James Burchell

James Burchell is Co-Founder and Partner of Tellon Capital, a real estate investment company he established with Ben Hamburger in 2014. Since its formation, Tellon Capital has invested more than £300 million in Central London office and retail assets. 

James has 40 years’ experience in real estate. He began his career at Hirshfield’s in 1986, specialising in auctions and investment, before becoming a founding member of niche commercial investment agency Lewis and Partners in 1994. 

In 2000, he established Faircroft Real Estate in partnership with Arrowcroft, completing transactions with a value exceeding £100 million. During the global financial crisis, he helped create a substantial asset management business dealing with distressed assets on behalf of a range of financial institutions. He subsequently became Chief Executive Officer of Arrowcroft following its acquisition of Faircroft in 2012. 

James left Arrowcroft in 2013 to establish Phoenix Real Estate, a multi-family real estate investment vehicle. 

Throughout his career, James has led office refurbishment and redevelopment projects across the UK’s major cities. His work is now focused primarily on London. 

He is a qualified chartered surveyor.

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SPEAKER_00 0:02

I always say, yeah, we do development. What could possibly go wrong? And we always had the belief that this was going to be something that was going to be a special building. We have spectacular views across London, from Bassi Power Station to Buckingham Palace, all the way through St James's Park, through the city, you can see Canary Wharf and obviously Westminster Abbey and the Houses of Parliament and Big Bend. So it really is a stunning, stunning view. And I always thought that we'd get a hedge fund that would come out of St James's or Mayfair that didn't want to pay £200 a foot for the best space, but would pay us £140, £150 a foot on the best space for the views.

SPEAKER_01 0:42

Hi, I'm Susan Freeman. Welcome back to our Property She podcast series brought to you by Mish Condorea in association with the London Real Estate Forum, where I get to interview some of the key influencers in the world of real estate and the built environment. Today I'm delighted to welcome James Birchall. James is a co-founder and partner in real estate investment company Telon Capital. He has over 40 years' experience in real estate, having started at Hirschfields in 1986. In 1994, he was the founding member of Lewis and Partners, a niche commercial investment agency. James established Faircroft Real Estate in 2000 in partnership with property investment company Aerocroft. During the global financial crisis, he was involved in the creation of a substantial asset management business dealing with distressed assets on behalf of a variety of financial institutions before becoming CEO of Aerocroft when the firm purchased Faircroft in 2012. Throughout James's career, he has refurbished and redeveloped offices around the country in all the major UK cities, but now focusing on London. So now I'm very much looking forward to talking to James about the challenges of navigating real estate investment through numerous structural and economic shifts, and the story of Forty Broadway St James's Park, now the HQ of Formula One. James, good afternoon and welcome. It's great to have you in the virtual studio today. And I was just thinking, your career has spanned, I think, four decades in commercial real estate. Just a lamp. My first question is really what drew you to real estate in the first place and what kept you here?

SPEAKER_00 2:29

What drew me was I wanted to be a lawyer. And I went to two seminars in my sixth form. One was on law and one was on quantity survey. And the one on law just looked like hard work. I can remember thinking that's not for me. I didn't have a great time at school. I was away at boarding school, struggled at school, and so the prospect of going to university and studying hard for three years, all of a sudden that appeal was no longer of interest. And the one on quantity surveying looked really interesting. I can remember it to this day. I could sit at the video of people outside with little wires around a hole and measuring. And I just thought that looked really interesting. And my grandfather had always owned some tertiary property and he'd always talked to me about it. And it sort of developed an interest from there. I had a friend of mine at school whose father worked for a firm some would remember, and this called Pepper Angles and Yarwood. And I went to see him for some advice. And he said two things. He said, Whatever you do, get qualified. And go into commercial, not into residential. He said, if you go into commercial, you can always go into residential. If you go into residential, it'll be a lot harder to go into commercial afterwards. So I left school and I didn't do as well as I had hoped I would do with my A levels. I had an offer from what was South Bank University today, but South Bank poly, but didn't make the grades. And decided that property was something that interested me and I'd try and get a job.

SPEAKER_01 3:59

I must say it never occurred to me to do quantity surveying, but we'll move on. So you started in agency and I think you set up Lewis and Partners?

