The EG Interview: R&F on building a new London skyline

In 2017 R&F Properties swept through London, amassing a £4.5bn development pipeline in under a year. Now, as the UK plunges into recession, the luxury resi developer is finally lifting the lid on its strategy. While most of the world has been tucked away at home during the coronavirus pandemic, one developer is ploughing ahead building the tallest residential towers in central London. R&F Properties has never shied away from the scale of its ambition. After an acquisition frenzy drew to a close in 2018, the Hong Kong-listed developer said that the 4,000 or so homes in its London development pipeline would equal around 10% of the new homes forecast for the capital that year. But after spending £900m of an anticipated £4.5bn in development costs, R&F has been quiet. Now, with much of the capital still in lockdown and the luxury prime central London market in decline, the company is ready to shout about its vision as it brings the housing to market. [caption id="attachment_1053215" align="alignright" width="200"] Breaker Xia[/caption] Breaker Xia, vice-chairman and UK chief executive of R&F Properties (pictured above, right), is upbeat. His goal is for the business to become the UK’s leading mixed-use developer, creating communities at scale. The masterplan for the Nine Elms development, SW8, is a blueprint for that strategy. “At Nine Elms we are combining several key items: the riverfront, the linear park and several high-rise buildings, and not only for the customer – we will also create a skyline for London,” he says. Xia is speaking over Zoom from R&F’s UK office in Nine Elms. He is joined by Stephen O’Driscoll, R&F’s UK development director (pictured above, second from right), and Michael Purefoy, the company’s global brand manager and former deputy general manager of Dalian Wanda’s overseas group (second from left). It is only their second week back in the office after lockdown, but on-site they are making strides. “The schemes are now at a stage where they are very visible,” says Purefoy. “Obviously, we are looking at the market as well – we are delivering these schemes in phases, and we will be commencing sales in phases. It is the time to come out.” Behind the team, some 800 construction workers are busy on four of the seven high-rise residential towers which will reach a peak height of 200m at 56 storeys. The pressure is on. A London landmark Xia came to London in 2016 with deep pockets and a vision for development at scale. He points for inspiration to China’s Zhujiang New Town in the Guangdong capital of Guangzhou, where R&F has delivered 16 projects, helping to form a central business district. “London is a global city, it belongs to the world,” he says. “We chose the Nine Elms area because it is a well-established centre. It has changed to become a busy, commercial area, as well as residential.” While other Chinese giants, the likes of Dalian Wanda, Fosun and Anbang, retreated under regulatory pressures, R&F broadened its focus from its debut at Queen’s Square in Croydon. In less than a year, it hoovered up 15 acres of SW8, adding Vauxhall Square, Nine Elms Square and One Nine Elms to the portfolio. O’Driscoll says the prospects for the area are so great that it would today be seen as “the best square on the Monopoly board”, adding: “We see it as a truly integrated community. Rather than separate ownerships that will be competing with each other in terms of supply into the market, by owning these three sites we can control which product [we focus on] and when.” Since 2018, R&F has switched its focus from land to talent. In the past three years it has grown the team to 80, all under the leadership of UK chairman Guan Zhixiong (pictured above, left). O’Driscoll moved from Manhattan Loft Corporation in 2017, while Purefoy started in 2018, taking over sales as Wanda left the UK. R&F has also hired from GL Hearn and Landsec as it bulks up its planning, development and sales capabilities, rebranding, getting on site and launching sales. Construction was in full swing across four sites and sales were underway at Croydon and One Thames City (previously Nine Elms Square) when Covid-19 hit. [caption id="attachment_1053213" align="aligncenter" width="847"] R&F Properties is creating a new skyline for London at Nine Elms, SW8[/caption] Crisis control When the team talks about the impact of the pandemic, they are positive – perhaps even a little dismissive. “We have had challenges before Covid-19. Everyone needs some comfort about this. This time will pass,” says Xia. “Our business plan is a long-term strategy. We have plans for eight to 10 years. Right now, we are still very flexible. In China this is normal.” But the scale of the company’s ambition means R&F has faced immediate challenges, not least in figuring out how to continue operations on two neighbouring sites during lockdown. “There was a period in March when we had to sit back, reflect and have a lot of intense discussions with the various contractors,” says Purefoy. Much of the