Hello, Thomas. How are you?

 

I'm very good, thank you.

 

Good. I wanted to talk to you about the launch of your development arm for Legendre UK, after having launched I think, as a firm in the UK, seven years ago. What is the reason for choosing now and what are the economic conditions around your choice?

 

So, first of all, Legendre are, by definition, contractors. That's what we are. And therefore, in terms of the way we develop in any country, we like to develop first, on the contracting side. And our view on that is that you can't be a good developer if you don't control your costs, you don't know what you're building, how to build it, etc. When we came to the UK, as you mentioned, seven years ago, our first view was: let's be a good, local contractor. And once we've done that, we'll expand and try to be more present on the full value chain, including on the development side. So that's what we've done. Now, we've got quite a few projects that are built, and we feel comfortable on that side. It was about finding the right individual and the right people to join us. But we knew that that sort of period would be about right.

Look, we are comfortable with the contracting side so, let's move it in that development environment. We wanted the right people, and we've been looking for people that we feel would fit our criteria, and that there was that opportunity. And that's kind of how we act. It's not so much looking at the economic environment or anything and thinking: is now the right time or not. It's more about finding the right people that will fit well in our organisation, and that's why we decided to get Nicolas (Swiderski) on board earlier this year.

 

And can you give me a rough idea of what those right criteria are for those people that you've hired?

 

I think it's about the appetite for risk – you need to make sure that on those things, you see so many opportunities, you've got to make sure that people's appetite for risk and the way they look at projects is the same. And I think it's around risk management. How do you manage risks? Of course, contracting is risky. But you know what you're going to be paid, more or less, you know what you have got to build, so it's a bit easier to manage. Whereas in property development, there's many, many more assumptions that you could take on many, many different things. So, I think it was very important to us someone that could look at risk and manage risk in the same way. And then we wanted someone who could fit in with our culture here in the UK, so we've got that international background and someone who knows the UK market. That was very important for us.

There are many, millions of people out there that are doing property development very well. And our idea was not to say we're going to do it better, necessarily. So, we needed someone who had that local knowledge; that's what Nicolas brought, because he worked for 10 years in the UK, but also in Sydney in Australia. So, you know, you've got that mix of different cultures where you do things slightly different, for instance, in Australia the way they fund projects. So that's quite interesting to have that mix. That local experience but mixed with other experience abroad.

 

And I mentioned earlier the economic conditions of now. From my chats with people across the industry, some are finding it quite tricky at the moment, economically. What is your bellwether of the economic condition of now?

 

So, you're right – it's a very tricky moment to start with (laughs). Clearly, the fact that the financial cost and increasing interest rates means that the traditional residential product for sale, we have developed for the last decade or so - it doesn't truly anymore. So, I think that's clearly very challenging. But in any challenging market, you also have opportunities for new entrants. And I think that's also why the timing was quite good. Because for us it means, look, we can position ourselves slightly differently. When you're a contractor developer I think you bring something a bit different. I think the way we look at projects as well, where we historically like to de-risk our projects, we're quite good at doing that.

One example that I think works very well in terms of the economics, for instance is repurposing existing offices. So, you have a crisis where there is a need for rented accommodation; at the same time, you have got a lot of vacant office space in London, so if you try to combine the two, I think there are some good opportunities. And that's what we're doing at the moment – quite a lot of those. And we think that the economics of those opportunities are working well. We have got people who want to sell offices just because they can't rent it anymore and the values are so low that it doesn't make sense to keep it; some of those assets are generally well located, and if you can look at their structure, the way they are, and we can reposition the accommodation somehow, there are some pretty good opportunities.

 

And one such, presumably, is Shorts Gardens, which is a conversion of a logistics building, I think, into homes, offices, commercial space, and a restaurant, I believe. Is that emblematic of the work you're doing at the moment?

 

Short Gardens is a bit different in the sense that it is for a client. It was an existing office space/commercial space that we planned to repurpose. But the office space is doing a bit of high end accommodation at the back. So that's a bit different, I would say. But one thing, and I mentioned it, because I saw that you talked with him a few weeks ago – what HUB are doing, Damien, what he is doing at the moment, which is repurposing those sorts of offices. I think they bought one in the City of London. That and one that we are doing at the moment, that's still confidential but we're in the process of acquiring an office building in Hammersmith for instance to repurpose it as co-living. And we are looking at a few of those opportunities in that category.