SPEAKER_00 4:10

Yes, but for six months I couldn't get a job till I got experience. And couldn't get experience till I get a job. I had to redo an A level to be able to get onto the RICS course at Reading University at the time. They were doing a degree in surveying through correspondence course. So I had to reset my A-level to do that. And there were plenty of firms that wouldn't take me on until I was able to actually start studying. My first job was for a firm called Russell Cash in Wellbeck Street. And I lasted about three months. Perry Cash and Stuart Russell, who are still great friends of mine today, they still say that I'm sort of, as much as the chaos that I caused, I'm still one that got away. But I think I wrote off too many cars, I misfiled too many papers, and that they thought that perhaps I needed somebody else to sort of keep me, sort of sent me in the right direction. I left there after three months. I went to work for Ellison Co., which at the time were large residential agents in Northwest London. And they had a commercial office and they wanted to move it into the West End, which we did. And I was there for 18 months. But then there was a lot of politics within the firm, breakup of the partnership, and I knew it wasn't somewhere I wanted to stay. And I got introduced to a firm that was then known as Hirschfields. And I got offered a job in the auction department on the basis that I would study and I would get qualified. And I started on the Monday. I can remember my boss Howard Harris said to me one morning, he the following morning, he said, How are you getting up in the morning? I said, I'm fine, why? He said, I'm picking up at five o'clock tomorrow morning. We're going to Scotland because in those days, Johnny Barnett was the auctioneer for us, and we auctioneered a lot of Ladbrooks and leasebacks. And uh Howard said, We're going up to Scotland and we're going to be visiting nine or ten Ladbrooks, we're going to be measuring them all, working out the rentals, and then we'll come back. And it was two days. And I absolutely loved it. I saw parts of Scotland I would probably never get to again, might not want to get to, but it really sort of fired my passion up for real estate, seeing all of these different towns. I actually have a photographic memory for anywhere I've ever been. So I went to 20 years after that, I went to look at a building in Airdrie and walked in with the agent. And uh he said, Have you been to Airdrie before? I said, Yes, if we walk down here and turn left, there's a Ladbrook's about four or five shops on the right. He said, You're 100% right. He said, When were you last here? I said, about 20 years ago. And so I sort of realized that I had this memory for wherever I'd been, and I loved it. And I spent a year on the auction side and was traveling the country and learning and working a bit on the investments with Stephen Lewis. And then after a year, I sat down with Colin Gershensen, who was the MD of Hirschfields. And uh he said to me, How are you doing? I said, I'm doing really good, I'm really enjoying it. I said, But I'm doing auctions and investments, and I was sort of struggling to do both. So he said, Well, what would you like to do? And I said, I'd like to do investments. So he said, Okay, from now on you do investments, but you help out on the auctions. And he said to me, and what have we done with you salary-wise? Because you've been here uh how long? I said, a year. So I said, I haven't had a rise yet. So he said, okay, fine. I was 1920. He said, I'm going to take your salary up. He said, What do you want at the moment? I said, 5,000. He said, we'll take it up to 6,000 pounds a year. You know, I was really happy with that. And I worked with Stephen at Hirschfields for nearly seven years. Hirschfields was bought out by the parent company of Pepper Angus and Yarwood. I joined the board in the summer of 93. And I can always remember going to my first board meeting and thinking, something's not quite right here, the numbers aren't right, I'm a bit worried as to where the business is going. And 93 was not a great time in the industry. And I knew I was going to get qualified that year. So I sort of thought I'll wait until I get qualified and then decide what I did and where I went career-wise. What I didn't expect was I got qualified on the 1st of December. Hochefields got put into receivership on the 10th. I got made redundant on the 17th. And Stephen and myself and one other partner, Matthew Clark, left to set up Lewis and Partners in December 93. We signed the papers on Christmas Eve. I was setting off for my honeymoon to Australia and the Far East and came back in in the middle of Jan with a card table and chair to start trading from. The first deal I had to do was negotiate with BT to get phone lines working. And we got six phone lines for free for a whole year because they'd screwed up. And we were often trading as Lewson partners.

SPEAKER_01 8:43

I'm just thinking, I mean, as you said, it wasn't a great uh understatement. It wasn't uh a great time. I mean, there's a property crash. I mean, how was it starting a new agency business then?

SPEAKER_00 8:54

Maybe it's naivety, maybe it's just enthusiasm, maybe it is just belief. We had a very good client base. We're taking our clients with us, we were still doing deals, you know, during 92, 93, and we believed that we could start a business. And we had very low overheads. There's the three of us, we had one secretary we took on, and our rent, we took space in 15 Cavendish Square, and our rent in the first year was five pounds a foot for the first year. So our overheads were low, and we just, you know, we had that belief, and we also had a specialism. We did a lot of work on secondary market, a lot of stuff that other people didn't want to take on. We had a few clients, some of whom were more challenging than others. Edward Erdman always had a philosophy for the most difficult clients, nobody's going to want to take them away from me. And I suppose we sort of took the view on the secondary properties as well. And we really focused on selling at a difficult time. One of our big breakthroughs with the institutions was that they asked us to advise them on a property in uh Potter's Bar, which was some shops and offices upstairs. And I can remember going to see it, and I actually got quite excited, had Carl Park at the back. I thought this would be really good to convert to residential. And Stephen and I sort of looked at it and thought, yeah, let's take this on. We got a phone call from the agent when they found that we'd taken it on, who said, thank you, because it's one of the most difficult sales they've ever had. And you know, they hadn't sold it. We put an advert in the Estates Gazette, we marketed it on the basis of potential for residential. We went to Best Bids and then we went to Best Best Bids and sold it well. And all of a sudden we had developed a reputation at being able to sell difficult properties. And we built the business on that for institutions, private clients selling single assets and portfolios, and we built up a very, very strong client base.

SPEAKER_01 10:44

I mean it's interesting because uh one probably couldn't do that now. Just start because the overheads are just, you know, so much greater than they were then. It would be very difficult to just start from scratch like that.

SPEAKER_00 10:58

You know, it's never easy and there's never a good time. I think the advantage today in some ways is twofold. One, you have flex offices, so actually, you know, you don't need to take an office per se. You can go and do a deal with one of the flex providers and take a lounge or two desks rather than an office. Secondly, you can specialise if you want to in ways that perhaps was a lot harder in those days. We have so many sectors today that we didn't have. What was known as alternatives today has really become mainstream. Uh whether it's retail warehousing, whether it's hotels, whether it's build-to-rent, residential, and even the residential world, which really wasn't a commercial world when we started, has now become, you know, there's subsectors within there. So I think in some ways, actually, it's a lot easier to set something niche up and be focused on than it probably was in those days. The only difference now is that a lot of the institutions don't own the assets like they used to. So that's a big change, and it's finding who the vendors are. I think that's far more disparate than perhaps it used to be.

