Property fund manager Willie Gething is keeping his head while all about him are losing their houses — and his optimism is strangely compelling, says Josh Spero
In the pantheon of clichés, ‘safe as houses’ has now been relegated to just above ‘it’s in the bank’ for reassuring investors, though at least the crash in bricks and mortar is purely metaphorical.
Yet Willie Gething, innovator in the property market, founder of Property Vision and now manager of a new property fund, is optimistic, even alarmingly keen, which sets him apart from most. ‘It’s a generational opportunity,’ he says. ‘This is the most extraordinary opportunity in residential property since I’ve been in the market.’ Having seen previous crashes — and survived them — he should know.
Still, this crash is that much faster and is falling that much further than previous ones. Gething’s optimism looks to an uncertain future; he is in no doubt that the current reality is frighteningly stagnant.
‘At the moment there is no property market,’ he notes. ‘It’s completely lying on its back with its legs in the air, in death throes. Residential property is in a much longer decline than commercial — a slow, grinding process of correcting itself.’ Based on previous recessions, Gething suggests that we may be one year into a three-year correction, but he stresses how no one can know where it will end.
For Gething’s Lennox Investment Management fund, which will invest £100 million in prime London residential property (the final close is this spring), the correction is vital, bringing prices down from Cloud Cuckoo Land to Kensington.
He criticises the extravagances of the top of the market — ‘some of those developments that hold up the traffic in Knightsbridge with guys paying completely absurd amounts of money’ — but cannot see London being unseated.
‘It’s gloom rather than doom,’ he explains. ‘The whole thesis of the fund is that London is here to stay — JP Morgan have just brought their European headquarters here, it’s the place that people want to do business. Looking ahead ten years, do I think people will still want to be in London? Absolutely.’
Thirty years ago, far from thoughts of the fluctuations of house prices, Gething’s world revolved around whisky. A typical City-boy preoccupation, except Gething was not a City boy out to drink his bonus. Transplanted 6,000 miles, Gething was the malt business’s man in Latin America.
He was, in fact, working in the City when an acquaintance asked him if he wanted to go back to South America, where he had spent some time learning Spanish. ‘When you’re 21, adventure is much more exciting than money. I was in the whisky business — it was actually Britain’s second biggest export to South America, after defence equipment. Guns and whisky! I was a manager, and aged 22 I had 21 markets I was responsible for.’
Images of banana republics are surprisingly on the mark. ‘They were all military dictatorships,’ he recalls. ‘I would find myself sitting in the equivalent of the NAAFI in Guatemala, sitting in front of a colonel, trying to work out how much of a bribe I was going to give him. The guy behind me would be from Smith & Wesson.
‘I remember sitting in waiting rooms with guys who brought pearl-handled revolvers as gifts for the generals’ wives, and I turned up with a tartan scarf from the whisky company.’
As distant as a turbulent Guatemalan army base may seem from the quiet Chelsea mews flat where Gething runs Lennox Investment Management, the way business is conducted in both is similar: ‘You learnt how to make people trust you, and business is an awful lot easier if you make people trust you.’
The lesson applies as much to moustachioed strongmen whose main form of recreation is disappearing people as to the people who are mark-to-marketing ethereal assets.
A return to Britain was inevitable in 1983, the previous year’s Falklands War (which Gething spent in Buenos Aires, a Briton abroad at the worst of times) having destroyed the British export market to South America. A job in London with the Distillers Company coincided with the video revolution, whose promise Gething and his friend Charlie Ellingworth saw and tried to master.
‘1983 was the cutting edge of the technological heat of the video revolution. It was comparable to the internet — video was going to change the world. Cinemas were going to fold, libraries were going to close, children were going to sit at home and learn from videos,’ says Gething. If video was the future, then why not use it to sell houses?
‘We came up with the thesis that people were going to want to sit in a showroom in London if they wanted to buy a nice house in the country, peruse some videos, and then they’d go and buy them. Complete nonsense, obviously.’ Nonetheless, they went ahead and produced a VHS film, complete with beatific panning over the landscape as cheesy music lulled the buyer into pastoral hallucinations.
‘We took this pilot film round a whole bunch of buyers and they said: “We think this is great but does it show the bad things? Does it show the motorway, the pylons, the main road?” And we said no. Of course, we realised there is this endless dichotomy between buyer and seller.’
This set Gething and Ellingworth on the track that would lead to Property Vision, whose principle was just as revolutionary as video, only it needed no syrupy score. In a world where buyers listened only to estate agents and taking outside advice was unheard of, Property Vision was going to act for the buyers.
