Propertyshe: James Burchell

“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 Battersea 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 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.”

Susan Freeman

Hi, I'm Susan Freeman.  Welcome back to our PropertyShe podcast series brought to you by Mishcon de Reya 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 Burchell.  James is a Co-founder and Partner in real estate investment company Tellon Capital.  He has over 40 years' experience in real estate, having started at Hirshfelds in 1986.  In 1994, he was a founding member of Lewis Partners, a niche commercial investment agency.  James established Faircroft Real Estate in 2000 in partnership with property investment company Arrowcroft.  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 Arrowcroft when the firm purchased Faircroft in 2012.  Throughout James' 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 40 Broadway, St James’s Park, now the HQ of Formula 1.

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, 4 decades in commercial real estate and my first question is really what drew you to real estate in the first place and what kept you here?

James Burchell

What drew me was I wanted to be a lawyer, and I went to 2 seminars in my sixth form.  One was on law and one was on quantity surveying, 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 3 years, all of a sudden that appeal was no longer of interest.  And the one in quantity surveying looked really interesting.  I can remember it to this day.  I can see 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 talk 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 will remember on this, called Pepper Angliss 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.

Susan Freeman

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 Partners.

James Burchell

Yes, but for 6 months I couldn't get a job till I got experience and couldn't get experience till I got 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 Welbeck Street, and I lasted about 3 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 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 3 months.  I went to work for Ellis Co., which at the time were a 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 Hirshfields, 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, and I can remember my boss Howard Harris said to me one morning, the following morning he said, ‘how are you getting up in the morning?’ I said, ‘I'm fine. Why?’ He said, ‘I'm picking you up at 5.00 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 Ladbrokes sale and leasebacks and, uh, Howard said, ‘we're going up to Scotland and we're going to be visiting 9 or 10 Ladbrokes.  We're going to be measuring them all, working out the rentals, and then we'll come back.  And it was 2 days and I absolutely loved it.  I saw parts of Scotland I'll 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.  I walked in with the agent and he said, ‘have you been to Airdrie before?’ I said, yes. If we walk down here and turn left, there's a Ladbrokes about 4 or 5 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 realised that I had this memory for wherever I've been and I loved it and I spent a year on the auction side and was travelling the country and learning and working a bit on the investments with Stephen Lewis.  And then after a year, I sat down with Colin Gershenson, who was the MD of Hirshfelds and 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 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 how long?’ I said, ‘a year’. So I said, ‘I haven't had a rise yet’. So he said, ‘okay, fine’.  I was 19, 20. He said, ‘I'm going to take your salary up’. He said, ‘what are you on at the moment?’ I said, ‘£5,000’. He said, ‘we'll take it up to £6,000 a year’.  You know, I was really happy with that. And I worked with Stephen at Hirshfields for nearly 7 years.  Hirshfields was bought out by the parent company of Pepper Angliss 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, where I went career-wise.

What I didn't expect was I got qualified on the 1st of December, Hirshfields got put into receivership on the 10th, I got made redundant on the 17th, and Stephen, myself, and one other partner, Matthew Clark, left to set up Lewis 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 the middle of Jan and 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 6 phone lines for free for a whole year because they'd screwed up and we were often trading as Lewis Partners.

Susan Freeman

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

James Burchell

Maybe it's naivety, maybe it's just enthusiasm, maybe it is just belief.  We had a very good client base.  We'd taken 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 was the 3 of us, we had 1 secretary we took on and our rent, we took space in 15 Cavendish Square, and our rent in the first year was £5 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 the secondary market, a lot of stuff that other people didn't want to take on.  We had a few clients, some of who 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 Potter's Bar which was some shops and offices upstairs.  And I can remember going to see it and I actually got quite excited.  It had car 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.

Susan Freeman

I mean, it's interesting because 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.

James Burchell

You know, it's never easy and there's never a good time.  I think the advantage today in some ways is two-fold. 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, you know, 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.