work at that point was external, around concrete and cladding, so builders were able to stagger work times. The government’s approval for longer working days also helped, and R&F turned Vauxhall Square into a car park and doubled the cycle capacity, helping construction workers to avoid the Tube and trains. “When people start to commute back into London, they’ll see that these towers have appeared since they last came in on the railway, and it’s going to be quite a surprise for some people,” says O’Driscoll. By mid-August, that iconic 56-storey City Tower at Park Riverfront (previously One Nine Elms) had crept up to the 19th floor, with the neighbouring Park Hyatt hotel at 10 of its eventual 42 storeys. Resi values are some of the highest in London, topping £2,200 per sq ft for a riverfront flat priced at £3.5m at the gateway to Nine Elms. On the other side of the linear park at One Thames City, three towers of up to 54 storeys with 880 flats will stand on a podium of retail and amenities. Here, flats are available for between £1.16m and £1.57m, with values closer to £1,500 per sq ft. We have had challenges before Covid-19. Everyone needs some comfort about this. This time will pass Breaker Xia | R&F Properties Phasing and adapting R&F’s sales strategy, like that of many of the biggest national developers, relies on both domestic and international buyers, with a special focus on China. Investors play a large role. “London is an international city, so there are buyers from all over the world. Yes, given our Chinese background, of course we have a lot of loyal customers from that market,” says Purefoy. “Phasing is the key part of that strategy. We’re looking at this as a multi-phased, multi-year scheme, and also with segmentation within this.” The first skyscrapers at One Thames City, towards the south of the site, will feature a higher number of one- and two-bedroom apartments. The second phase will include more family homes, which will be lower-rise, built around courtyard gardens. The flats at Vauxhall Square will be high-rise and compact. But R&F will also have to contend with neighbouring schemes in the 20,000-home regeneration area, and Xia has a keen eye on his rivals. He receives regular reports on development progress and planning, and is ready to shift the strategy if he deems it necessary. This includes switching resi for offices, which the company will do in the second phase of One Thames City, having witnessed high demand for commercial space. Royal Mail has done the same at its Nine Elms Park site, opting to switch a resi block for an office, although, unlike Royal Mail, build-to-rent is not currently on R&F’s radar. “Historically, Nine Elms wasn’t known for commercial offices,” says O’Driscoll. “But with the arrival of the diplomatic headquarters, hotels and the Northern Line extension, it is becoming a destination. “By building it out in phases, we’ve been able to fine-tune the product over the later phases to react to what people want, and also, because of Covid-19, we’ve been able to refresh the offer for both commercial and residential.” That phasing means there is no fixed timeline for completion – like the masterplan, it is flexible. “This is only really a target,” says Xia. “This year is suffering new challenges; our business plan will be adjusted.” The pandemic offers an opportunity to learn and focus on design. It means more green spaces, a big push for amenities, bicycles and balconies, a private residence garden and even a jogging track. “One of the things we’ve been able to achieve here by combining three schemes is focusing on scale,” says O’Driscoll. “We are going to be delivering residential amenities that we think will set it apart from everything else.” Flight to the country The R&F team believes the portfolio’s value will hold strong despite any worries of an urban exodus. “We are heavily committed to zone one,” says Purefoy. “Although some people might see this flight to the countryside as being a solution, ultimately London is still the capital. It is still where most of the jobs are. There is always going to be a demand for homes here.” Xia notes a possible upside from any potential shift to the suburbs: “There may be other opportunities to find a countryside scheme.” For now, R&F is focused on developing that £4.5bn portfolio and is not planning new sites. However, it is not closed to expansion in Greater London, and Xia repeats that they are here for the long haul. As the interview comes to an end, Xia cuts off his colleagues to reiterate his long-term optimism: “I think I need to say something.” He pauses. “I think Covid-19 will pass.” He points to China, which is three months ahead of the UK in dealing with the pandemic. There, the virus is not gone, but there are far fewer cases and the property market is rebounding. By the end of this year the crisis will be over, Xia believes, and in one or two years a distant memory: “Don’t worry about right now.” To send feedback, e-mail emma.rosser@egi.co.uk or tweet @EmmaARosser or @estatesgazette Photos © Tom Campbell