When we meet, Gerald Kaye has not taken a Zoom call for more than three weeks. Such is the Helical chief executive’s resolve that offices are vital – and that working remotely is futile – that he has begun downright refusing to engage with the videoconferencing app.
What about when his colleagues aren’t around? “Well, there is this old-fashioned thing called a telephone,” he says, deadpan. “It works perfectly well without being able to see the person you’re talking to. Zoom is just a thoroughly disheartening experience.”
Of course, Kaye would say that. His FTSE-listed office developer saw revenue drop by 13% during a year of lockdowns to £38.6m, its lowest since the global financial crisis. Profit was £17.8m, its lowest in eight years, although net asset value per share improved slightly. That was in May, and things have improved since – but like many in real estate, Helical needs office workers back in their swivel-chairs.
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When we meet, Gerald Kaye has not taken a Zoom call for more than three weeks. Such is the Helical chief executive’s resolve that offices are vital – and that working remotely is futile – that he has begun downright refusing to engage with the videoconferencing app.
What about when his colleagues aren’t around? “Well, there is this old-fashioned thing called a telephone,” he says, deadpan. “It works perfectly well without being able to see the person you’re talking to. Zoom is just a thoroughly disheartening experience.”
Of course, Kaye would say that. His FTSE-listed office developer saw revenue drop by 13% during a year of lockdowns to £38.6m, its lowest since the global financial crisis. Profit was £17.8m, its lowest in eight years, although net asset value per share improved slightly. That was in May, and things have improved since – but like many in real estate, Helical needs office workers back in their swivel-chairs.
“Most tenants are recognising that they need to be in the office,” Kaye says. “A number of people I come across say ‘I can do my job from home’. But that is because they have spent very many years in the office learning how to do it. If you are established, you know your colleagues and you have a rapport with your clients, helping you to work remotely for a while. But even those relationships begin to break down over time.”
Kaye, an industry veteran of more than four decades, should know. Having started out as a graduate surveyor at Knight Frank & Rutley in 1979, in 1990 he became a director at Sir John Beckwith’s London and Edinburgh Trust, one of the biggest listed property companies in the UK. He went on to replace Mike Slade as Helical boss in 2016 and has since streamlined the business into a purely office-focused operation.
“The great thing about property is that you learn something new every day – but particularly when you are coming into the business,” he says. “I did a three-year degree in property [at Reading University] but it is nothing like being in an office with people who have much more experience. You are like a sponge; you soak it all up.
“To deny that opportunity for younger people, just because we can’t be bothered to get on the train or it is easier to sit in our comfortable homes, is completely wrong.”
It is the second week of September – so-called “back-to-work” week – when EG speaks to Kaye and, sure enough, things are looking up. Transport for London is enjoying a record number of commuters on the Tube, while a slew of occupiers is emerging with fresh office requirements. Daily Covid-19 cases may be high, but central London is slowly returning to normal.
Opportunity knocks
In this environment, Kaye smells opportunity. A recent Colliers report found that 20m sq ft of London office space currently falls short of the minimum energy efficiency standard – EPC rating E or better – that will be introduced in England and Wales in 2023. That means that as many as one-in-10 offices in the capital could be unusable in less than two years.
Meanwhile, the government is consulting on legislation that will mean only A or B-rated commercial buildings can be leased by 2030, effectively outlawing around two-thirds of London’s stock by the same ruling. “In other words, a lot of buildings require a lot of work,” says Kaye.
“Leases are getting shorter too,” the chief executive adds. “Historically, a 25-year lease was more common. But now, most tenants want 15 years or less, so the cycle of buildings being vacated is speeding up. The older buildings just will not tick the boxes for tenants who are seeking to achieve net zero carbon.”
Most tenants want 15 years or less, so the cycle of buildings being vacated is speeding up. The older buildings just will not tick the boxes for tenants who are seeking to achieve net zero carbon
Helical, then, is looking to buy, and it has eyes only for London. The business, which has slimmed down significantly since Kaye took charge, has one building left from what was previously a sizeable Manchester portfolio, having sold £115m-worth of offices in the city last year. The remaining Manchester office will also be fully leased and sold off in the next 18 months, Kaye says, leaving the company with “considerable firepower for new opportunities”. Especially, he adds, given the fact that Helical’s loan-to-value ratio has fallen to 22% in the last year, down from 31%.
Moreover, the company is widely expected to sell its landmark 88,600 sq ft Kaleidoscope building in Farringdon, EC1, within the next year now that it is fully leased to Chinese social media giant TikTok on a 15-year deal. That would add around £120m to the war chest, although Kaye will not be drawn on the market chatter. “We haven’t decided,” he says. I press – perhaps an Asian investor looking for a new London asset? “Maybe.”
The only way is east
Just down the road from Kaleidoscope, opposite the former Smithfield Market, is Helical’s upcoming 200,000 sq ft scheme at 33 Charterhouse Street, the first UK office project to get the BREEAM new construction “outstanding” rating. Around the corner from that is its 3.2-acre, 236-home Barts Square scheme, which also features 258,000 sq ft of grade-A office space and 20,000 sq ft of retail and restaurant space. The recently refurbished 25 Charterhouse Square is among several other Helical projects which make up a growing empire in the EC1 region.
And Kaye is not finished with Farringdon just yet. The new Crossrail station nearby is “really transforming the area”, he says. “Over the last few decades, the centre of London has moved eastwards. You have the huge investment that went into Canary Wharf, and then you also have the huge redevelopment of the Olympic Park in Stratford, with all the new rail and Tube links that came with it. The centre of gravity has moved in this direction, and there are still plenty of opportunities around here.
“We are looking all over central London though, probably best described as TfL zone one,” he adds. “We are opportunity-led.”
For all the big picture thinking, the devil is very much in the detail for Kaye. As we walk around Barts Square, he explains how lacework carved into the side of a window reflects the area’s lacemaking heritage; he points out the restored wrought-iron gates and pre-war facades of historic Smithfield; he even gives me a potted history of the neighbouring church of St Bartholomew the Great, which, for all its medieval heritage, stands out most for being the place where Hugh Grant’s character didn’t quite get married in the 1994 film Four Weddings and a Funeral.
The overall effect is a mixed-use development that is polished, amenity-rich and unashamedly modern, but still has a sense of character, tradition and place. When the outside world looks like this, no wonder Kaye has little time for getting stuck on Zoom calls.
To send feedback, e-mail alex.daniel@eg.co.uk or tweet @alexmdaniel or @EGPropertyNews
