Measuring Up Metric
By Graham Parker | Published: 01 April, 2010
Metric Property Investments, a specialist retail property investor formed by three ex-British Land directors, has raised £190m by becoming the first REIT to float on the London Stock Exchange since the crash.
Metric is led by chief executive Andrew Jones, previously head of retail at British Land, Valentine Beresford, previously European director at BL and Mark Stirling, previously BL’s asset management director.
The trio have worked together for 15 years, first at Pillar Property where they ran the Hercules Property Unit Trust and then at BL.
With Hercules and its associated funds Pillar was seen as the UK market leader in out-of-town property with a 6m-sq ft portfolio of retail parks either owned or under management valued at £4.6bn. The flagship asset was Fosse Park in Leicester, Britain’s highest-rented retail park, but it also included the 320,500-sq ft Gallions Reach shopping park in Beckton, the 300,000-sq ft Manchester Fort shopping park, the 350,000-sq ft Glasgow Fort shopping park and the 115,000-sq ft Orpington shopping park.
Pillar also ran a portfolio of in-town shopping centres in partnership with a Canadian institutional investor under the PillarCaisse banner. And in 2003 it bought the £700m Chartwell Land portfolio from Kingfisher.
Pillar was itself acquired by British Land in July 2005 for £811m, giving the team an even bigger portfolio to deal with including properties like Meadowhall and Eastgate in Basildon. Then, shortly before Christmas 2009, Jones, Beresford and Stirling announced their resignations judging that the time was right to set up on their own. “It’s been a lot of work but it’s great when a plan comes together,” says Jones. “We’re where I wanted to be when I decided to jump from BL.”
So why does Jones believe the float was so successful - raising £190m when its target had been £150m - when others have failed to reach their targets?
“I think the extended team of advisors was the best in the market, and that was well-received,” he says. And the line-up of retail property’s great and the good that makes up the non-executive directors must also have been a factor.
Metric’s board is chaired by Andrew Huntley, chairman of Richard Ellis from 1993 until 2002 and now a non-executive director of Liberty International. It also comprises Alec Pelmore, previously the City’s top-rated property analyst and now a member of the supervisory board of Unibail-Rodamco; Europe’s largest owner of shopping centres, and Next property director Andrew Varley. “We wanted non-execs who could really contribute to the success of the business,” Jones says, “and we’ve got some real heavy hitters.”
And timing was also undoubtedly an issue. Although some high-profile retailers have pulled IPOs recently, investors have woken up to the fact that there is re-pricing going on in retail property, as opposed to the retail businesses themselves.
Now the cash has been raised the pressure is on to build the portfolio. The company promises a cautious approach to gearing, with a borrowing level of no more than 60 per cent, but that gives it £300m to place in the market.
“We’re fully engaged in looking to invest,” says Jones. “But we’re not in a hurry. It’s easy to spend money but harder to invest it.”
And now that he’s out there again, how is Jones finding the investment market? Are there any signs of pre-election jitters? “Obviously there are retail funds that have cash and have to invest it, but I think a few of them are beginning to worry some of the cash might start flowing the other way, so it’s not quite as hot as it was a while ago,” he says.
So what exactly is he looking for? “Clearly retail parks are an area we know well. But we’re in the market for shopping centres and we’ve had a look at the portfolio that The Mall’s put on the market. And we’d also look at high street properties. We don’t want to be dogmatic about percentages in different sectors – it’s very much opportunity-led.”
For Jones the key issue when appraising a potential purchase is income. “We’re very much driven by rent,” he says. “The first question we ask is ‘what is the right rent for the property?’ and we’d be very reluctant to get involved in over-rented properties unless there was a real prospect of that being resolved in short order.”
Equally, Metric doesn’t expect to be buying at the top end of the market. “We’re not looking at sexy, brand-new properties,” says Jones. “We prefer properties where there’s an opportunity for us to add value.”
But within these parameters Jones says there is suitable stock available. “We’re in detailed discussions on a number of properties and we hope to announce something soon,” he says.
Looking further ahead, Jones expects to see more retail property coming to the market. “This year I think the banks are going to start exerting greater influence – especially the Scottish and Irish ones – and that’s going to turn previously reluctant vendors into more motivated ones,” he says. “That’s going to throw up more opportunities for us.”
Once the portfolio has been assembled, what is Jones’s view on timing? “Every asset has a different life-cycle, but we will definitely be looking to recycle the portfolio,” he says. “Whether that’s typically a three-to-five year hold, or even a three-to-seven year hold, we’re about recycling not stamp collecting.”