SPEAKER_01 12:12

Interesting. So just rolling forward a bit, uh, you set up Faircroft, I think, in 2000. So what prompted that move?

SPEAKER_00 12:21

I'd got to know Aerocroft. I'd built a portfolio in Copen Garden for a client of mine, which would sold out. You know, the best relationships are always comes from advocates. And he happened to be away with the chief exec of Aerocroft, who was Nicholas Hay, who was Leonard's son-in-law. Leonard Eppel was the founder of Aerocroft. And my client was telling Nikki what I had done and what I was doing. And the client called me one day and said, Look, I think you should go and have a chat with Nikki. He's looking at doing something different to what they've done before. I said, You could probably help him out. So I think we probably got to know each other over about a year or so, understanding what he wanted to do. Arakroft were best known for city centre regeneration, and they're best known for the Albert Dock in Liverpool, which I sort of say took 30 years to become an overnight success, but is probably the first example of true city centre regeneration of a landmark side. And he wanted to move more into asset management trading, which was more of what I was doing for clients than the big strategic development side of things. And one day we were having lunch and he sort of asked me what I want to do. And I said, An ideal world, I'd love to have my own property company backed by a major player, gave me the credibility to be able to buy, but the flexibility to run my own business. And he either said, If you're serious, I'm interested, or if you're interested, I'm serious. I'm going away for a few days. When I come back, let's have a conversation. He was as good to his word and he called me. And we got together and worked out a structure. It was actually quite hard. You know, Stephen and I had worked together for 15 years. So to sort of come back into the office and sort of say, Listen, I've been given an opportunity to set up my own property company, was managing that was actually, you know, very sensitive. And, you know, I talked earlier about advocates of relationships. Stephen and I have as good a friendship today as we've ever had. Actually, our elder sons are friendly together. So it's really important. And I think the value and importance of relationship sometimes gets lost today in the AI and internet world that we have. I negotiated a uh a graceful exit from Lewis Apartments and created Faircroft. And the idea was that we would do a lot of what I've been doing, but more asset management rather than just trading. And we bought our first deal 10 days into the business, paid £392,000 for a shop in Wood Green. The hammer came down, and I sort of thought, oh my god, this is the biggest mistake I've ever made. I've just, you know, I've got this all wrong. And then I had a tap on my shoulder from uh somebody I knew who sort of said, Hmm, I think I should have bought that. He said, Would you sell it on to me? So I thought, well, actually, that's probably, you know, uh, should I, shouldn't I? I called Nikki and said, What do you think? He said, It's your business, whatever you want to do, it's up to you. I thought, I'm 10 days into my business, I can show my partners, I can trade, I can buy, I can make profits. So I took the profit and moved on. And it also meant that I could also develop a reputation that I can say to people, you know, people say, Well, you're a new business, what have you done? And straight away I could say, We've done a deal already. When I left Lewis Partners to set up Faircroft, I went to see a number of my mentors because it was a huge step change to go from being an agent to being a principal.

SPEAKER_01 15:39

Who were your mentors?

SPEAKER_00 15:41

So uh Peter Levy, David Lewis, who else did I go and see? I went to see Nick Leslaw, trying to think who else.

SPEAKER_01 15:51

Well, that's quite a few.

SPEAKER_00 15:52

A few, yeah. And I happened to have it was quite interesting. I'll always remember this. My kids were at school, the same school as Paul Kemsley's kids were, and I obviously I knew Paul. Um, I sort of asked Paul, you know, what would his counsel be? And he he said to me, get your first deal done. He said, because it just creates your track record. And so to have done something within 10 days, the business really gave us a launch pad, and away we went. And we built a really good business between 2000 and 2007. We concentrated mainly on city center offices, retail, prime retail around the country, and we bought some vacant industrial, which we thought we could either refurbish or trade on or relay. Sold a loadout in 06 and 07. I saw the market tipping. We had some mad prices being paid in the auctions and thought, should we sell everything? But I had a business, I had staff, I had a team. I didn't think I had enough to sort of not do anything again, as opposed to thinking, well, okay, if I was to sell everything, I'd be able to bank and maybe do the next stage. But I didn't ask enough people the right thing to be doing at that time. Saw the market starting to tip. Had a we had one conversation, we owned a prime shop in Eastport, and I had an offer one day at about 5.5% for it. And Nikki said to me, he said, What do you think? I said, Well, I said, you know, that 5.5% is the old 7.5%, and I'm not sure that's going to change. I looked at him, I said, if I don't think it's going to change, it probably is going to change. So I think we'll sell it. And we sold it. And we then made the decision that we wanted to be out of everything that was ex-asset management, ex-rental growth, and ex-capital growth. And we wanted to be out of it by the 30th of September 07. And we exchanged on our biggest asset on the 13th of October 07. Took a price chip the night before on the basis that I could see where the market was going and got out.

SPEAKER_01 17:48

So this was just before the financial crisis.

SPEAKER_00 17:52

Yeah, uh Northern Rock, the run on Northern Rock had started, which actually made our sale challenging. But it was a real, you know, we could see the market was tipping, rates had gone up, and we just thought it was time to sort of bed down and really just keep our heads down.

SPEAKER_01 18:09

Did you sell the whole portfolio?

