Hi all,
Interviewing soon with Related Argent in London (partnership between Argent LLP & The Related Companies)"delivering groundbreaking projects such as King’s Cross in London, Hudson Yards and Deutsche Bank Center in New York, Brindley place in Birmingham, The Square in West Palm Beach, Florida and The Grand LA in Los Angeles is brought to bear on each of our projects."
From a few articles I've read online, they develop + own + operate, but my firm sent bid for a "fully serviced plot" on the market via broker (1.5y ago) and we originate, finance, develop and operate our communities.
The bid: Basically buying a piece of land (part of their huge plan) ready for construction + delivery based on existing granted planning they have (call it 150 senior housing flats). They would require a few things, including design approach they would advise on + energy provider + Sustainability framework etc...
Question:
- Is their job a huge "early stage project manager" job, getting the greenlight for GBP 10bn project, buy the land with an (or multiple) equity provider + leverage (then refinance as it goes) and then make profit on the plots because they've "prepared" them (electricity, broadband...) + planning application? If that's so, they would just let firm A buy plot 1, build its 150 units + operates (according to their initial granted planning)?
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Is it more we prepare the huge plan, we impose our conditions to fulfil the global vision, we're prepared to do the job for capital providers that can't project manage (LPs, Funds, HNW...)?
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Do they charge fees on each and single plots once acquired by third parties? If so what kind of fees?
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Do they provide developer and/or operator services via in house expertise/brands for let's say a REPE fund that is just feeling it would be great to play a 2y construction + 5y operation game then exit on a 200 units BTR scheme?
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Would they have any control on futur tenants / operations or the idea is just to have the big plan completed and then let things run!
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Basically, what's the plan? DM fees? JV with exit profit? Profit Share? Operators business? Everything?
I'm pretty lost regarding the business model as they advert a lot of things but not their way of making money...
Thanks in advance for any insight you may have on the company, the business plan, my questions...
Bump
Fees
Could you tell a bit more?
They charge fees. Related is building $25b worth of real estate in Hudson Yards - not hard to do the math on how much fee revenue that throws off. They spent $400mm to deck the railyards and their bid was certainly no more than $1b (the original winning Tishman bid), so you can also back into how much of their overall bid that fee revenue will cover (e.g. will it take out their basis or not?). If you told me I could build a meaningful portion of the most famous skyline in the world and you'd cover my all-in costs, and I'd have the opportunity to make billions on the back end if things went well... of course I'd do that!
Moreover, the sheer scale of the site allows for some pretty incredible monetization opportunities. Related bought a window manufacturer to ensure steady and timely access to window wall at the site - can you imagine how many hundreds of thousands (if not more) window products are in place there? The savings on construction must have been enormous, or if not savings, then profit to Related. The sheer amount of concrete and steel on site will move the market for those materials in NYC; a market which they now make, because they're the ones placing orders, and so can profit on futures contracts in those materials. HY is remaking the NYC city skyline, meaning there is probably foreign and domestic money looking to invest as a trophy play, which means Related can probably syndicate out its equity to a point where their fee revenue exceeds their equity exposure. They can charge construction management fees, they can self-perform some of the work, etc etc. All of this is before you start talking about whether the project actually makes a dime. And while the retail may get slaughtered, the offices over there are some of the most desirable in the city and the residential has done okay as well.
With a company like Related the answer is "all of the above". Development isn't that black and white at a big shop (I'd say $5B+ AUM), and business plans are flexible and reactive to market conditions and where they see the best opportunities/best way to utilize capital. All companies will have their bread and butter, but its not like they're locked into that strategy.
With Related, they will simply act as a land developer (buy and entitle the land and maybe put in the infrastructure to sell shovel ready plots), but more frequently they are a cradle to grave developer who works through the whole process and is primarily focused on building large mixed-use projects.
Revenue is earned from multiple streams - fees (these can include development fees, asset management fees, construction management fees, acq/disp fees, leasing fees, and so on), promote they earn when they deliver outsized returns, and their pro rata share in project profits. Breakdown and exit strategy totally depends on the project at hand.
Thanks a lot, definitely helpful. I'm talking to the Argent/Related team on Friday and your information is pure gold. Job spec missions are 90% similar to current gig and headhunter said they really liked the CV. Let's see. I'll have many questions ready.
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