Susan Freeman

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

James Burchell

I'd got to know Arrowcroft.  I'd built a portfolio in Covent Garden for a client of mine, which we'd sold out and you know, the best relationships always come from advocates and he happened to be away with the chief exec of Arrowcroft, who was Nicholas Hay, who was Leonard's son-in-law, Leonard Epple was the founder of Arrowcroft.  And my client was telling Nicky what I had done and what I was doing and the client called me one day, he said, ‘look, I think you should go and have a chat with Nicky.  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.  Arrowcroft 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 site and he wanted to move more into asset management trading, which is 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 did I want to do? And I said, ‘in 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 businesses. And he either said, ‘if you are 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 relationships sometimes gets lost today in the AI and internet world that we have.

I negotiated a graceful exit from Lewis Partners 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 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, should I, shouldn't I? I called Nicky 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.

Susan Freeman

Who were your mentors?

James Burchell

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

Susan Freeman

Well, there's quite a few.

James Burchell

There's a few.  Yeah.  And I happened to have, it was quite interesting, I 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 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 centre offices, retail, prime retail around the country and we bought some vacant industrial which we thought we could either refurbish or trade on or re-let.  Sold a load out 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, we had one conversation, we owned a prime shop in Eastbourne, and I had an offer one day at about 5.5% for it. And Nicky said to me, he said, ‘what do you think?’ I said, ‘well, I said, you know, 5.5% is the old 7.5%, and I'm not sure that's going to change’ and 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.

Susan Freeman

So this was just before the financial crisis.

James Burchell

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 our heads down.

Susan Freeman

Did you sell the whole portfolio?

James Burchell

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 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 over geared, we’d been offered, you know, a 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 imploding ’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 realise how much of a mess they’re in, they are going to need help.  And we started advising, we were 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 distress 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 Lloyds bank HBOS deal and they didn’t believe us and then they came to us about a year afterwards after they’d done it at about 11 or 12 and said, ‘you were right, how do we get out of what we are in’ and they had a complete meltdown over it which obviously caused them serious problems afterwards. 

But I knew I needed to do 2 things.  I wanted to grow the distress asset management business, I knew that would be a 5 year play and I knew I needed more capital to be able to grow and buy.  We looked at raising a fund, didn’t quite come off and in March 2011 I got introduced to my now partner, at MIPIM 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 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, Nicky 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, Nicky was in his 60s.  He says, ‘why don’t 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.

Susan Freeman

So did you put the JV with them on hold?

James Burchell

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

Susan Freeman

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

James Burchell

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, 2 offices.  I had long time 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 Nicky and my perspective, 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 amicable divorces at the same time because in the space of 4 weeks I separated from my wife and separated from Arrowcroft.  I would recommend it though.

Susan Freeman

What year was that?

James Burchell

That was in 2013.

Susan Freeman

2013.  Well they say problems come in three’s.  Was there a third or was it just the 2 divorces?

James Burchell

I think the 2 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 multi-family than single-family as a business.  We actually did a tri-party deal between my new business and Arrowcroft Ben’s business which was a part of the Albert Dock that we bought out of receivership.  You know, again I sort of mentioned about relationships and that is absolutely key for me but you know, you don’t have to agree and you might part companies, 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.

Susan Freeman

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

James Burchell

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 learnt.  Could you do things differently with hindsight, you know, we’d all differently with hindsight.  I don’t do ‘what if’ in the past but sort of try and take the lessons and learn so that you know, I do things differently going forward.

Susan Freeman

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

James Burchell

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.  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 nobody knows how big or small we are but we can punch very heavily above our weight because you know, we can create a brand by reputation and that for me is more important than having 60, 70, 100 people working for me.

Susan Freeman

Well I suppose you had to give it a go otherwise you wouldn’t have known?

James Burchell

Absolutely and you know, I never would have looked back and said I wish or what if or you know, could I have done that and you try these things and you know, not everything you try in life works and again, you know, the lessons that come out of it are being brave enough to say, okay fine, you know, 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, 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.

Susan Freeman

Yeah.  So you were then back in business with Ben, you co-founded Tellon?

