The EG Interview: Grainger’s Helen Gordon

“They always give the women the tough jobs,” says Helen Gordon, chief executive of listed build-to-rent behemoth Grainger. For the past five years, Gordon has been the only female chief executive of a major London-listed real estate company. But that is finally changing as Hammerson welcomes Rita-Rose Gagné and Lynda Shillaw heads to Harworth. Gordon sees great opportunity for the next generation of leaders. “We’ve got quite a stretch in the industry at the moment in all sectors and this is a really good time for steady hands and hard work, which is how a lot of women end up getting to the top,” she says. Gordon is a case in point. RBS’s former head of global real estate asset management is celebrating continued growth at Grainger as investments surge to £3bn, with BTR at £1.7bn. This is almost double the target she set at the start of her leadership in 2016, with 5.2% growth in the last year. Throughout the pandemic, Grainger has continued to make BTR acquisitions as the company repositions itself from a housebuilder focused on sales to an income-led landlord. It currently boasts a share price exceeding its pre-Covid level, a rare achievement for a propco in the wake of the coronavirus pandemic. But Gordon is adamant that as the industry claws its way out of the crisis, it cannot ignore long-term strategies – enabling diverse workforces and focusing on the ESG agenda. “Grainger has been around for 112 years,” she says. “Those of us that are looking for the long-term will be looking at long-term trends as opposed to short-term issues.” That doesn’t mean less of a focus on immediate concerns such as rent collection – after all, Gordon says, “you need that to survive”. But it does mean an acknowledgement that the factors genuinely reshaping businesses are bigger and broader than numbers in a set of interim or full-year results. “If anything, we will emerge [from the Covid crisis] as a country and a society that is far more attuned to our responsibility to each other, whether that is social responsibility or environmental responsibility.” Full house Gordon speaks to EG from Grainger HQ in London Bridge. It is late November. The UK’s second lockdown is underway and she is in a largely empty building with chief financial officer Vanessa Simms and the leadership team of directors. She is happy to be back: “I miss the office so much.” She likes to be around people, not screens. The board has convened for Grainger’s full-year results day. Despite two major projects being paused in the first national lockdown and a freeze on non-essential home moves, Grainger’s rental income is up 16%, with like-for-like growth at 3% and rent collection at 97%. A year after Gordon joined Grainger, she hired Simms as CFO. Alongside chair Baroness Margaret Ford, the business became the only FTSE 250 company with women in the most powerful roles. A full house, you could say. But it was never intentional, and Gordon has been reluctant to portray Grainger as any sort of bastion for diversity. Now, with Simms set to head up the finance team at Landsec next year, Gordon is “open-minded” about her successor. Grainger’s 304 employees comprise 56% females. Some 87% are white, with 6% Asian and 4% black. (See Grainger’s 2020 annual report.) “This year, we’ve been focusing on our diversity and inclusion and we feel very strongly that we should increase the diversity of the workforce at Grainger,” says Gordon. With the business in a stage of high growth, it’s also important for Gordon to get those teams together. She relished the four months between lockdowns, during which time staff were invited in on a rotational basis. “It’s given people that time to interact,” she says. “We have our ops team working with our development team working with our investment team. I actually think when a business is growing at the rate we’re growing and delivering product, it’s so important. It’s very much an evolving sector.” The ear of government Gordon has been at the forefront of change this year, not only through her leadership of Grainger, but as president of the British Property Federation. “It was a big agenda year, because our industry was under pressure,” she says. Gordon inherited the D&I priorities from her predecessor, Landsec chief Rob Noel, with a mandate to improve the perception of the industry. The task couldn’t have come at a more important time. “I saw first-hand some amazing behaviour across the industry – in terms of how supportive they were being to employees but also customers,” says Gordon, highlighting the work of retail REITs in particular. It’s almost easier to get Zoom access to the secretary of state when you haven’t got to go through the rigamarole of Westminster “But I do think there was some pretty poor behaviour from some of the occupiers that were not paying their rent – the ‘can pay, but won’t pay’,” she