IT was to have been the £200 million landmark headquarters of Europe’s third largest bank, a new building that would have reasserted Royal Bank of Scotland’s commitment to Edinburgh, just as Norman Foster’s Commerzbank tower reinforces the German financial giant’s future in Frankfurt am Main.
The project would have done the people of Edinburgh proud, as it would have meant the demolition of one of the UK’s ugliest buildings — the brutalist New St Andrew’s House, built to house Scottish Office civil servants in the late 1960s.
One architectural guide describes this edifice, for which the Royal Bank paid £20m for a 96-year lease in August 1999, as a “suitably frightening” home for Scottish Office bureaucrats. It has been lying empty since 1995, when it was vacated by civil servants after the discovery of asbestos.
Martin Hulse, director of the Cockburn Association, says: “Royal Bank of Scotland could have gained lots of goodwill by putting forward a good design for this site. I for one was ready with my dynamite.”
What’s more, the Royal Bank of Scotland planned to replace this eyesore with a head office which, hopefully, would have reinvigorated the economy of the capital’s east end. The building would have made a powerful statement about its intentions and reinforced its long-term commitment to Scotland.
But the whole grandiose scheme now lies in tatters, amid bitter recrimination and soul searching.
“This is a once in a lifetime opportunity to get rid of one of the ugliest buildings in the country,” said Donald Anderson, leader of Edinburgh City Council. “Obviously I am disappointed and concerned but I remain hopeful that the problems can be ironed out.
But those close to the project suggest its chances of going ahead on the earmarked site are now “minimal”. There have even been rumours that the Royal Bank of Scotland may mothball the plans out of spite alone.
Royal Bank’s surprise decision 10 days ago to abandon the St James House project, a proposed development on which an extended team — including architects, civil engineers, lawyers, chartered surveyors and many more — has been engaged for the past 18 months, prompted immediate speculation as to the bank’s motives.
There have been rumours that the decision to scrap the project indicates that the Royal Bank of Scotland is reconsidering its commitment to maintaining its global headquarters in Edinburgh, particularly since the bank’s centre of gravity has inevitably shifted towards London in the wake of its March 2000 takeover of NatWest.
But Royal Bank’s chief executive Fred Goodwin last week denied there was any change of heart about Edinburgh being the site of the group’s headquarters.
Plans for the building, which would have seen 3,000 Royal Bank staff housed in 300,000 square feet of “sensitive” and “environmentally friendly” purpose-built accommodation designed by Edinburgh-based architects Michael Laird Partnership, were virtually complete.
Unlike the transport blackspot of the Gyle, where the bank already has two office buildings (the 89,863 sq ft Younger Building, opnened in 1999, and the 243,000 sq ft Drummond House in 1992), the proposed at the St James’ complex would have enabled people to work within a stone’s throw of Waverley Station and St Andrew Square bus station. But the project’s demise seems to have stemmed from two things.
Goodwin and the bank’s new executive board are thought to be lukewarm about a project which they inherited from a troika of executives heading for retirement — executive deputy chairman Sir George Mathewson, chairman Lord Younger and vice-chairman Sir Angus Grossart. This threesome is supposed to have dreamt up the ambitious plan for a headquarters on the site of New St Andrew’s House over house claret in Edinburgh’s New Club.
“It was Sir George’s vision. I have tremendous respect for Mathewson,” said Stephen Spray, a director of LaSalle investment management, which advises the landlords of the St James Centre, who have been accused by the bank of getting in the way of the project.
But a management reshuffle which saw Fred “the Shred” Goodwin replace Mathewson as Royal Bank of Scotland chief executive was brought forward to last March in the wake of the bank’s £22bn acquisition of NatWest.
The project’s originators saw it slip further through their fingers as Mark Fisher, the head of Royal Bank/NatWest’s bizarrely named “manufacturing” division — which includes group property — was appointed over the head of Ernest Sheavills, the Royal Bank of Scotland’s director of property and facilities.