SPEAKER_00 18:11

No. We sold a large chunk of it, but kept a number of assets, which kept us sort of going. I think one of the key things which we'll sort of talk about during the GFC is we were never in distress because we'd sold a lot and we paid debt down and we had never overgeared. We'd been offered, you know, gazillion from this bank, that bank, and never taken it because we never wanted to take that risk. And it meant that during the GFC we were never in distress. And that meant actually when we started to advise the banks, we basically watched the world implode in 08. I went to a seminar in March 09 that said UK banks had lent somewhere around 400 billion between 07 and 09, and values had fallen somewhere around 50%. At which point I sort of sat there and thought, okay, so the banks have probably lost the best part of 200 billion. They've been bailed out by 50 billion. Banks are in a mess, they don't even realize how much of a mess they're in. They're going to need help. And we started advising or going to talk to the banks and say, you know, you're in distress or you're going to have distress here. Let's help you out. And we built one of the biggest distressed asset management businesses. We were one of co-op's biggest borrowers. Again, we were very comfortable not in distress. And we begged them not to do the West Bromwich deal. We told them it would be their Lloyd's Bank, HBOS deal, and they didn't believe us. And then they came to us about a year afterwards, and after they'd done it at about 11 or 12, and said, you were right, how do we get out of what we're in? And they had a complete meltdown over it, which obviously caused some serious problems afterwards. But I knew I needed to do two things. I wanted to grow the distress asset management business. I knew that would be a five-year play. And I knew I needed more capital to be able to go and buy. We looked at raising a fund, didn't quite come off. And in March 2011, I got introduced to my nail partner at MiPID. And it was a sliding doors moment. He'd been in the bunker, had a meeting with Colliers. The partner at Colliers had hosted a lunch. I went to the lunch and the partner at Colliers put the two of us together and it sort of says the rest is history. He was coming over to the UK to create a family office. We did our first deal in sort of JV. I still had Faircroft in 2012. And then in the summer of 2012, Nikki sort of said to me, Look, he said, the business is really moving in your direction. You know, we've got a big portfolio of asset management now. Leonard was in his late 80s, Nikki was in his 60s. He says, Why don't uh we buy you back in? Why don't you become CEO, I'll become chairman, and Leonard will become life president. I thought it was a great opportunity to take a sleeping giant and turn it into a real force in the real estate world with a great reputation.

SPEAKER_01 21:02

So did you put the JV with Ben on hold?

SPEAKER_00 21:06

No, the deal was it sort of became a tripartite deal. So what it folded into the Arocroft Faircroft deal, so it was a joint sort of deal between us and and Ben. So that we kept that as part of the deal.

SPEAKER_01 21:19

Okay. But it didn't go according to plan, really, did it?

SPEAKER_00 21:23

Uh no. It's interesting, isn't it? That they sort of say sometimes living with somebody and marrying somebody can be completely different. And finding myself inside the family and inside the business. I'm not good with politics. I just love doing deals and you know working on the business. I was running 60 people, two offices. I had long term lifers who thought they should have had my role and played chaos. I had family members who really didn't want me moving the business how I wanted to move it. And to be fair, from both Nikki and my perspective, I I think we realised that this wasn't working how we had hoped it was going to work. I think I'm the only person that managed to negotiate two amical divorces at the same time because the space of four weeks I separated from my wife, I separated from Aracroft. I wouldn't recommend it though.

SPEAKER_01 22:15

What year was that?

SPEAKER_00 22:17

That was in 2013.

SPEAKER_01 22:19

2013. Well, they say problems come in threes. Was there a third or was it was it just the two divorces?

SPEAKER_00 22:26

I I think the two divorces were enough, but I made sure on all fronts that everything was amicable. And in fact, when I left Arrowcroft and I knew that I was going to do something a bit different this time, I was going to be more multifamily than single family as a business. We actually did a tripartite deal between my new business, Haracroft, Ben's business, which was a part of the Albert Dot that we bought out of receivership. You know, again, I sort of mentioned about relationships, and that is absolutely key for me. That, you know, you You don't have to agree, and you might part companies, you execute with grace. And I think that's really, really important. Because things have a habit of coming round, and people have a habit of coming round. And if you burn bridges, then it becomes very difficult. And I'd like to think that I've avoided burning too many bridges over the years.

SPEAKER_01 23:16

It's pretty impressive that you managed to sort of exit that situation, which sounds as if it was slightly acrimonious and actually sort of come out with the relationships in time. So it was obviously the right thing to move on.

SPEAKER_00 23:30

I think move forward. I sort of think that, you know, everything you do takes you to your next stage. And there's loads of lessons learned. Could you do things differently with hindsight? You know, we we'd all do differently with hindsight. I sort of don't do what if in the past, but sort of try and take the lessons and learn so that, you know, do things differently going forward.

SPEAKER_01 23:49

So what was the main lesson, do you think, from picking up the Arab role?

SPEAKER_00 23:54

I'm not a corporate person. I'm not politics. I love our business, I love our industry. And I think more than anything, I love doing deals. And when you're running a corporate, that takes you away from that side of things. And I thought, you know, could I build a bigger business? Could I do it differently? And I think the lesson really is everybody has their own sort of forte and their own strengths. Can I do it? Could I do it? Yes. Is it my style? No. Uh do I prefer smaller, sweeter? Yes. And the other thing is sometimes, you know, putting the business as a brand rather than the individual, I think is also important. And you know, nobody knows uh how big or small we are, but we can punch very heavily above our weight because you know we can create a brand and a reputation. And that for me is more important than having 60, 70, 100 people working for me.

SPEAKER_01 24:52

I suppose you had to give it a go, otherwise you wouldn't have known.

