Manish Chande’s eyes are shining. Looking over glossy brochures in his office on London’s Dover Street, Mountgrange Capital’s chief executive points at the plans that will change a run-down part of Edinburgh.
Caltongate, the 6-acre wasteland site sandwiched between Scotland’s new parliament building and Waverley Station, is set to undergo a £300m mixed-use transformation that will make it one of Edinburgh’s most sought after areas.
The site is one of five spread across the UK bought by Mountgrange from Dutch fund SOFAM Beheer in 2004 (see panel). The purchase added the tagline “developer” to Mountgrange’s label of investment and property company. But the deal was more of a fluke than a plan. “SOFAM Beheer came to us to ask our advice [about its estate], which we gave. They said ‘Well if you think it’s worth that much then why don’t you buy it?’,” says Chande. And that is exactly what they did.
Not that Mountgrange is turning its back on office investment. Far from it. The company is still very much interested in any office buildings that come up. It is merely casting its net wider to include retail and residential. Investment and property are still very much part of Mountgrange.
Maidstone is a prime example. Mountgrange has just submitted plans for a £50m mixed-use redevelopment on 5 acres at the town’s Springfield Park. The first phase will include a 65,000 sq ft office development, the biggest scheme in Maidstone for nearly 20 years. But a key issue is that it will be built speculatively. In a market which has shied away from speculative development, Mountgrange is positively embracing it.
Investment and property elements have been incorporated into the company’s new philosophy, frequently repeated by Chande, of buying into “operating businesses with a strong aspect of property”, an ideal developing at a pace with the investment in a marina and a London hotel.
Yet another string to Chande’s bow appeared last June. It was then that Chande, with Martin Myers, his partner in Mountgrange Capital, and Martin Landau set up their own £100m investment fund. Mountgrange director Nick Berry will be one of the fund managers. However, Chande stresses that this fund will be separate from Mountgrange.
These new avenues are adding to Chande’s coffers. Estimated by the EG Rich List to be worth £60m -a figure Chande scoffs at but doesn’t deny – he is regarded in the market as a “good man” and “well respected in the industry.”
But he has also been labelled one of the shrewdest property players in the City, approaching everything at a feverish pitch.
It is this combination of traits that has signified Chande’s career.
Although he has worked with Myers for the past 20 years, Chande’s rise started as chief executive of Imry Property Group and took off in 1997. It was then that Chande, who trained as a chartered accountant, set up Trillium with Myers, aided by £70m worth of backing from Goldman Sachs.
Trillium, named after the official flower from the Canadian state of Ontario, was one of the first companies in the UK to specialise in outsourcing. The market considered the innovation as almost revolutionary.
While Chande and Myers had already been working on different ways of managing property during their time at Imry, Chande says they can not take all the credit for thinking up outsourcing. Rather, it goes to the government.
When the government put all the Department of Health & Social Security’s UK work out for tender, Trillium duly won. “You would think the private sector would have been leading the idea, but it was the government who said they should pass all the buildings on to experts. Usually the land lord-tenant relationships are adversarial, but we believed it appropriate to develop a more business-like proposition.”
Within a couple of years, Trillium had more than 1,000 employees, becoming so successful it caught the eye of Land Securities. The developer giant took over the business in 2000 and Chande was reported to have personally made £8m from the deal.
Times have changed for outsourcing, believes Chande. “The future of the market is all about sale and leaseback. [Outsourcing] is still a relative concept but I don’t think there’s a huge future in it. Things have moved on.” Mountgrange buying into NCP in May 2002 is a classic example of the beginnings of this shift.
Mountgrange bought a share of the business, which had a property portfolio worth £800m and whose principal shareholder was Cinven. The property base was sold three months later to the Royal Bank of Scotland before Mountgrange leased the properties back for 50 years for £700m. NCP was sold to 3i in July last year for £550m.
