Bindesh Shah Black Mountain Partners INVESTMENT DIRECTOR

Bindesh, your career started in management consulting, how did you transition into real estate?

Starting out as a consultant was a good training ground as I learnt how to assess situations from all angles, it was then an MBA and banking so only around 2008 did I move away from equities to property, almost by chance in fact as it was a direct outcome of the economic crisis at that time. 

What was it that attracted you to real estate? Is there something about the asset class in particular that you find especially interesting?

I was initially attracted to real estate by my fascination with architecture. What I find interesting is the idiosyncratic nature of each individual investment due to each building’s unique location, history, the space itself, its build quality, use and so on.

What lessons did you learn living through the previous crisis?

Real estate is fundamentally a sticky asset class, if you own an asset, banks don’t want to take on bad debt, so there may be opportunities to go in and buy assets on the cheap. Real estate was a relatively resilient asset class, the expected deluge of distressed sellers coming onto the market simply never materialized.

If anything the questions were around a drop in occupier demand from the financial industry in London but again that didn’t happen as new supply was cut and occupier demand bounced back thanks to media and tech.

How would you describe your role at Black Mountain Partners in broad terms?

Essentially I’m identifying if there is a business case for a new project by taking a new site opportunity and creating a vision for what can be achieved there, whether it be a refurb or a new build.

What does that process look like?

In most instances we start with a price for the site and try to work out if it is justified based on a number of key factors such as how much floor space is in offer, rentals rates, how long it will take to rent, the type of tenants it will attract, whether the location is attractive to those tenants, whether the covenants are attractive to end investors, as well as the kind of debt you’re going to get.

Then of course we have all the cost side of the equation which comes from my colleague Tony Scholes and the cost consultants.

What type of issues might you have to deal with along the way? 

If Black Mountain Partners buy the building and there are tenants in place with long-term contracts, working out how we might get them out can require its own separate strategy.

We also have to consider other stakeholders such as Planning for the City of London, whether there are other buildings lined up for future development in the same area that might impact our business case, and so on.

Would you say this process is universally applicable, or specific to the UK? 

In the UK we have this distinction between leasehold and freehold that can add an extra level of detail, for sure. UK property taxation also means it is generally cheaper to buy a building in a corporate envelope but that in turn means we take on all of the company’s liabilities, which can equate to more risk.

Presumably there are instances where you have to dial certain elements up or down?

Emphasis can absolutely differ from project to project, yes. In some situations we may immediately identify the location as highly attractive so then we shift our focus onto the cost component, for example.

It is simpler to price up a demolition and new construction project compared to a refurb as we have more visibility on the former; we have less visibility on a building built 80 years ago.

Then there is the asset management component?

Yes, so as an asset manager, we arrange the debt, assess the lease contracts to bring in tenants, agree terms of leasing, and generally manage the delivery process all the way through. Real estate investing is actually a combination of product design, sales, marketing, research, finance and more. 

How do you manage your relationships with investors?

We are constantly in touch with a network of different investors, working out what is attractive to them, or what we need to do to make a project attractive for them. Every conversation is an opportunity to see a project from a different perspective but also to go deeper into a fund’s investment likes, dislikes, and so on. 

What is your outlook on this sector for the next 12 months?

Right now I think there are more opportunities than in 2019, especially for refurbishment and redevelopment projects.

Additionally, a lot of things that people have been talking about for a while, such as wellbeing and sustainability in real estate, are coming to the fore. We are now looking to bring forward projects that reflect that shift, designing our product accordingly.

If there is a fight for quality, the building with state-of-the-art amenities is still going to win every time.