SPEAKER_00 24:56

Absolutely. And you know, I never want to look back and say, I wish or what if, or, you know, could I have done that? And you tried these things. And you know, not everything you try in life works. And again, you know, the lessons that come out of it, uh, and being brave enough to say, okay, fine, you know, uh that didn't work. For me, failure is not not succeeding, failure is not attempting. If you don't give it a go, you'll never know. And being brave on it, and it was a you know, it was a big step. And then a lot of people thought I was very brave to go out and start all over again on my own, all over again. But to me, it didn't feel brave, it just felt right.

SPEAKER_01 25:31

Yeah. So you were then back in business with Ben and you co-founded Telon.

SPEAKER_00 25:37

So Ben and I sort of said in 14, look, we've done a couple of deals together, let's see where we go. Uh and freed from the politics and and everything else, and it was a good time to be sort of buying at that time. We did four deals buying and selling in six months, said this really works, let's create something together. And we created Telon. And we've had telon now for coming on 12 years.

SPEAKER_01 25:59

And do you work through partnerships with family offices, you know, high net worth individuals?

SPEAKER_00 26:05

Yes. We've sort of widened the net a little bit. Some high net worth, some family offices, some of the smaller private equity teams, businesses, some institutions we're talking to. We like those where we know we can get decisions. Again, I'll come back to sort of the large scale and the politics. I don't mind being challenged. I think it's really important. Ben and I look at things very differently, which is great because we challenge each other on things. And the same with our investors. You've got a family office that's investing with you or a high net worth. They might look at something, come up with a different question. My view has always been I'm not scared to be challenged because one of three things, either I've got the answer, I haven't got the answer, I'll go and get it. And if I can't get the answer or there's a challenge there that I can't respond to, I need to revisit what I'm doing. And I think that's really important. And I think it's really healthy to be open to be challenged.

SPEAKER_01 27:06

So let's get on and talk about 40 Broadway in Victoria, which, you know, one of Telen's standout um projects. And I just think it's such an amazing story. So let's start at the beginning and perhaps take us back to when you first looked at it and you know how you saw an opportunity there that perhaps other people didn't.

SPEAKER_00 27:28

So we got offered this in the beginning of 2017. It was a leftover, it was the last asset in a joint fund. And it fell between the stools. It was leasehold from Christ Hospital, three leasehold. It had its anchor tenant was into paying, I think, 11 pounds a foot until 2023. And the initial yield was around two and a half or three percent. So it didn't fit the private equity guys because the it was a too long a hole. It didn't appeal to the institutions because of the leasehold nature. So there was a hole there, and we saw it as an opportunity. It had an expired planning consent, it was 70,000 square feet, it had an expired planning consent for 100,000 square feet. So we saw it as an opportunity, and the fund wanted it out because it was the last one in the fund. So we saw it as an opportunity. I'm not quite sure we expected quite the journey that we've had on there. So we bought it in the summer of 17. And then again, I talk about relationships and I come back to that. Prized Hospital is a charity that was set up in the 16th century by King Edward. Today it's still a school, it was based down in Horsham for deprived and underprivileged children with an enormous amount of heritage, and obviously it's got a legacy. And I knew from all of my days the trustee who represented the board and the trust for the freehold. And we'd negotiated that when we'd bought it. And I used to pick up the phone every month to him and go, Hi, how are you doing? You know, would you sell the freehold? Can we regear the lease? And every month he'd say, James, we're not selling, we're not selling, it's not for sale. And one month I picked up the phone to him and said, you know, would you sell? Would we change? Would you regear? He said, James, he said, I've had a word of the trustees, we're fed up with you calling us every month. Okay. He said, You're driving me mad. He said, This is the price. If you want to buy it, don't negotiate with me, don't play games. This is the price, just do it. So we said, Thank you very much indeed. We'll do it, we'll take it, we'll buy it. And we ended up a combination of owning a half-acre site in St. James's Park with an expired planning consent, so we knew we could get the massing. The original consent was for two buildings, an office building and a residential building at the rear. The rear building, the leases expired 18 months before the in-to lease did. So we always thought we could do that separately. Having bought in the freehold, we then submitted the planning application to redevelop and get a new consent, but it's two office buildings rather than one office and one residential. We got our consent in June 19 to build two buildings. And then in June 2020, we went into administration. Now we had into on two-thirds of the space, paying 11 pounds a foot on a 60-year lease with a big RV liability for development compensation. And again, I talk about relationships. I get a phone call one day in the summer of 2020 from a friend of mine who I'd worked with during the GFC, who was the administrator. He says, Huh. He said, Boots on the other foot now. He said, I'm the administrator and I'm working for Intu and I'd like some help from you. So I said, you know, what can we do? He said, we want to leave. We want to close the building down, the office down, we want out. And I was sitting there thinking, okay, so in three years' time, I've got a big development compensation liability coming, and you want to leave now. So I thought, but I can't make this too easy. So I gave a little bit of a wriggle and made him work a little bit for it. And by the end of December 2020, Intu had vacated, and it meant that we could start our demolition much earlier than we had anticipated, which was great for us.

SPEAKER_01 31:28

Did it come as a shock that I mean Intu were one of the biggest shopping centre owners? I mean, were you expecting their demise or um I think we were in the middle of a COVID world at the time.

SPEAKER_00 31:42

So I think nothing sort of shocked us. There were lots of noises. There was talk of, I think they were trying to buy Hammerson at the time and that all failed. There was a lot of talk in the market about the amount of debt that they had. So I think from our perspective, I suppose shocked, but not surprised, if that made sense. But sort of it worked in our favour.

