rent and business rates, declining footfall and fixed costs.
This compares with the stratospheric rise of Arcadia’s online rivals Asos, Amazon and Boohoo.
“Lots of its mid-market brands, such as Dorothy Perkins, Evans and Burton, have not been doing that well. For years Topshop was the engine that kept all those things ticking over and covered up their mistakes,” he says.
“As I understand it, and from the figures I’ve seen, Topshop’s like-for-like sales have been going backwards at double-digit rates for the past couple of years.”
Most recently, Taveta Investments, the company behind Arcadia, last month posted a 42% decline in operating profit to £124.1m in the year to 26 August 2017. Its sales fell by 5.6% to £1.9bn during the year.
It has left the industry guessing at what the future holds for Arcadia. “I can’t see an obvious exit for Philip Green from that group. I can’t see an obvious buyer, can’t see that you could float it. There is a big pension deficit with PR issues and political issues around a sale, particularly after what happened with BHS,” says Shah.
“I don’t say it with any pleasure, because there are thousands of jobs at stake there and obviously we’d all hope for a good outcome, but it is really hard to see what that is right now.”
Could a CVA be on the cards?
Speculation that Green could kick off a CVA for the Arcadia group brands has been rife in the industry in recent months, but Shah reckons that the potential reputational damage it could cause would be too much of a risk for Green.
“There was a very strong rumour going around about a month ago that he’d looked at a CVA with Deloitte and CBRE. I called him up and put it to him. The response I got, which I think was right, was, ‘Partly thanks to you Oliver, I can’t do a CVA because I’m Philip Green’.”
“The reputational hit of closing so many stores, cutting rents, and laying off staff would be very difficult for him to do – and difficult to keep suppliers confident. I’m sure he’s looked at it. I don’t think he’ll do it, personally – I might be wrong – but the whole atmosphere around CVAs has gotten a lot more difficult.”
As examples he points to retailers House of Fraser and New Look, which have both carried out CVAs in recent months and fueled ongoing debate over whether the process is being used as a device to slash rent bills rather than function as a genuine rescue plan.
“Anyone would think twice now about doing a CVA – it’s not the obvious silver bullet it was six months ago. There’s more of a stigma around it,” he noted.
The man who flew too close to the sun
Although Shah hopes his account of the billionaire’s rise will reach the property industry, he is also optimistic it will speak to a broader audience beyond the business world.
“It is a story not just of business and changing market conditions and pensions, but of ego and ambition,” he explains.
“It’s an epic story, and a sad one in some ways, of someone with a lot of talent and charm who could have used it differently, but always wanted that bit more for himself, always wouldn’t leave a bit on the table for someone else, always had to win and squeeze the extra bit of juice out of every deal, and pushed it too far.”
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