“Fisher felt the risk outweighed the potential benefits,” said a source close to the project. There is also the question of whether NatWest people now in senior roles within the merged bank really want to see everything centred in Edinburgh. The source added: “They got to the point where they realised that a building bought in a fit of enthusiasm was giving rise to a scheme which was much riskier even than it needed to be. It was a visionary project, but it had been inherited by a risk-averse generation.”
There is also the possibility that just as the Scottish Executive is struggling to sell the £225m Holyrood parliament building to the nation’s taxpayers, Goodwin et al would have struggled to persuade Royal Bank shareholders that ploughing £200m into bricks and mortar would have enhanced the value of their shares.
Goodwin is also said to have become exasperated by endless talks between the Royal Bank’s development team and the St James Centre’s landlords, Coal Pension Properties Ltd and other interested parties including the John Lewis Partnership, which owns a department store adjacent to the site, and Dutch-owned property company Scottish Metropolitan. According to some sources, these talks were tinged with “a marked lack of goodwill on all sides”.
Goodwin set a deadline of 31 August for the completion of a development agreement, which would have seen the parties concerned apportioning the burden of risk involved in what is considered to be a complex construction project between them. The discussions also involved renegotiating the title and lease to the site above the St James shopping mall.
The lease acquired by Royal Bank in August 1999 was for the existing 260,000 sq ft office block, New St Andrew’s House. The Royal Bank was in the throes of negotiating a new lease for a planned 300,000 sq ft replacement building. “This simply required the surrender of the old lease and the granting of a new one,” said Spray.
When the August deadline was missed, Goodwin set a revised deadline of 30 September. Technically, the deadline was again missed, in as much as the final legal document was not yet signed. But CPPL, John Lewis and ScotMet all agree that the agreement was “as good as there” and the bank’s advisers themselves felt that a workable agreement had been reached. However this was not good enough for Goodwin — in what some observers describe as a fit of pique — pulled the plug on the project.
RBS spokesman Howard Moody last week blamed “other private sector parties” — in other words, CPPL, John Lewis and ScotMet.
But one source close to the talks thought they were being made a scapegoat for deeper-seated problems within the bank.
“This was a riskier project than they initially realised and the new management team at the Royal Bank of Scotland was seeking to palm off some or all of that risk. They were looking for a lot more goodwill from the landlords than could ever have been forthcoming.”
Spray said: “I have no idea why Royal Bank acted as it did. From where I am standing there was no reason why this deal involving my client, John Lewis and Scottish Metropolitan was put on hold by the Royal Bank.”
Greg Williams, spokesman for John Lewis, said: “The bank’s advisers said we were virtually there. To suggest that we are not in favour of this project is simply not the case.”
But one property expert suggested the retail faction may not be as white as it likes to paint itself. “My initial reaction was that CPPL were the cause of the problem. They can be very awkward people. I suspect one party is trying to get too much out of it. Perhaps they were trying to milk it too much.”
Both John Lewis and CPPL had a vested interest in ensuring the Royal Bank should build its world headquarters above their retail properties. After all, having 3,000 relatively high paid white-collar staff working above and adjacent to their shopping emporia would obviously have boosted trade, and the prestige of the shopping mall.
“It would be fantastic both for Royal Bank of Scotland staff and the people of Edinburgh,” said Spray.
The two sides involved in the negotiations, advised by the law firms Burness and DLA, had even resolved the problem of a concrete deck. This would have been put above the St James Centre mall’s ceiling. Royal Bank of Scotland had agreed to fund what Spray describes as an “artificial daylight solution,” to compensate for the lack of natural light.
Architects Michael Laird, structural engineers Anthony Hunt Associates and mechanical and electrical engineers Fulcrum would not comment on the project’s collapse.
It is known that several London-based professionals had moved north with their families to work on the project and some had already put their children into Edinburgh schools. All three firms are now facing serious issues of redeploying or making redundant staff who had been working on the project.
Insiders in the bank were last night saying Mathewson was “extremely disappointed” that a flagship project dear to his heart has bitten the dust. By Friday he was said to be fighting a rearguard action in an attempt to get the project back on the road. But Goodwin strongly denied that there has been any rift between Mathewson and himself.
This article was published in the Sunday Herald on 15 October 2000