SPEAKER_01 32:05

So, I mean, I think one could make a film out of what happened on this project. So it's sounding really good. You've got a, you know, larger development site than you anticipated. You bought in the freefold, but then what happened?

SPEAKER_00 32:20

We then got consent to merge the buildings into one building rather than two. And we started our demolition in January 22 to demolish the whole development, which was quite a program. We knew it would take nine to ten months to demolish the entire site, which we did. And we appointed Henry Construction as our main contractor. We now had the Ukraine war going on. And construction at that time, you know, the costs really went, excuse the pump, but through the roof. So then it was a question of, okay, you know, what's going to happen, where are the risks? The biggest risk was on steel cost at the time, more than anything else, energy and steel. And we agreed to underwrite 50% of the steel cost and forward fund 50% of the cost on the basis that they took a advanced payment bond out in addition to the main performance bond to cover us for the cost of the steel. And that's exactly what we did. Uh they started on site in uh November 22 and started piling. And it took four or five months for them to complete the piling. It was a big, big job, obviously, a half an acre site. And then in June 2023, Henry went into administration. And we had advanced notice that it was coming. I was quite fortunate that I had a friend of mine who gave me some advice to get my own insolvency lawyer, which we did. And we served notice to terminate Henry on site 24 hours before they went into administration, which was really quite key because it meant that we were able to take control of the site straight away. We weren't beholden to anybody. And so what we did was we brought Erith, who were our demolition contractors, back on site to strip out what needed to be stripped out from the works that had been done, test and everything, make sure the piling was right. And then they built the basement box and the core. And we then had negotiations with Red Construction for them to come on site. We had a couple of conversations with a couple of other contractors, but we found red were probably the best for us as a fit. And they came on board. It took us about nine months to negotiate because you can imagine they're taking on a contract or a site where there's an element of risk and uncertainty and needing a lot of clarification. And at the same time, we still had Erith building the box in the core. And they started on site in June 24 with a PC of December 25. It took up an enormous amount of time dealing with putting it all back together. And at the same time, we had one of the insurance companies on the payment bonds who decided they wanted to be very difficult. So we ended up taking them to court, which we successfully won, but was again time-consuming and challenging and draining.

SPEAKER_01 35:19

It sounds incredibly uh stressful. You to begin begin to wonder what else could possibly go wrong. And you were doing all this speculatively without a preload.

SPEAKER_00 35:30

Yes, I always say, yeah, we do development. What could possibly go wrong? And we always had the belief that this was going to be something that was going to be a special building. We have spectacular views across London, from Bassie Power Station to Buckingham Palace, all the way through St James's Park, through the city, you can see Canary Wharf and obviously Westminster Abbey in the Houses of Parliament and Big Ben. So it really is a stunning, stunning view. And I always thought that we'd get a hedge fund that would come out of St. James's or Mayfair that didn't want to pay £200 a foot for the best space, but would pay us £140, £150 a foot on the best space for the views. And we'd probably let half of it to them, and then we'd let the rest probably floor by floor. And we have 4.4 metres in the basement. So we thought we might get a medical use, because there are many buildings that have got natural light and that floor to ceiling height. We thought we would get maybe a medical use or an embassy or something on the ground floor and basement.

SPEAKER_01 36:30

And it is right next to St. James's Park station, isn't it?

SPEAKER_00 36:34

So yes, it's directly opposite. So yes.

SPEAKER_01 36:37

Okay, so you had confidence, you had belief that you know this was going to work out. But as you say, you know, Ukrainian war, you know, one sort of didn't know what was going to happen next. So there must have been moments when you doubted your judgment on it.

SPEAKER_00 36:55

Um yeah, you do get why on earth did I do this? Um could I be using my time differently or better? But at the same time, when you're in it, and you know, you've got an obligation to your investors. And also you it's not so much you want to create a legacy, you recognize that there is an opportunity to leave a legacy. And I think there were two things that really got me excited about it. One, every time I went onto the roof and I saw the views, it just, you know, it just blew me away. And secondly, I was very heavily involved in the detail. Uh, Ben and I were on the detail on the design, especially for our ground floor reception, the design of the club room, the cafe area. You know, we'd see the end-of-trip experience, the um the changing areas, the facilities that we've we've created. And we saw post-COVID the importance of that, what I call the hotelification of offices. People want today best in class, but they want to be looked after. And we looked at a number of buildings in London as to what people were doing, what we liked, what worked, what we thought didn't work, how can we make it even better, what was important to people. And we were determined that we were going to create a best-in-class office. You know, we knew that we were going to have to attract people to a location that wasn't seen as core. You know, it's not Victoria, which has changed. It's not St. James's. And we really focused on the fact that it was St. James's Park and almost creating its own location. You know, we benefited from the old New Scotland Yard development and that regeneration with the retail and the offices and the residential there. So that whole area was becoming far more attractive as an environment. And we thought, you know, we need to make sure that this is absolute best in class.

SPEAKER_01 38:52

So you have to have sort of total belief in your judgment and just deal with the challenges as they come up.

SPEAKER_00 38:58

Uh yes, and the agents will tell you, our letting agents will tell you they thought I was start raping MAG when I told them what rent I wanted to achieve. And we didn't quite achieve the rent that I wanted because obviously the nature of the tenant and the lease led that we've got, but we far exceeded what we originally thought we were going to get because the market moved on.

SPEAKER_01 39:16

So how did you track Formula One to the building? Were they looking at the area? How did they come to you?

