22 September 2007 – Estates Gazette
While other major projects in the capital are being hit by the credit crisis and planning problems, Merchant Square, the final phase at Paddington Basin, is ready to go.
If being first out of the blocks is the key to successful regeneration, the Reuben brothers and private millionaire Bruce Jarvis’s family have every right to feel pleased with their investment in London’s Paddington.
As Nick Searl, development director for the joint venture’s European Land & Property unveils exclusive images of the 1.8m sq ft Merchant Square scheme at W2, he’s in a bullish mood. At long last, the final phase of the chequered Paddington Basin development looks set to be built ahead of rival “new destination” schemes in the capital.
In August, the final piece of the jigsaw fell into place when Westminster council gave the go-ahead for a Perkins + Will-designed residential tower after calling for amendments in June. The 43-storey tower is the focal point of the scheme, which includes five other buildings that gained consent in March and June
“We are significantly ahead of the other comparable areas,” 43-year-old Searl explains. “Victoria and Waterloo are at different stages of the planning process, and King’s Cross has outline planning, but they’ve still got to get detailed consent.”
And, while the credit crunch has sent shivers down the spines of those trying to realise funding for major projects, EuropeanLand is ready to push the button on speculatively building the first phase of 1m sq ft of office and 800,000 sq ft of residential space on its 3.2-acres of disused industrial land.
Wright and senior development director Richard Banks are in “final negotiations” with a handful of shortlisted banks about providing senior debt for development of the first two buildings.
Searl and his equally upbeat 46-year-old partner, managing director Howard Wright, have been reticent about talking up the project, which fronts the Grand Union Canal. “We didn’t want people responding by saying ‘oh, it’s another false dawn up at Paddington’,” admits Searl. “We wanted to make a noise when we could prove it was real.”
Following August’s good news, the race to finish the scheme has begun. Enabling works have started on the first office, a strikingly angular 260,000 sq ft design by Mossessian & Partners, which is scheduled for completion by the end of 2009.
Work begins on the first of three residential buildings in October, a 16-storey, 275,000 sq ft Kalyvides-designed scheme with the remainder of the project delivered in later phases once the first phase is fully let.
DTZ’s West End team will market the 1m sq ft of offices, while Laing O’Rourke and Carillion will construct the first two buildings.
The Wright and Searl double act has been immersed in Paddington Basin’s regeneration for more than a decade. The duo were instrumental in building the first three schemes for then developers Godfrey Bradman’s EuropeanLand, Pearcroft and Chelsfield. They also worked on the 220,000 sq ft The Point, prelet to Orange in 2001, and the 240,000 sq ft Waterside building, prelet to Marks & Spencer in the same year.
The two have been about the only constant in a period that has seen a bewildering list of well-known stakeholders take and then relinquish control of the basin. During that period, two high-profile projects for the Merchant Square site fell through – Richard Rogers’ 1.2m sq ft Grand Union Canal project and Terry Farrell’s £1bn Paddington Health Campus.
The messy wrangle that broke out over whether a £1bn health campus should be placed on the site at the end of 2004 followed eight years of dithering by the Department of Health over buying the land. In March 2005, the government balked at the £148m the Reubens, Multiplex and Pearcroft were asking for in exchange for giving up their own proposals.
Throughout this period of changing ownership and government wrangling, Wright and Searl pushed on, persuading the investors to keep bankrolling their vision.
In March 2002, the Grand Union Canal scheme gained consent after a series of revisions. Nevertheless, by 2003 the pair were considering tearing up that consent and going back to the drawing board in response to a changing West End occupier market.
“The Rogers scheme was designed as a 650,000 sq ft office block off the back of our lettings to M&S and Orange. The market turned and we felt there was a limited likelihood of getting funding without a letting of 300,000-350,000 sq ft,” says Searl.
Wright and Searl then made a “commercially led” decision to build something “more deliverable” by breaking it up into what Searl calls “bite-sized chunks that would be easily funded”. Working with Tryfon Kalyvides, they decided that three office buildings, of a net size of 260,000 sq ft, 200,000 sq ft and 160,000 sq ft, and three residential buildings would be delivered. “Office-wise, it was three differently sized products that could be phased and, within those products, there were three different sized floorplates – 23,000 sq ft , 18,500 sq ft and 12,500 sq ft,” says Searl.
With Merchant Square, the team persuaded the then investors – Multiplex, the Reubens and Pearcroft – to take the “unusually bold” step, Wright says, of financing work on detailed designs before outline planning had been granted. “The first office building alone cost £2m in detailed design while the planning process was ongoing.” The new masterplan was to be built around the parameters already established by the Grand Union project and built on the tried and tested relationships the two men had fostered over their years in the area. The team then began a particularly rewarding relationship with Westminster council, meeting once every fortnight to discuss progress. “Westminster became proud of the project,” Searl says.
Now that EuropeanLand is pressing on with the first office block it will no doubt give rival Development Securities – which has prelet 73,000 sq ft of its One Kingdom Street phase of PaddingtonCentral to global software company Misys – something to think about.
Not that Wright and Searl see things that way. “The main thing,” Searl adds, “is that we are building, whatever else is happening.”
A constant amid several owners
Who owns what at Paddington?
Howard Wright came to the development of Paddington Basin via Godfrey Bradman’s European Land & Investments and Pearcroft, the property vehicle of multi-millionaire Bruce Jarvis and family.
Pearcroft backed Bradman’s European Land in his joint acquisition of the site back in 1996, alongside Elliot Bernerd’s Chelsfield. Wright had worked with European Land as project director on the Home Office’s headquarters in Victoria and the King’s College hospital site, London.
Searl worked on the Paddington project for Chelsfield and slowly the two men emerged as the senior executives overseeing the development of the area.
In 2000, Pearcroft bought out Bradman’s 50% stake in the development.
Then, in 2004, Multiplex and the Reubens took control of Chelsfield’s 50% stake as part of their complex takeover of the group alongside Westfield. By 2006, the Reubens had bought out Multiplex.
Of his many bosses, Wright says Pearcroft has been the one constant.
“I had known Multiplex’s John Roberts and some of Multiplex’s team had worked for me. But it largely let Chelsfield staff continue to get on with the project. The Reuben brothers, Simon in particular, have got more involved and have been straightforward to deal with.”
What is Merchant Square?
The 1.8m sq ft gross scheme, initially masterplanned by Tryfon Kalyvides, proposes six buildings.
Phase one comprises a 16-storey, 275,000 sq ft residential building with ground-floor office and retail, and a 260,000 sq ft office building.
The next phases comprise a residential block of 140 flats with retail at ground floor designed by Mossessian & Partners and Perkins + Will and two office buildings designed by Perkins + Will of 160,000 sq ft and 196,000 sq ft.
The focal point is a 43-storey residential tower designed by Perkins + Will.