Sir John Ritblat needs no introduction. Despite having stepped away from the day-to-day grind of the property industry 17 years ago, he will forever be remembered as the man who bought British Land from Jim Slater in 1970 for £1m and, using pioneering techniques such as securitisation, built it into one of the largest property companies in Europe, worth almost £7bn and with close to £20bn of gross assets, including many managed joint ventures.
Sadly, that was then. Ritblat stood down from British Land in 2006 and today, the business is not even one of the UK’s top 100 companies. This June, it fell out of the FTSE 100 after 21 years, to be replaced by engineering company IMI. The once seemingly unassailable real estate behemoth, which now boasts the strapline ‘Places People Prefer’, proved all too assailable – much to the irritation of its former chairman.
Still a charmer at nearly 88 years old, the ever-dapper Ritblat greets me with a customary “hello darling” when we meet for a rare interview. During the wide-ranging conversation, the life-long philanthropist and polymath reflects on a career that, as well as the top job at British Land, saw him take on the roles of chairman of The Wallace Collection and the London Business School, president of the British Ski Federation (and successor British Ski and Snowboard) and multiple board level roles at establishments such as the British Library and the Royal Academy of Music.
As expected, the man described by fellow industry legend Sir Stuart Lipton as “one of the great investors” pulls no punches as he delivers a brilliantly acerbic – and totally on-the-money – verdict on the state of the market, political and economic outlook, nature of entrepreneurialism and changing of the guard at the REITs he initiated.
What do you hope to see from the chancellor in the Autumn Statement?
If ever there was a time to keep it simple, now is the time. We need the hand of firm government on a few key essentials. The government should be adamant that it will not play to the audience, despite the looming election. It should take the positive stance of real government, acting with neither fear nor favour.
As to the specifics, my advice is: stop focusing on the minutiae and press on with the money supply. Be prepared to override local authorities in respect of planning matters to expediate the process.
Look after sterling. Otherwise, with the magnitude of current funding, it will be on a slippery slope, particularly with rising rates in the US. The Bank of England has failed in its monetary endeavours and has landed a monkey on our backs with wrong-headed policies such as its buy-back programmes and other initiatives – or lack of them.
It is paramount that sterling is seen as an attractive repositioning [opportunity] for foreign funds. It is political idiocy to inhibit foreign investment in the UK with changes to tax and non-dom status. Free markets are one of the cornerstones of democracy and we already have enough tax regulation in the UK.
What is the biggest problem the government faces?
Governments, not just this government, are not trusted. We’ve had so many problems, some of which are bound to occur in a huge business, which is what the UK is. There is no trust, and it doesn’t matter who’s in government. It’s disappointing with Labour that they really are not concentrating on very simple things. They can’t change the world. Muhammad has to come to the mountain.
With the general election looming, is a Labour government now inevitable?
No, I don’t think so. The Labour government of the extreme left is discredited, even amongst supporters, and the trade unionists are not as influential as they used to be.
So what do you want to see?
No new surprises and no hung parliament. What we want is some long-term government. One of the problems is that ministers are not trained to run some of the biggest businesses in the world, which we have in the UK. The term of office is too short and politicians are not professional managers; most are not commercial. There is an unbridgeable gap between politicians and business, and vice versa!
Is there anyone you admire politically?
I think several people in government have considerable stature, but that doesn’t mean to say they have any ability whatsoever to run a hands-on business of the size involved. What used to happen was that the minister had a role of non-exec chairman, involved in governance and overseeing policy. Now, we put people in charge for a few months and most have no competence or knowledge at all, and then little likelihood of being able to obtain the knowledge or depth of experience.
What does the government need to do to improve the economic outlook?
I think we’ve got to press ahead with expansion. There is no choice in my view. I don’t see how the government can finance the budget and relieve the Bank of England balance sheet. We may be on the edge, but pressure for a bit more funding is not as bad as the failure to keep the money supply going. The extra tax required in proportion to the overall deficit and the GDP is sustainable, but I cannot see how we can deal with that without a further increase in interest rates.
What is going to happen with interest rates?