SPEAKER_00 39:23

They weren't looking for a hundred thousand square feet, and they weren't looking in St. James's Park. But there's very little choice of building. Their agents brought them to it, and they saw what's the art of the possible, what they could create. Again, I talked about the floor to ceiling heights on the ground floor in the basement, and they thought that they could create something very special for a global headquarters for F-1. And they're going to put a restaurant in and a cafe and retail, and they are going to really put their brand mark right in the middle of Sir James's. And it sort of meets when it you look at their brand aspiration and their partnerships, you know, with Tag Hire and with LMVH and that quality that this fits as a quality brand and a quality building that matches their aspirations. And they saw what was what was possible.

SPEAKER_01 40:18

So what length lease did they end up taking?

SPEAKER_00 40:21

They've taken 15 years.

SPEAKER_01 40:23

Okay. And can you tell us what sort of rental?

SPEAKER_00 40:26

No, uh that I can't. As I said, you know, we were looking originally, I I said to the guys, you know, we wanted a hundred quid a foot overall. We haven't achieved that. We've achieved a very good rent overall. But obviously, you know, a tenant like that with a lease limb like that, you're going to make some compromises because the overall world is much better having them there.

SPEAKER_01 40:50

And even then it wasn't totally straightforward, was it? Because there was a there was another planning issue.

SPEAKER_00 40:56

Nothing is straightforward. As I said, it's development. And then if you want to throw planning in. Yeah, so we did have some challenges. Westminster Council managed to have a uh cybersecurity attack whilst we were trying to amend the planning to accommodate F1. So it did become a little bit stressful, a little bit challenging around Christmas time, New Year while we were trying to get this over the line. And it's like one of those things, just when you think what could possibly go wrong, something else sort of reared its head. But I was really pleased, and uh it's all credit to the team. And again, I talk about relationships and working with people in teams and smaller teams. We had a really good construction team because you know we finished on time. There were a couple of weeks delayed by an external issue, but everybody was really driven to finishing on time and on cost, and that was great. And then the team worked really, really well and hard on both sides to get the deal across the line. This was a deal that everybody wanted. So looking at the bigger picture, and also, you know, when when things do come up, and things do come up, negotiations come up. I won't comment about lawyers, you know, um causing challenges or issues or you know James, you're using the wrong lawyers.

SPEAKER_01 42:12

Yeah, obviously.

SPEAKER_00 42:14

Obviously, clearly. But you know, working together as a team and working a strategy and working out how to get things resolved as a team, I think was real key to the success. And I think that was on both sides, making sure that everybody got what they wanted. And you know, the big thing is, and this is things that sometimes people forget, is it was in everybody's best interest for us to get this deal done. And sometimes what you have to do in your best interest isn't always what you think is in your best interest, but just looking in what the bigger picture is and what's in your best interest to get the best result is something just to always keep in the back of your mind, uh, which we did, and everybody did, and we've ended up with a with a fantastic result.

SPEAKER_01 42:56

It does sound uh pretty amazing, and I don't know how you calmly coped with all this stress because I think even on a personal level, didn't your house burn down while you were in the middle of all these negotiations?

SPEAKER_00 43:07

Yes, I bought a house four years ago and six weeks after we moved in, it burnt down. So, in the middle of dealing with all of this in the summer of 23, I was dealing with an insurance company that didn't want to pay me out of my house and uh a number of other issues dealing with the rebuilding. So I'm not quite sure how. I've got a very good family. I think they kept me very grounded in that respect. And I think, you know, when I look at the fire at home, the great thing is no fortunately nobody died. And I think that's really important. Yes, it's you know, we lost 90% of everything that we had, and so dealing with that was was as stressful, was challenging. But I think having good people around you and those relationships and having good support or family is huge. And a business partner. I've got a great business partner, you know. As I said, so we think differently sometimes, we don't always agree.

SPEAKER_01 44:00

and everything we don't have to agree in everything but we don't you know we find always find a solution together between us and just let's talk a little bit about relationships because you know that's something that you have stressed during the course of this uh conversation and I know uh for instance you've spoken about the importance of MIPIM and you know partnerships and I mean how important is face-to-face networking because you know in yeah this digital age we live in where you know you can uh speak to people on Zoom how important is it to actually go to industry events and actually form those relationships?

SPEAKER_00 44:36

I think it's absolutely fundamental to look at somebody in the eye to see their body language. You know when we hit Brick Wall with something on F1 they invited us down to Begin Hill and we sat down face to face and met with them and yeah we were able to sit and work out together around a table and find a solution. And I think it's absolutely key I think in the world that we're in today that importance of relationships gets lost. A text an email a WhatsApp the connotation of the text can be lost and could be read differently to sitting somebody across the face to the table to somebody. My ex-FD always used to say let's go out for a coffee let's go out for a walk let's go out and talk about it and go out much better to go out and talk about things than sit in the office or clear your head clear your ideas I found that so invaluable over the years. And meeting people and if I hadn't gone to MIPIM I wouldn't have my business partner you know and the deals that I've done at MIPIM over the years uh whether I've sat opposite a vendor who I've then been introduced to or met purchasers or done deals because I've met somebody at MIPIM. You know I've met people on a plane and been offered a deal on the plane yeah these things just wouldn't happen. And then the number of deals that you know when you sit around a table and close things off you can get things done. You know that when you're constantly just emailing back and forth it's a lot easier for people to get very entrenched. That's the position that's my position. If you don't understand what somebody's position is you don't understand what somebody's driver is and you can't really send an email back when you get an email then you get annoyed with it and go, what's your driver? You know you need to pick up the phone to somebody or or go and have a coffee with them and say okay let me understand what's your driver what's causing this part of our success is why we were able to build the distressed asset management business in post-GFC. Or if we went to see all the banks face to face and we met all of them, they would say to us what can you offer us? And our response was always what's your driver? Okay, what do you need? What does credit need? If you want to sell we'll buy if you want the debt we'll deal with the debt. If you want asset managed out or develop managed out we'll do that. If you want the company you know to take over the company and keep the load we can do that. But what's your driver? And you can't ask people that over the phone you can't ask that on an email in the same way. They wouldn't tell you would they no but when you're sitting down having a cup of coffee with somebody you can sort of say okay you know and people will generally be more receptive to being open. And so for me it's key and also and I was thinking about this this morning you know walking around the West End you never know who you're gonna bump into. You never know where a conversation's going to lead. And that is the key and that's I think part of why I do what I do, why I love our business is you just never know where a conversation's going to lead or who you're going to bump into.

