COMMENT: Letter from London

Columnist and author Peter Bill comments on the remuneration of top real estate executives in the UK; Transport for London's new office which is being built near Queen Elizabeth Olympic Park; and clever Scottish fund managers.

To the stately Corinthia Hotel in Whitehall on July 7 for the British Property Federation’s unchanging changing-of-the-guard party. Exiting the presidency was the earnest Bill Hughes of Legal & General. Bill supervises £15 bn (€21.4 bn) of real estate assets. His successor is the sociable Chris Taylor of Hermes. Chris has AUM worth £10 bn.

Both are fine fund managers. Are they rewarded as well as those in the public market? The question sprang to mind after being gently chided at the party by Chris Grigg, boss of listed REIT, British Land. Chris G has AUM of £19 bn. A weeks or so earlier I’d Tweeted out news from BL’s annual report that the CEO’s total remuneration had risen by 25% to £6.8 mln. Chris pointed out that it's misleading to simply quote a total which is contingent on meeting targets. His basic salary is £800,000.

Well, fair enough, I am partly - correction - extremely jealous. Chris is widely seen as having done a great job since he joined BL at the pit of the recession in January 2009. All the same, £6.8 mln does seem a lot for managing a company with 488 employees.

How does his pay compare with the remuneration of fund management bosses? No idea, more at a guess. I was once told by a shocked property company CEO (earning multi-millions) that a predecessor of Chris Taylor at Hermes was on £1.2 mln.

You probably should not compare comparing private fund manager pay with those running public companies. All sorts of reasons why not can be furnished, especially by listed company directors. But, what the hell. This is for those who actually know what top fund managers earn and want to make comparisons. Here is what the executive directors of three big UK REITs earned in the year to March, with last year’s number in brackets:

• British Land: Chris Grigg £6.8 mln (£5.4 mln); Lucinda Bell £3 mln (£2.4mln); Charlie Maudsley £2.8m(£2.6m); Tim Roberts £2.9m (£2.4m)

• Land Securities: CEO Rob Noel, £4.7 mln (£2. 3 mln ) CFO Martin Greenslade £3.2 mln (£1.2 mln)

• [ b]Great Portland Estates: CEO Toby Courtauld £3.5 mln (£3.4 mln) Neil Thompson £2.8 mln (£2.7 mln) Nick Sanderson £2.4 mln (£2.1 mln).

PS: I’ve no idea what AXA Real Estate Management (AUM £40 bn) pays it’s global head of asset management, Anne Kavanagh. Anne breezed into the BPF party fresh from helping put together a £300 mln deal to buy the Pinnacle tower site in the City. It was reported at the time of purchase as ‘all equity’. Nothing was said about financing construction, which must be going to cost around £500 mln.

Anne confirmed the entire project will be paid for by equity from the four ‘club’ owners, which includes AXA and Singaporean sovereign wealth fund, Temasek. No debt will be raised. Count up how much that will save in interest charges between now and late 2018 when the 278-metre skyscraper is due to finish.

PPS: It will be interesting to see if original Pinnacle contractor Brookfield Multiplex will be retained. After all, they have just begun work for parent Brookfield on a rival skyscraper at 100 Bishopsgate. Anne changed the subject when I asked. This woman is clearly not being paid enough.


New 'hubs' in east London
To the Queen Elizabeth Olympic Park for a ground-breaking ceremony to celebrate the start of work on a 265 000 sq. ft. office block which will house Transport for London in 2018. Go! Take a look! Book a swim in the Olympic pool! The scale of what’s being developed is breathtaking. TfL were pretty much bludgeoned into going after grimly holding out for a move to Canary Wharf. Shame on them. Work has also begin on a 430 000 sq. ft. block for the Financial Conduct Authority, also gently persuaded to move out. Noises coming out of Whitehall suggest the government is keen to decant more central London based civil servants into ‘hubs’ in east London.

Gordon Brown without the politics
To the 34th floor of the Gherkin to meet with the deeply reassuring Multi-manager team at Standard Life. You’d willingly give all your personal wealth to Investment director, Neil Richardson, after listening to him for half an hour. He is one of those Scots that Standard Life specialise in minting: intelligent, logical, cautious, greying. Gordon Brown without the politics.

'Most fund manager talk about ideas,' said Neil, scorning his callow rivals. 'We talk about risk.'

Four squiggly lines appeared on a graphic your child could produce. By magic they merged into one. 'That’s about as exciting as it gets,' he said with the ghost of a smile. 'It’s a risky world, give us your money and we’ll manage that risk' was the central message.

A message slightly at odds with the latest report put out by Standard Life’s real estate team, AUM £11.7 bn. UK real estate pricing 'remains relatively attractive despite further downward pressure on investment yields', they say. Really? In London all but crazy foreign buyers have been burned from the market. 'Investors are more comfortable moving up the risk curve as the cycle progresses and rental growth continues.'

Frankly it feels less comfortable and a lot more risky than that, in London at least. I did try to probe deeper and asked Standard Life why their UK real estate guys are more bullish. Flannel and waffle followed.

Peter Bill is the author of Planet Property and former editor of Estates Gazette