Proving the momentum of Mountgrange and Chande doesn’t stand still is the implementation of the company’s idea of building a portfolio of businesses with property assets. Mountgrange is part of the consortium that includes Michael Berrow, former manager of pop band Duran Duran, who bought the marina at Noss-on-Dart, south Devon last May for £15m.
“The marina is already a good source of income for us,” says Chande. “It is a good operating business but it also has property and land. We will do something in time but we will be sensitive to the area.”
Development was a different tactic. Buying the Dutch portfolio in 2004, which the market expected Chande to sell on quickly, has led Mountgrange firmly into the development arena.
The move was, says Chande, a natural one forced by changes in the market. “Fifteen to 18 months ago we saw the market rapidly rising in terms of value. We had a lot of investments, particularly retail, in areas like London, and in Lincoln, but we felt the market was moving up and decided to sell at the bottom”.
He adds: “The trick is to sell as the market is rising, because inevitably it will go up and then down. We are now looking at developing things ourselves because land was relatively cheap.” And this, coupled with the original price, is what attracted them to the Dutch portfolio.
Apart from two sites in Edinburgh – Caltongate and Lady Lawson – and one in Glasgow, the developments in Maidstone and Hove have attracted considerable market attention – mainly because of the size and success of schemes being built speculatively in areas not considered to have much grade A space.
The company’s confidence has been bolstered by its development in Hove.
Chande admits the market thought “we were mad” to build speculatively on the south coast. That changed when the 200,000 sq ft scheme was snapped up by Legal & General, after having been considered by pharmaceutical company Hoffman-La Roche. Chande says the insurance company was attracted to the area because of its location, people and the building.
“Yields have hardened and the occupier’s market is so location-driven,” says Chande. And in Chande’s book, if a company does its homework before building, it can only succeed.
He adds: “At the end of the day, property is a lot to do with understanding the research and demographics, but it’s also about a little luck.” This is clearly a belief that will be applied to all parts of Chande’s – and Mountgrange’s – future businesses.
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November 1975-January 1981Midgley, Snelling & Co, London. Experience extended from assistant through to principal in charge of the audit of private-sector companies January 1981-April 1985 Deloitte Haskins & Sells, London. Assistant audit manager (June 1984) April 1985-September 1997 Imry Property Group. Chief executive and finance director. Joined as finance director and implemented reversal of the private company into a publicly quoted company, Imry, in 1987, to create a quoted entity with a value of about £100m September 1997-March 2002 Trillium. Chief executive. Formed the Trillium Group of Companies in late 1997 with investment support from the Whitehall Group of Funds. In November 2000, The Trillium Group of Companies was sold to Land Securities for approximately £360m and became a main board director of Land Securities March 2002-present Mountgrange Capital. Chief executive and co-founder. Formed company with a capital base of approximately £30m in conjunction with business partner Martin Myers focusing on property and other investments. Key investments include MITIE Group (non-executive director) |
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Edinburgh Site one – Lady Lawson, had planning consent, but Mountgrange decided it was unsuitable for offices. The company has approached student housing developer Unite to build out student accommodation. Site two – Caltongate, had planning consent, but Chande says: “It would have won awards for design but we wouldn’t have been able to let it as it wasn’t configured for the office market.” Four architects are now working on the 6-acre, mixed-use site. Mountgrange hopes to have full planning consent by the end of the year to build out the 150,000 sq ft of spec offices, 200 residential units, a 200-bed, five-star hotel, service apartments, art quarter and public square Hove Has planning consent for 200,000 sq ft over three buildings. One building is already up, two are under construction. Prelet to Legal & General. Will be ready later this year Glasgow Phoenix Park. Mountgrange has submitted an outline planning application for mixed-use development comprising commercial, industrial and residential on a 140-acre site Maidstone Mountgrange has just submitted plans for a £50m, mixed-use redevelopment on 5 acres at the town’s Springfield Park. The first phase will include a 65,000 sq ft office development, the biggest scheme in Maidstone for nearly 20 years |
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