I was interviewing a partner in a leading City of London law firm the other day. She was talking about trends in the UK’s commercial property market, which today can see multi-million portfolios of bricks and mortar change hands several times in a single year.
She touched on why the private equity boys simply adore property-heavy companies so, why hotel companies are so fond of sale-and-lease-back deals, the merits of Opco/Propco restructurings, and why private-equity money is piling into the nursing home and mental health care home sectors (this is the sort of thing our new prime minister Gordon Brown will doubtless welcome, given his closeness to the likes of Permira’s Damon Buffini and Apax Partners’s Sir Ronald Cohen).
The law firm partner presumably earns a king’s ransom tying-up deals along these lines. She was kind enough to take the time to explain some of their intricacies to me, a relative newcomer to the flipping and stripping of property assets, for inclusion in a feature article on the UK’s over-heated commercial property market.
What was more surprising was that, as the interview was ending, she gave me a few of her private thoughts on the current frenzy of dealmaking.
She said: “I do worry that the human element is getting missed out. A lot of money is being made, and it’s being made in a pretty ruthless way. It’s entirely financially-driven. The drivers of these deals — who could include private equity firms such as Stephen Schwarzman’s Blackstone Group as well as property entrepreneurs like Robert Tchenguiz and Richard Balfour-Lynn —have absolutely no interest in the long-term health of the corporate entities concerned or the plight of their employees or customers.”
It was a fascinating and timely admission. What was astonishing was that the lawyer did not say that this part of our conversation was “off the record”. For the sake of the longevity of her career, I’m assuming it was.
This blog post was published on 7 July 2007