James Burchell

So Ben and I sort of said in ’14, we’d done a couple of deals together, let’s see where we go and free from the politics and everything else and it was a good time to be sort of buying a bit at that time.  We did 4 deals buying and selling in 6 months, this really works, let’s create something together and we created Tellon.  And we’ve had Tellon now for coming on 12 years.

Susan Freeman

And do you work through partnerships with the offices, uh, high net worth individuals?

James Burchell

Yes, we sort of widen the net a little bit, some high net worth, some family offices, some of the smaller private equity teams, business, some institutions we’re talking to.  We like those where we know we can get decisions, again I 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 and come up with a different question.  My view has always been I’m not scared to be challenged because 1 of 3 things; either I’ve got the answer, I haven’t got the answer so I’ll go and get 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.

Susan Freeman

So let’s get on and talk about 40 Broadway in Victoria which you know, one of Tellon’s stand-out 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?

James Burchell

So we got offered this in the beginning of ‘17.  It was a left over, it was a last asset in a joint fund and it feel between the stalls.  It was leasehold from Christ Hospital, free leasehold.  It had its anchor tenant was in to paying only £11 a foot until 2023 and the initial yield was around 2½ or 3%.  So it didn’t fit the private equity guys because it was a too longer hold.  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 and had an expired planning consent for 100,000 square feet so we saw it was 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, I’m going to come back to that.  Christ Hospital is a charity that was set up in the 16th century by King Edward. 

Today it’s still a school, it is based down in Horsham, for deprived and under privileged 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 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 re-gear the lease?’ and every month he’d say, ‘James we’re not selling, we’re not selling, it’s not for sale’.  One month I picked up the phone to him and said, you know, ‘would you sell, would you change, would you re-gear?’  He said, ‘James, I’ve had a word with the trustees, we’re fed up with you calling us every month okay?  You’re driving me’, 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 29.47.  The original consent was for 2 buildings, an office building and a residential building at the rear.  The rear building leases expired 18 months before the IN2 lease did.  So we always thought we could do that separately.  Having bought in the freehold we then submitted the planning application to redevelop, again new consent but as 2 office buildings rather than 1 office and 1 residential.  We got our consent in June ’19, to build 2 buildings and then in June 2020, went into administration. 

Now we had IN2 on two thirds of the space paying £11 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 an administrator who said, ‘ha, boots on the other foot now’ he said ‘I’m the administrator and I’m working for in-two 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 3 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 them work a little bit for it and by the end of December 2020, IN2 had vacated and it meant that we could start our demolition much earlier than we had anticipated which was great for us.

Susan Freeman

Did it come as a shock, I mean IN2 were one of the biggest shopping centre owners, I mean, were you expecting their demise or um…?

James Burchell

I think we were in the middle of a Covid world at the time so I think nothing sort of shocked us.  There were lots of noises, there was talk of, I think they were trying to buy Amazon 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 makes sense.  But sort of, it worked in our favour.

Susan Freeman

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 freehold but then what happened?

James Burchell

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 programme.  We knew it would take 9 to 10 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, expose the pun 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 the 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 an advance payment bond out in addition to the main support bond to cover us for the cost of the steel and that’s exactly what we did.  Uh, they started on site in November ’22 and started piling and it took 4 or 5 months for them to complete the piling.  It was a big, big job obviously, half an acre site.  And then in June 2023, Henry went into administration and we had advance notice that it was coming. 

It 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 for the works that had been done.  Tested everything, make sure all 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 9 months to negotiate because you can imagine you know, they’re taking on a contract of a site where there’s, you know, an element of risk and uncertainty and needing a lot of clarification and at the same time we still had Erith building the box and the core and they started on site in June ’24 with a PC of December ’25. 

It took 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 payroll but 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.

Susan Freeman

It sounds incredibly stressful, you must have been concerned and wonder what else could possibly go wrong and you were doing all this speculatively without a pre-lap?

James Burchell

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 had spectacular views across London, from Battersea 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 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.  Um, we 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, you know, we might get a medical use because there aren't many buildings that have got natural light and that floor to ceiling height.  Uh, we thought we would get maybe a medical use or an embassy or something on the ground floor and basement.