Overnight success took a while. After producing several videos, ‘we had run out of money and hadn’t signed a lease on the showroom. We were renting this wonderful office between Gay News and Zipper Films in a brewery in Chiswick. We were in a cupboard, in fact, with a door sitting on two trestles as a desk and one phone and one second-hand moped and one third-hand Ford Fiesta and no money.’
They took the Fiesta around London on alternate days, scanning the windows of estate agencies in search of properties on which they could advise clients. If you were in the market for a house in 1983, you had to play by the estate agent’s rules, however, and most agencies scorned them even though they were not trying to sell houses; they charged an upfront fee (another innovation, a way of validating the relationship) and arranged viewings when the buyer wanted.
An advertisement in Country Life said they would help people to find the right house and managed to draw in a few clients, ultimately leading to a virtuous circle of deals and credibility.
As well as advising on the upsides (or otherwise) of properties, Property Vision told its clients what they should expect to pay, which was not just a case of naming a figure lower than whatever the estate agent was toting but also involved the concerted valuation of a property’s merits.
The constant close engagement with buildings made Gething ‘a bricks-and-mortar man’, rather than the race of brokers who deal with Chinese steel and Nigerian oil and Indonesian copper but only ever leave electronic fingerprints.
There was no shortage of extraordinary customers (especially after the Big Bang) whose frantic lives needed managing, so the job became as much about problem-solving as property-choosing.
Occasionally, ‘you entered their lives for a while, gave them advice and became good friends’, but successes were fractionally bittersweet: ‘The better the job [you did], the less you saw the client; you bought them a great house and then twenty years later you might hear from them.’ It is the first-hand nature of his business — engaging with the clients and the buildings — which most seems to have pleased Gething.
The business grew and grew along with the economy, and — along with the economy — was nearly destroyed in 1989.
‘It was a complete disaster,’ Gething reflects. Since property tends to lag behind the markets, the recession hit Property Vision between 1990 and 1992. ‘People just stopped buying. We hunkered down, we did very few deals, and those that we did do, we did at greatly reduced asking prices. I still remember now, eighteen years later, using our average reduction off the asking price as our marketing tool: something like 23 per cent off.’
If anything, the downturn will be worse this time, Gething suspects: ‘Certainly the decline in prices during the last twelve months has been double the decline in the first year last time round. The bigger the bubble, the bigger the bang when it goes. The other big difference is that this time we are in a downturn that is truly global.’
Recovery in the 1990s was aided by affiliating with Sotheby’s when they were involved in property, and again the business grew until he sold it to HSBC in 2001. Even then, he stayed as CEO until 2004, joining the bank’s board, but in 2005 he became head of HSBC’s global real-estate division, which involved investing in property. Although he has only good words for HSBC, and the sale brought clients from around the world to Property Vision, Gething’s job became too theoretical.
‘What I really understand is looking at houses, going inside them and saying: “What happens if you put the kitchen where the dining room is and the dining room where the sitting room is?” I did too much strategising and not enough visualising and touching and feeling of property.’ Striking out on his own with Lennox Investment Management was a chance, in the final stage of his career, for Gething to combine his practical and financial abilities. He chose an interesting time to put his name on the block.
The exigencies of the market have made raising money all the more difficult, but some trusted (and trusting) families and HSBC have invested in Lennox Investment Management, along with Gething himself.
He told them when he was pitching the fund that he would not buy houses now, although he did have specific types in mind: ‘tired’ family houses which need refurbishing and lateral apartments. A better layout and air conditioning are key parts of the renovation. Everything should be family-sized, to discourage flat-hopping singletons from creating a fast turnover.
There are areas he will not touch: why buy in the Docklands when east London is expanding for the Olympics? Property there is being sold at 50p in the pound and shows no sign of recovering as the over-mortgaged look for tenants. The supply constraints of central London are attractive limitations.
Property requires patience. The easiest way to lose money is to panic and sell in the rush downwards, as if you will be exempt from the deflation. There is no doubt that Gething knows this, which is why he can wait, calm, for the frenzy to subside.
When it does, he will start sizing up Chelsea’s decrepit drawing rooms and reconfiguring whole buildings, aware that ‘there’s no secret, no special formula. There’s no magic or mystique: rather like investing, most of it is rolling up your sleeves and getting stuck in.’ Meeting Willie Gething, you begin to suspect that there is a secret: not the method, but the man.