“My biggest headache is dealing with banks,” Toby Courtauld (pictured) told this week’s British Property Federation conference. Just 24 hours later he revealed 200 million reasons why he could afford to be so disparaging.
As well as his day job heading Great Portland Estates, Courtauld is, of course, the current BPF president. And under questioning from The Today Programme‘s Sarah Montague, his acknowledgement that relations with banks these days are “tortuous” clearly struck a chord.
“The banking relationships we have are infinitely more complex than they were 10 years ago. We are having to deal with legacy issues – theirs not ours.
“And I don’t see it getting any easier in the next few years.”
It was a damning, but pretty familiar refrain.
Significance was added 24 hours later when Great Portland Estates revealed it had turned to the bond market to raise $200m (£130m) through a US private placement issue. Originally launched at $75m, the bond was more than five times oversubscribed. The group subsequently decided to increase its second issue in as many years to $200m.
That’s the top end of the market, you may say. But at the bottom, with banks like Clydesdale and Yorkshire beating a retreat from property, smaller borrowers are having to think beyond the banks for debt solutions. Others, the luckier ones perhaps, are pursuing debt-for-equity swaps (see below).
All this begs several questions.
Can property return to any semblance of its former relationships with banks – or is this the new normal?
Do the big boys even need it to if the likes of GPE and British Land can tap the deep capital markets of the US with apparent ease?
And perhaps most significantly of all, what is the newly minted GPE going to do with all that money?
LandProp looks beyond the M25
Creating long-term value is the stated aim of Inter IKEA’s property division. And, unusually for an overseas developer in this economic climate, the organisation that owns the intellectual property rights of the Swedish furniture giant believes there is value beyond the M25.
For the past two years, LandProp, as the UK property arm is known, has been working up plans for Strand East, a 1.9m sq ft scheme on the edge of the Olympic Park in Stratford.
It is now in advanced talks to buy in Manchester – ITV’s Quay Street site, home to the Coronation Street set – and in Birmingham, where it is in talks with the council to develop a 25-acre scheme in the Icknield Port Loop regeneration area in Edgbaston.
It is hugely encouraging news for those cities, of course. But with Inter IKEA expected to grow its activity further, it is encouraging news for other regions too.
Agency shake-ups
The shake-up in the agency world continues. After DTZ and Colliers comes GVA. Its situation is very different, of course. DTZ and Colliers were fights for survival and sales at bargain-basement prices. GVA’s refinancing this week is a debt-for-equity swap that sees Lloyds Development Corporation, the mid-market private equity arm of the banking giant, up its equity stake to 30%.
It puts GVA on the front foot by giving a war chest to pursue further acquisitions. But it creates an expectation that the company will grow in value – and fast. Its minority owner will not want to wait much longer than three years for a return.
Of course, there is a sense that necessity as much as desire prompted GVA and Lloyds to act. But the agent has moved quickly. Others, with groaning balance sheets, will want to do so too. Consolidation, refinancing and a fair amount of distress will continue to be driving forces of much of the agency world through 2012 and beyond.
