Warning new levy will ‘kill off’ property developments

The listed developer and investor, led by Edward Ziff, described the levy as “another impediment to a very fragile recovery” in the commercial property market.

Mr Ziff, who was at last week’s Mipim international real estate fair in the South of France, said market sentiment is improving, but the levy will pose difficulties, particularly in the provinces as the UK tries to rebalance its economy away from the South East.

Leeds and Sheffield are among the local authorities that plan to introduce the charge next year for developers to help pay for new infrastructure.

Richard Lewis, development director at Town Centre Securities, said the levy could “kill any development off”.

Mr Ziff is concerned about the impact this will have on the UK’s “two-speed economy”.

Describing the national market, he said: “Everybody knows London to be the power that it is, but then the rest of us are all fighting over what’s left and it’s tough.

“The underlying dynamics of the economy in this part of the world is tough. The further you go away from London the colder it gets, literally. So when you get up to Scotland – and we own quite a lot of property in Scotland – it is double tough.

“It will be a good while before any feeling of emotional or psychological change that we are feeling in London spreads out not only as far as Leeds but also heads its way up and covers the whole of the UK. There’s a lot of catching up to do.”

Town Centre Securities, founded by Mr Ziff’s late father Arnold in 1959, counted properties worth £287m at the end of 2012. Its portfolio is concentrated in Leeds, Manchester, Edinburgh and Glasgow.

Mr Ziff said: “Our sense of what’s going on in the property market is that things are not getting worse. We are seeing more interest.

“But that isn’t showing itself yet in terms of deals done. I can’t happily say I get my morning post and a deal comes across my desk and I want to rush out and do it in this part of the world.

“I have seen a number of the situations in the South East where I have wanted to rush out and do it.

“We are still looking for forced sellers so we can buy cheaply. Or we are not buying at all. We are not in any rush. We have strong rental income, we have strong occupational demand for our property, we are let at approximately 98 per cent.”

He said that while sentiment is improving, it will take a while for this to translate into actual improvements in reality.

Mr Ziff added: “I’m in no doubt the banks think that they mean business again.

“When they say they have mega millions or billions to lend to the property sector, I think they think they mean it.

“But the moment you scrape under the surface, what they mean about lending and what the market means about lending are two very different things.”

He said the vast majority of property investors are having to fight for longer leases, particular with retail tenants in the regions.

Outside of London, Manchester is the most successful city at promoting itself, he added.

The city used acclaimed physicist Professor Brian Cox to showcase investment opportunities at Mipim.

Mr Ziff said: “I found that a real sign of Manchester’s confidence. They know how to market themselves and they are very adept at it and other provincial cities follow in their wake.

“For someone from Leeds, it’s enough that we have got to follow in the wake of two Manchester football teams. To have to follow in their wake in any other regard I find deeply insulting and hugely disappointing.

“Leeds are doing better. We have a fantastic leader, a really good chief executive, we have a marketing team led by Lurene Joseph which is taking us in a direction far better than we have had in recent years.

“We are doing it better but we have a lot of catching up to do.

“These things ebb and flow and every dog will have its day. I’m just hoping ours comes soon because we need to catch up.”

He said a colleague met with Travelodge to talk about its requirements in Leeds, but the hotel group was more interested in sites in Manchester.

He praised moves by Bradford Council to help finance Provident Financial’s new headquarters in the city with a £6m loan.

He said other local authorities including Leeds, Wakefield and York are looking at innovative ways of helping to finance new developments.

“That’s local government taking it upon itself to create,” said Mr Ziff.

No-one has escaped the downturn

EDWARD Ziff does not know anybody who has escaped the downturn unscathed.

The chief executive and chairman of Town Centre Securities said: “Even people who had sold out at the top, they had taken their cash and made alternative investments.

“I think everything has been hurt.”

Mr Ziff said his father Arnold always emphasised the need to offer security to help borrow as cheaply as possible.

“If you are securing your assets in order to provide finance to grow your business, that is going to be a real hold on the business,” he said.

“Then what we always used to do was make sure we weren’t geared up to the gunnels.”