Susan Freeman

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

James Burchell

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

Susan Freeman

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 didn't know what was going to happen next.  So, there must have been moments when you doubted your judgement on it?

James Burchell

Um, yeah, you do get, why on earth did I do this?  Uh, could I be using my time differently or better?  But at the same time, when you are 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 recognise 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.  Ben and I were on the detail on the design, especially for our ground floor reception, the design of the club room, the café area, you know, we'd seen the end-of-trip experience, the changing areas, the facilities that we've created.  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.  Yeah, 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.

Susan Freeman

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

James Burchell

Uh, yes and the agents will tell you, our letting agents will tell you, they thought I was stark raving mad 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 length that we've got but we far exceeded what we originally thought we were going to get because the market moved on.

Susan Freeman

So how did you attract Formula 1 to the building?  Were they looking at the area?  How did they come to you?

James Burchell

They weren't looking for 100,000 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 F1 and they're going to put a restaurant in and a cafe and retail.  And they're going to really put their brand mark right in the middle of St James's and it sort of meets when you look at their brand aspiration and their partnerships, uh, with TAG Heuer, 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.

Susan Freeman

So what length lease did they end up taking?

James Burchell

They've taken 15 years.

Susan Freeman

Okay and can you tell us what sort of rental?

James Burchell

No, that I can't.  As I said, you know, we were looking originally, I said to the guys, you know, we wanted £100 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 length like that, you're going to make some compromises because the overall world is much better having them there.

Susan Freeman

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

James Burchell

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 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 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 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.

Susan Freeman

James, you're using the wrong lawyers.

James Burchell

Yeah, obviously, 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 a 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 at 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.

Susan Freeman

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?

James Burchell

Yes.  I bought a house 4 years ago and 6 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 my house and 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 stressful, was challenging.  But I think having good people around you and those relationships and having good support of family is huge and a business partner. I've got a great business partner.  Yeah, as I said, so we think differently sometimes, we don't always agree on everything, we don't have to agree on everything, but we don't, you know, we find, always find a solution together between us.

Susan Freeman

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 conversation and I know, 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, this digital age we live in where, you know, you can speak to people on Zoom, how important is it to actually go to industry events and actually form those relationships?

James Burchell

I think it's absolutely fundamental.  To look at somebody in the eye, to see their body language, you know, when we hit a brick wall with something on F1, they invited us down to Biggin Hill and we sat down face-to-face and met with them and, you know, 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.  And you know, 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, it would be much better to go out and talk about things than sit in the office. It'll clear your head, clear your ideas.  I found that so invaluable over the years.  And meeting people and, you know, 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, 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, met people on a plane and been offered a deal on the plane, you know, 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 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 was 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 it asset managed out, developed 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.

Susan Freeman

They wouldn't tell you, would they?

James Burchell

No, but when you are sitting down having a cup of coffee with somebody, you can sort of say, okay, you know, and people are, 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 going to 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.

Susan Freeman

No, this is true.  And I also wanted to ask you, I mean, obviously you are a property entrepreneur, but you are a member of the Entrepreneurs Organisation, 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.

James Burchell

You asked me about stress.  I had a forum based in London for 8 years, and I'm still really close with most of the guys from there.  I've been part of a European chapter for 5 years now.  Um, 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.  Uh, one of the great things about EO is that nobody, uh, 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 $100 million, 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 of conversation or 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 are 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 judgement between you.  If I told somebody to do something and they didn't do it, I'd have judgement 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 going to have judgement 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 stopped learning.  Every day's a school day.  Every day I'm learning and you know, we have, even within EO, 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 learnt 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.

Susan Freeman

So important, isn't it?  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?  Or is it actually in reality still about relationships and, and who you know?

James Burchell

I always think 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 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.

You know, 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.

Susan Freeman

Well, that's reassuring, James.  Thank you so much, that was really fascinating.

James Burchell

No, thank you.  Thank you for inviting me on, I really appreciate it.

Susan Freeman

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 PropertyShe podcast interview coming very soon.

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