 

And just a couple of other projects that are of note – you're working with Pocket Living, I think, in Harrow and Walthamstow. And you've also worked on the Dockley Road apartments, which just featured in the NLA Awards. Can you just chat a little bit about those projects? 

 

Yep. So, I think I'm going to start with Dockley Road. Dockley Road for us was very important because I think that's kind of the beginning of our property development arm in the UK. The way we approach that is that we won it as a contractor and the client needed extra equity. It was during COVID, and they weren't able to raise that equity. And we decided to invest alongside our clients. And what that does is that it's a very virtuous circle where people are working together. There's a lot of talk about partnership and so on and so forth. But people who do real partnerships - there aren't so many. And I think we've done it. It was very successful in the sense that the client's interests and our interests were the same.

Normally, you're going to get a person or situations between a clients and developer, between the developer and the contractor. But here by investing into the scheme we wanted the same thing as our client, which was to deliver on time, because we wanted our equity back, at some point, we wanted to deliver a good quality product. Because by doing so, we knew therefore we would get our money back. We wanted to minimise the extra cost to the project, because again, there was an element of contingency, and if it wasn't spent, it was coming back to us. So, there were a lot of interests that were aligned. And that's how we realized that there were definitely some good opportunities for contractors and developers to work together. That was a few years ago. And I would say, really, that that is what convinced us that we wanted to into the property development type. 

 

Really? Right.

 

Yeah, absolutely. That was super successful. And I would say go and speak to that client particularly, he will only say good things, and not because he is the client but because he did see the real potential. It’s easy to talk about things. But when you experience it, and when you see that it comes to fruition, I think it makes a real difference. So, we did it on that, with Dockley. And we replicated that scheme with Pocket Living.  So, same principle. With Pocket Living we secured those two schemes as normal tender, but then there were opportunities to invest. They'd heard about what we'd done on Dockley, and we said, look, if you want, we come as a partner alongside you guys as well. The issues that we had to deal with were slightly different - they wanted some more equity, because they want to minimize their cash investment, which makes sense. But it was also that this was end of 2021 beginning of 2022 so costs and inflation were going through the roof. So the fact that we were investing alongside them, and therefore there was an interest for us to minimize the impact of costs increase, etc; I think that was very reassuring for Pocket. And again, that's something that has worked extremely well. It's on site at the moment; the extra costs are well-managed. It should come to a completion end of 2024 and for sale in 24/ 25. And we replicated that model with Pocket Living, which we are sure is, very, very successful. That's one element.

The second element with Pocket Living - we decided also to invest because we believe in the product. I think in the current market the cost-of-living crisis, you see interest rates and mortgage rates going through the roof, I think Pocket Living offer something that is a bit different. With an initial investment, which is not out of proportion, in London, you want to buy your flat in Zone 2, Zone 3 is going to be £500,000. At Pocket they are going to be between £250,000 to £275,000, so I think it is a good way for young professionals to enter into the property market and get a first step on the ladder. And I think that's very important, and we do believe in that product. And that's why we are very happy to work with Pocket and we are looking at further opportunities with them.

 

So finally, what's next for Legendre? Are you looking at other areas, other sectors? Or is housing your main focus?

 

So, we remain focused on our two key sectors, which as you mentioned are residential and commercial. Historically those two are the areas where we have been very strong – the only thing is that for 2024 and 2025, we want to start trading a bit more geographically; we keep our eyes open to opportunities outside of London. But also, residential will remain a focus but we want to look at other forms of residential. We discussed co-living; Build to Rent clearly is a strong sector for us and is an area where we want to develop in the next couple of years, working with housing associations. So, I think for us, staying in that market but trying to diversify a bit more our client base and being able to talk to more people in those markets. One of our strengths as well is we are very flexible. But I think it’s more resi market and trying to expand, and commercial market, retrofit because they suit us quite well.

 

Well, all I can say is good luck with all of that! It sounds like you're going to be very busy.

 

Yes, we are we're hoping so! And thanks very much for that (laughs) It's a very exciting time. 

 

Nice to speak to you!

 

Thank you very much. Have a good day!

 

Thank you. Bye