SPEAKER_01 47:46

No, this is true. And I also wanted to ask you I mean obviously you are a property entrepreneur but you're a member of the entrepreneurs organization and obviously that covers entrepreneurs from all over all sorts of businesses many of them outside of real estate and I just wondered if there is anything that you have sort of picked up from that you wouldn't necessarily have known from just dealing with real estate people.

SPEAKER_00 48:08

You asked me about stress I had a forum based in London for eight years and I'm still really close with most of the guys from there. I've been part of a European chapter for five years now I probably wouldn't have survived the divorce or managed the divorce as well without them. I wouldn't have dealt with COVID as well without them I would probably have opened doors in the way that I have it's a tribe is how I would describe it one learning I had out of it was learning how to use my tribe and ask for help when needed that's probably been a really big learning one of the great things about EO is that nobody everybody's an entrepreneur everybody has their own business. It doesn't matter what size the business is you know whether you're turning over a million dollars or a hundred million dollars you know you all go through the same challenges and the idiosyncrasies of individual industries vary but the principles of the challenges we face are all exactly the same. And so the learning that I get from them there isn't a forum a conversation a discussion that I don't take something away from that I just would not have had or benefit or learnt from. And then I think also you know when you're running your own business it's a very different experience to if you are in a corporate or in a a working environment. And so to have people who understand what you're going through, who have the empathy for you. And one of the beauties of it is nobody tells you what to do. You sit in your forum or in your group you're talking and you know people will will not say do this or do that because you don't want to form any judgment between you if I told somebody to do something and they didn't do it I'd have judgment that I told them what to do and they didn't do it. And if I tell them to do it and they do it and it goes wrong they're gonna have judgment that I've told them what to do is wrong. So it's all about learning from other people's experiences and we talked earlier about what was the learning. And the biggest thing for me is that you know I never stop learning. Every day's a school day every day I'm learning and you know we have even with Inio you know we have a lot of online learning so I'm always listening and learning from that. I have a global real estate industry group as well so there's quite a lot of people in real estate and I've learned so much as to how different people do things in different parts of the world and what works and what doesn't work. And I think it gives me a much broader horizon than just being in the real estate industry.

SPEAKER_01 50:37

It's important isn't it well which sort of takes me to my final question. Is there any particular skill that the next generation of real estate entrepreneurs need that perhaps previous generations didn't?

SPEAKER_00 50:53

Or is it actually in reality still about relationships and and who you know I was thinking it's not what you know it's not who you know it's what you know about who you know that really counts it's the evolution you know what we did 20 years ago 30 years ago isn't what we do today in the same way but the fundamental principles are you know technology yes it makes changes yes you can do things differently but if you're buying or selling anything you need to build a relationship with somebody if you're letting you need to build a relationship with your tenant. You know as investor developers we are nothing more than a glorified supplier you know we buy from people who want to sell we provide a product that people want to occupy if you want to retain it you retain it if not you want to sell it to those people who want to buy that's what we do. And in all of those you need a relationship and those relationships are key and fundamental to it. Yeah AI is not going to build your building people will build your building it may ease the speed of which you can put everything in place it may give you more information you may be able to have better knowledge and understanding but if you don't have a relationship with your contractor or your team you're not going to build it. If you don't have a relationship with your tenant you're not going to let it if you don't have relationships with agents you're not going to find the deal or if you don't build a relationship with a vendor you know you're not going to be able to buy it. And I think that is the real key is building of relationships the building of trust building of credibility I think those fundamentally underpin what we do. And I don't think that will change but I think the way that people will use the technology will speed things up and change the way that we do things but the underlying principles I think will stay the same.

SPEAKER_01 52:47

Well that's reassuring James thank you so much that was really fascinating. No thank you thank you for inviting me on I really appreciate it thank you so much James for talking to us so candidly about life as a real estate entrepreneur and how you've managed to weather a number of economic cycles and challenges and come out on top. And so useful to have you reinforce the key importance of relationships. So that's it for now. I hope you enjoyed today's conversation please join us for the next Property She podcast interview coming very soon. The Property She podcast is brought to you by Mishcon DeRaya in association with the London Real Estate Forum and can be found at Mishcon.com slash propertyShe along with all our interviews and programme notes. The podcasts are also available to subscribe to on your Apple Podcast app and on Spotify and whatever podcast platform you use. Do continue to subscribe and let us have your feedback take the time to post a review and most importantly keep sending through suggestions for future guests. And of course you can continue to follow me on LinkedIn and on Twitter at Property She for a very regular commentary on all things real estate prop tech and the built environment. See you again soon