Property men scent recovery: Good timing proved crucial to making developers' fortunes in the 1980s, and is likely to again, says Tom Stevenson

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The Independent Online
PROPERTY, according to the adage, is about three things: location, location, location. A glance at the performance of property shares over the past 10 years shows that, to an even greater extent, it is about timing, timing, timing, about selling out at the right moment, rather than buying at the wrong one.

British Aerospace, which bought Arlington Securities at the top of the market for pounds 278m, and several badly advised foreign groups have had four years to repent at their leisure.

But what about the lucky few who saw the downturn coming and turned their inflated shares into hard cash within weeks of the FTA property index peaking? Where are they now?

One of the biggest fortunes was made by the Beckwith Brothers, John and Peter, who shared pounds 80m when they sold London & Edinburgh Trust to SPP, part of the Swedish life insurance group Trygg-Hansa, for pounds 491m in April 1990.

Four years earlier the group, which had redeveloped Birmingham's charmless Bull Ring shopping centre, had been worth just pounds 45m. Along the way it had been involved in plans to redevelop Spitalfields market in the City and outraged the residents of Richmond-on-Thames by knocking down their ice rink.

Nothing showed the deftness of the Beckwiths' timing better than the subsequent performance of LET under its new parent. Within two years the company had plunged to a pounds 150m loss and had to be bailed out with a pounds 400m cash injection.

The brothers were tied in with lucrative contracts but their new role at SPP, overseeing the old LET portfolio, gave them little scope for entrepreneurial creativity. They quit when they could last October.

Unfortunately the terms of their departure - which involved a one-year gag - have created one of the great mysteries of the UK property scene: what they plan to do next.

When he last spoke out, Peter Beckwith commented that 'no one in their right minds would develop out in this market'. With the market waking from its long slumber it is hard to credit that the brothers will not be back before too long.

Certainly some of the other successes of the late 1980s property boom have already returned with a vengeance to the UK market.

Martin Landau and the Bourne brothers, Robert and Graham, have made clear their confidence in the UK property scene in the past few weeks. Using new stock market vehicles, they are taking advantage of the sector's nascent recovery.

Mr Landau did not make as much as the Beckwiths from the last boom, but the pounds 25m he netted from his 8 per cent stake in Imry Merchant Developers allowed him to spend the recession in reasonable comfort in the south of France.

Imry was sold to a consortium of private investors, including George Soros, in 1989 for pounds 314m. Following a similar pattern to LET, their investment went from bad to worse. Within two years, the developer of Rose Court in Southwark collapsed into the unwelcoming arms of its leading lender, Barclays Bank. The latter has so far had to provide pounds 240m against its pounds 400m loans to the company.

Last month the stock market welcomed the return of Mr Landau. Shares in Clayform Properties soared after he and his partner, Anthony Bodie, took a 5 per cent stake at 14p, allowing the company, renamed Development Securities, to stage a pounds 27m placing at 35p.

The support of institutions for Mr Landau was underscored by the fact that the shares were placed at 5p more than the company's net asset value. Historically property shares usually trade at a discount to the underlying value of the assets they own.

The share placing included a pounds 1.5m investment from Mr Landau, who plans to use Clayform to build up a portfolio of retail, office and industrial sites, mostly in London.

It all looks remarkably similar to his moves seven years ago when he headed a management buyout of Guinness Peat's property arm before reversing into Rivlin, a stock market shell, to form City Merchant Developers. A merger with Imry International followed before the profitable exit three years later.

Mr Landau is convinced the roller- coaster property ride will take off all over again, not least because of the enthusiasm of banks to fund the boom.

'Banks are very lazy. They won't lend to farmers, they don't understand manufacturers, they won't lend to the Third World, so they come back to lending to property. Bankers are not very bright people.'

The announcement last week that Ex-Lands was moving back into UK property with the acquisition of a pounds 5.8m portfolio of commercial and retail properties in London was the latest boost to the resurgent sector.

A small property company better known for its Bernhard Langer- designed golf course developments on the Continent, Ex-Lands has been run since 1990 by Robert and Graham Bourne, two of the most successful investors during the boom of the late 1980s.

The fact that they had decided that the time was right after holding fire for nearly three years attached a disproportionate importance to the modest acquisition.

The Bournes set up their previous property vehicle, Local London, in 1979 but it was only after flotation in 1986 that it really took off. Local came to the market valued at pounds 6m and by 1989, when the Bournes sold it to Priest Marians, had grown to a pounds 111m company.

Its success was a typical 1980s tale. Buoyed up by the market's faith in its founders, Local's shares were ready currency for a string of deals. The company made its own the concept of being a 'space retailer'.

It specialised in buying up awkward properties that no other developer would touch, dividing them up with hardboard partitions and renting them out on short leases to growing numbers of small businesses.

Matching long-term liabilities with short-term income was always risky and when demand for office space in Local's business centres fell it was inevitable that the company would be in trouble. Fortunately for the Bournes, when that time came they had already jumped ship.

Priest Marians collapsed within a year, weighed down by the debt it had taken on to buy Local London. When Grovewood Securities came to its rescue, it too was forced to call in receivers.

Whether the Bournes, the Beckwiths and Mr Landau can repeat their successes remains to be seen. If history is any guide, however, it would be surprising if they fail to find ready buyers for their new empires at precisely the right/wrong time in the next cycle.

(Photographs and graph omitted)