I suspect we will see a further increase in interest rates to ensure there is no hiccup in government funding. It’s a separate issue from inflation, which I suspect will run its course. As for sterling, well mind your eye!
Where do you think they will end up?
Interest rates have already reached my forecast of circa 5% and I believe we are still going higher. The 10-year gilt is nudging 5%.
I can’t believe we won’t have a traditional yield curve. These inverted market positions, where long is cheaper than short, I can’t see how that’s going to go on. And therefore, I see a rise in medium term interest rates, but I don’t see that has to be detrimental. After all, the historical rate of interest for two thousand years has remained more or less stable at 5% and, as Lord Macaulay said, can be construed as the “natural rate”. The artificial low we have just seen has been, without question, an aberration and today’s interest rates are very much the historical norm.
Are we going to have a global recession?
I don’t want to opine on that, with its significant political overtones. Suffice to say, one should ask what the future of dollar strength will be should the US funding requirement be larger than the market, and possibly exacerbated from any sales by Japan and China, which hold not billions but trillions of dollars. A wave of sales would not be helpful to the US or indeed to any of us.
As to suggestions that the renminbi will replace the dollar as a reserve currency, I think that is very unlikely. What is for sure is that to facilitate an across-the-board improvement in trade and concomitant stability, we need both luck and a fair wind!
What’s your view on Chinese investment in the UK?
I think we should encourage it, as in the world of realpolitik money does not smell. We need major overseas investment in this country that cannot be easily withdrawn, as land, buildings, machinery, plant and skilled workforces are not liquid resources. The government always has the ultimate sanction of telling China to go home, but without their assets, which are then locked into our economy.
How attractive is the UK investment wise?
It’s cheap because the currency is cheap. Despite our current turmoil, we have a pretty good workforce, considerable integrity and skills, which is why we’re still miles ahead on the financial side. We have always had the best skilled workforce. It’s a joke to think that Frankfurt or Munich could possibly cope. Not a chance. We grumble about our infrastructure, but our commuter facilities are amazing by most standards. It’s not just the know-how, it’s the English language, it’s the location, it’s the physical facilities and in the end, it’s the people.
How did you feel when British Land fell out of the FTSE 100?
That’s already history and I have no memory!
What issues are keeping you awake at night?
The impoverishing attitude of a major leg of democracy, enshrined in the ghastliness of woke and of the undermining of free speech. Parliament should have none of this nonsense.
What impact is this having?
Conditions and times are such that no government, however short the horizon, can afford to sit and do nothing. I think we have a reasonable chance, as long as the government has the courage not just to do what’s necessary, but to do it regardless of the extremists we seem to have in both our parties. At the moment, we actually have the tail wagging the dog. It is quite hard for me to understand why we are influenced by such a tiny, vocal percentage of the population. Maybe loyalty, courage and balance will return in the great tradition of British phlegm.
What is the cause of this inertia?
Fear. Just take something I know a bit about: the governance of museums. Museum boards are no longer independent. They have to be extremely careful about what they say, never mind do. Chairmen and trustees should be independent in every sense of the word. We have the same in business. We have far too many restrictions and regulations. We have got to cut the red tape, and one of the ways of cutting it is to have a more effective civil service. We seem to have lost the decision-making ability. Everything is referred to a committee. You cannot run an energetic engine of business or operation by removing an effective decision-making process.
Do you see any prospect of civil service reform?
Only if we changed the operation of government itself. When we had an Empire, the permanent secretaries were the supreme beings. After the Second World War, the early Labour governments were not inefficient at all, and we had very, very good people. We didn’t have people wasting their time on woke. Life could be hard and there was inequality, but generally speaking, the man in the street was comfortable in his skin and people had considerable national pride. The British temperament and skills experience kept everything on an even keel. It was only when we were seriously provoked twice in a generation by the Germans that the British got up steam, and when we get up steam, we’re the most formidable nation in the world.
What’s your current read of the property market?
There are some quite good things. On the high street, we had overtraded and we had got careless and we had failed to invest enough, but actually, we’re getting into quite good shape. Look at Marks & Spencer. They’ve done a 100% turnaround. [Chair] Archie Norman is absolutely exceptional. He’s a perfect example of a man of corporate experience, who gave up his seat in parliament after about 10 minutes, and he’s gone back to running a major organisation. Now it’s firing on all cylinders.