adds. Gordon set about lobbying for an industry in strife. “It’s almost easier to get Zoom access to the secretary of state when you haven’t got to go through the rigamarole of Westminster,” she says. Gordon worked with the BPF and housing minister Robert Jenrick, raising concerns over renter support, the eviction ban and anti-social behaviour. But with a government focus on tenants – both residential and commercial – there has been zero protection for landlords. “The industry is one of the few that has suffered and not got government support,” Gordon says. Now, as the country looks to recovery, she believes real estate will play a central role. Talking tax “I would argue that the industry has taken a real hit and now, to build back better and to help the country’s productivity, it needs government to support it,” Gordon adds. “I think they have to think about how investment, not only post-Covid but post-Brexit, is going to be sorted out by the real estate industry.” I’m not sure I’ve ever had a conversation with Helen Gordon that didn’t turn to tax at some point, although it’s almost always provoked with the question “what would you like to see from government?”. The BTR industry is still beholden to taxes that the for-sale industry is not, and landlords pay the stamp duty land tax second-home surcharge. Gordon has repeatedly called for long-term relief for large scale investors, as well as changes to landlord licensing and VAT. She argues such a move is necessary to create a level playing field to provide more homes, more economic activity and more jobs. Gordon will keep battling. So too will David Partridge, her successor at the BPF. For the second year running, the BPF president will focus on the same objectives, namely perception and people. This year may have been the most challenging yet for the industry, Gordon acknowledges – but it has highlighted the value of a network. “From a personal point of view the BPF has always been a brilliant network for people,” she says. “I missed that part of it – seeing people in person, that’s been quite difficult this year.” That challenge may ease next year. But with a changing of the guard Gordon and real estate’s new leaders will have plenty of opportunity to shape the industry in response to one of the toughest periods it has known – and it won’t look the same as it did before. Grainger in ‘growth mode’ Over the next five years, Helen Gordon aims to double Grainger’s BTR portfolio by tapping into a £2.1bn pipeline. Of this, £1.1bn is secured, with the majority on-site or about to commence, and £429m in planning and legals. “I think everyone assumed that would slow significantly,” says Gordon. “But we’ve done virtual planning meetings, we’ve carried on with acquisitions and we’ve put five new schemes on site during this time.” A large proportion of the pipeline has come through partnerships and portfolio buys, backed by the sales revenue from regulated properties. In 2018, the BTR giant bought out joint venture partner APG’s 75.1% stake in GRIP REIT. The 35-asset portfolio comprises 1,700 homes valued at £696m at the time. The following year, Grainger was selected by Transport for London to develop 3,000 rental homes across eight sites next to tube stations, with a 51% share adding £600m to the portfolio. The partnership, Connected Living London, will include about 40% of homes at discount market rent. “That’s even more resilient than market rent, as people are less likely to move if they’ve got a great deal,” says Gordon. Others BTR providers have turned to affordable housing this year, with Aberdeen Standard Investments pivoting its strategy towards affordable rental and M&G Real Estate pursuing a shared ownership REIT. Grainger owns shared ownership homes via its for-profit Registered Provider Grainger Trust, but Gordon isn’t looking to grow this: “We have extremely high standards of maintenance and service. If somebody has shared ownership it is pushing them to have to invest in that as well, which sometimes doesn’t work.” Similarly, Grainger isn’t jumping on the suburban BTR bandwagon, despite exposure in its legacy portfolio. “The areas that we focus on are where it is high value and the barriers to home ownership are high. At the moment, with the strength of the housing market, I don’t see a lot of suburban housing coming our way.” Grainger will instead focus on mid-market rents in areas of high value, and has a focused strategy and a hitlist of 22 cities. “We know exactly where we want to be, not only within a region, but within cities and particular parts of cities as well,” says Gordon. It will continue in “growth mode” for at least the next four years. Then, when net rental income has doubled to around £150m, it will likely slow development and convert to a fully-income focused REIT. To send feedback, e-mail emma.rosser@egi.co.uk or tweet @EmmaARosser or @estatesgazette