Do you think retail has hit the bottom?
Yes, I do. Things got so bad, they had to change and we were also over shopped. We had two years of extraordinary circumstance, where Covid closed almost everything. How often is that going to happen?
So, do you think anybody who survived that is now stronger because they had to reinvent?
Well, look at House of Fraser. It virtually went bust but was bought by [Mike Ashley] and has been resuscitated. In the end, people are gregarious; they want to go and see their mates, their friends, their girlfriends. Shopping is a national pastime. There’s nothing like seeing the goods or trying something on. Also, delivery is getting too expensive. Shopping should also be fun!
Which retail sectors will fare best?
Out-of-town retail parks that have become a destination have got to be a good investment. They normally have good access, parking and storage, a delivery service, an ability to adapt the infrastructure to changing circumstances and a wide choice market in mainly congenial locations and probably a clutch of our most lively retailers.
Who’s going to benefit in terms of the property companies?
This is a trickle-down process, but I have to admit that I am chary of making a forecast having seen the debacle over the last 10 years or so of many of the leading property companies, where in most cases we need, or are seeing, a radical change in management.
What did they do wrong?
Too much borrowing, not on a fixed interest basis and far too short. Large credits failed to use their covenant to avoid giving preferential loan-to-value security. The aim should always be to borrow unsecured with income covenants where possible, in order that borrowers can get through difficult times, just as long as they can service the debt. This gives flexibility to both parties, minimises accidents and strengthens balance sheets.
Substantial debt is part and parcel of real estate and debt management is more or less 50% of the business of property investment and development. Ideally, it should be a corporate liability and preferably unsecured in order to leave the properties as free and clear as possible, and then you’ve got to bet the bank!
What’s your take on [British Land chief executive] Simon Carter and [Landsec chief executive] Mark Allan?
No comment on current management – yet. We shall have to wait and see and wish them luck and better institutional support than has sometimes been apparent. As to the departed managements in many cases, not least British Land, the less said the better, with assets and share price that have failed abysmally and beyond belief over the past 15 years.
What about SEGRO?
It has a very good business model but will not avoid a reduction in the balance sheet, which had probably peaked. Although it is a specialist operation, I think it will flex it on the back of good income and continue to pay a good dividend. A reduction in capital values is still only a lower book value and may not be a cash event if it remains unrealised. If the management holds its nerve, they should borrow on their good cash flow and retain sound prospects.
What is your involvement with Delancey and what is it focusing on at the moment?
Delancey is my son Jamie’s creation, and I am glad to be on hand for some of the projects. Its priorities are often the very big scale activities that Delancey is very good at. When Minerva was acquired, Delancey turned it around. Everybody thought it was a dead duck. It took on £1bn of debt, turned it around and it was hugely successful. Elephant & Castle is a very big project, and Delancey is on top of it, as it is Earl’s Court. When you have schemes as big as those, you can put your stamp on them. They’ll be as good as it gets.
What is happening at Earl’s Court at the moment?
There are 42 acres at Earl’s Court. It must be the development in London. Nobody’s got anything like that. The Earl’s Court Development Company team, the onsite operational team running it, is very busy.
And Hammersmith Bridge? Didn’t you propose a double-decker crossing there?
I became personally involved, propelled by the obvious need to try to expedite progress. Together with similarly public-spirited Norman Foster, who provided resources to develop some original plans, I managed to coordinate the various parties and to produce a plan that has now received approval. This is one of London’s main arteries and, with the public and so many other parties involved, it is a major project by any standards, providing access to millions of users in any one year – and inconvenience, waste and cost to the same degree. Government has got to accept as a priority the need to facilitate the funding and for the maintenance of what is a national obligation and not just a local responsibility. I have every confidence that once the project starts, we will bring it in on time and on cost, and on a much better basis than originally expected.
What appealed to you about the project?
I took it on because I could see what needed to be done. The bridge is going to be a new bridge within the old bridge. The first floor is going to be bicycles and pedestrians and the second is going to be only vehicular. Frankly, It’s been a very poor reflection on the capital. With any luck, the next six months ought to see the issue publicly resolved, despite the great complications. Nevertheless, it is not a happy circumstance. The failure and closure of a bridge for years, not months, is another instance of an abject failure of government to grasp essentials, which I suspect would not be allowed in many other similar capital cities.
Why were you so keen to get involved in such a big project?
Because I’m mad as a hatter! No, seriously, it’s because I do that journey twice a week and I’m irritated beyond belief… and I knew what to do and I knew what the problem was.
What else are you working on at the moment?
I’ve also come up with a scheme to decant the Houses of Parliament, the Palace of Westminster, into a building that will be demountable and removable, and will allow them to get on with the repairs. They’ve now sacked their third committee. I have developed these plans again with Norman Foster, but the Speaker’s Committee don’t want to move. It’s a travesty. We think we could complete the scheme for probably £9bn or £10bn in under 10 years, while their scheme will cost £20bn and take 20 years, and it will go wrong. There’s no way it’s possible for them to stay in a building that is past redemption.
We have a completed proposal for decanting them, with a foundation that will be on the equivalent of a floating raft and removable in due course to be sold for a suitable, sustainable use elsewhere.
Looking ahead, are we going to see lots of distressed assets coming to market?
The banks continue to be very poorly managed. They have got to learn to ride the waves; they cannot just foreclose when there’s a dip. If the income is there, why foreclose on an asset because the value is not there in the short term? It will encourage a recovery in the market if there are fewer forced sales.
The banks are run so much by rote and regulation that I don’t think they can run their businesses in an ideal manner. It’s very important the banks nurse the markets along, but some might say that they should not have got there in the first place. The chart of the share prices of most banks over the last 20 years says it all, with mostly an unacceptable performance.
How is it possible for the Bank of England, never mind the banks, to allow lending to people for as short as two years, and mostly under five years, at an uncommercial floating rate of interest? This was a recipe for disaster, bound to end in losses and tears. Where was not just the governance and control, but also the commonsensical commerciality and concern for the customer and similarly flexible documentation?
What does the industry need to do to better?
The industry needs to utilise its industry bodies more effectively. We’ve got to make sure that the RICS becomes a respected body again, and that it recruits people who are very commercial, who know their way around Westminster. It’s hopeless with its ossified traditions. You couldn’t say the RICS is a force for good in the firmament.
What else needs to change?
We’ve got to stop government making moves that are counterproductive. We’ve got to change the whole of the planning system, which is actually not hard to do. We should encourage as much foreign investment as we can. We should have as many non doms as we like. They’re putting money into the UK. What do we care if they don’t pay a tax on their foreign earnings, as long as they pay corporation tax here? We’re mad to push the foreigners away; mad.
Do you see a three-day or four-day week becoming the norm?
If you look at the percentage of young people who meet their prospective partners at work, I don’t think most young people want to be at home. It’d be nice if commuting could be made a little more pleasant, but just speaking to my personal staff here, they hate it at home. They’re mostly in five days a week, but it’s a private company and people are very dedicated and vocational. I think this business of a three-day week is absolute nonsense. I don’t think this is tenable for most businesses.
So, are you optimistic or pessimistic about the rest of this year and the year ahead?
I think 2023 will not have been a bad year. It will have been mixed because the economy is mixed. The government has got to take a longer-term view because you can’t plan anything otherwise. What we need is certainty, longevity, the ability to plan and to have a government that won’t be knee jerk and will minimise regulation. We’ve got so many things that knock you off course, every day, such as the planning system. How can you build the future of a country when there are no verities and you can’t plan? It’s terrible.
Do you think you are the last of a dying breed of true entrepreneurs?
That is the problem with the industry. We don’t have any leading big people prepared to make things happen. The biggest clogs are the boards. They are so involved with looking after their rears, there’s no entrepreneurial instinct left. In my day, the entrepreneurs were amazing. At British Land, I was a principal shareholder. I ran it to make money. The other shareholders might be moaning and groaning from time to time, but I had the support of a very strong board for more than 35 years and confidence in the industry to give me the independence that was necessary – and the results.
The demise of the REITs