"We're financially strong. We'll use crisis to expand"

Yaron Shahar  / Photo: PR

Teddy Sagi's UK real estate unit Labtech CEO Yaron Shahar tells "Globes" that London will bounce back with Labtech even stronger.

The UK has been in lockdown since March 23 and according to a recently published Bank of Englaand report, the British economy might contract by 14% this year, on the assumption that there will be a relaxation of restrictions in June. The Bank of England is concerned about the sharp fall in employment and household income in Britain.

But Yaron Shahar, the CEO of Labtech Holdings, the real estate unit in London of the Teddy Sagi Group, does not seem bothered.

In Israel, the coronavirus has created significant change in perceptions about many things that had previously been taken for granted. There is talk about a major slowdown in the economy that will be affected by the economic ability of households, collapse of chains, the transition to online purchases, and the reduction in employment space. How are you coping with the crisis?

"I don't want to underestimate the crisis. I personally think that in the short term everybody will suffer. But we have liquidity and we are financially strong, and so we will take advantage of this crisis to grow and to expand. We are looking for the right opportunities in London, or other places in Europe, in order to enlarge our portfolio and bring about a jump up to another level in our operations.

"From our point of view, the damage we are sustaining at the moment in relation to our size and our capabilities is not significant. I believe that people are social animals and within a few months of the crisis passing, people will resume their previous habits. People want to live, to go out, to breathe and to take trips."

Labtech was founded in April 2018 by Israeli businessman Teddy Sagi in order to coordinate all the real estate operations of his Group in London. The private company owns Camden Market and many more commercial properties in the city. According to Shahar its assets portfolio is worth more than £3 billion.

What are the main areas of activity of the company today?

"The company is concentrating on the real estate market in London. It is engaged in managing and operating the activities of shopping and cultural complexes, managing office buildings, co-working office spaces, and operating a network of residential apartments and accommodation. The company of course owns Camden Market, which is Teddy's landmark investment."

"We don't buy in order to renovate and sell"

This is not 45-year old Shahar's first overseas job. He studied economics, worked for a time in the Prime Minister's Office, and then worked in the underwriting sector for the Apex-Meitav Dash investment fund. From there he moved onto to managing the real estate activities of Adi Keizman in Berlin for three years and then the real estate activities of the Sagi Group in Spain. "The trust between Teddy Sagi and me grew and then he brought me to London to manage Labtech, the parent company.

The company has 250 employees and the strategy is to build and to lease - not to buy and to sell after a short time.

Shahar said, "Sometimes we sell projects that don't fit into our core endeavors, or if we feel that we have realized the value and prefer to invest in new things. But in most cases, we develop and remain operating it. I am personally involved in the planning, development and design level of the product that we want to receive."

"We also don't buy buildings to give to external companies to renovate, and then to operate and to sell," Shahar says. "Our model is much more hands-on. We have a professional management team that touches every aspect from cleaning through to managing tenants - the mix of renters and the connection with the tenants."

"The company has a department that is involved in the day-to-day management of the real estate asset, which is called Runtech. "Runtech is a company that has technological elements that contribute to our ability to maximize the value of the property, for example, IP infrastructures (communications over an Internet infrastructure), energy savings and more."

Renters are interested in that?

"Our assets portfolio is in Central London, which is the world's most competitive real estate market. It's a sophisticated, strong and very liquid market and there is demand even during hard times. Renters today are aware about parameters like the environment, energy savings and the like."

"Beyond a certain standard there is no obligation, but if you want to allow flexibility that can brings another type of customer, you must invest more."

You mentioned that you have shared office workspaces. That's a field that recently took a blow, even before the virus. What is different from the shared office workspaces that you are offering compared with other chains such as WeWork and the like?

"The main difference is that we are the owners of the real estate, we don't lease it. Apart from that, we have a more premium product, which is more expensive and targets a different sector of tenants. We do not appeal to individual renters but large, established companies that can take an entire floor and what the flexibility of not having to lease ahead of time for 15 years."

Labtech's flagship Hawley Wharf project in London is a huge complex in Camden Market for mixed-use including residential, commercial, culinary and more, which is in the later stages of construction. According to the website of the Allford Hall Monaghan Morris architectural firm responsible for designing the building, the cost of construction is £180 million.

Shahar said, "It's a very beautiful project that was built on the banks of the river. One stage is already occupied and the next two stages will be opened after the coronavirus crisis will end, and I estimate that this will happen towards the end of the year. It's an area that has genuine mixed usage. Most of the offices are already leased out to tech companies. They love privacy and also that their employees have the options of restaurants and parking. The apartments are premium apartments of the highest standard that there is."

"Camden is part of London culture"

The heart of Labtech's businesses in London is Camden Market. Teddy Sagi bought the market in sections between 2014 and 2017. He floated the market on the London Stock Exchange but in 2017 decided to take the market private again and bought all the shares at a valuation of £1.1 billion. Since then the market has been managed by Labtech as a private company.

"The market itself is a tourist attraction with about 30 million people visiting it annually. We have beautiful historical buildings and our mix of customers is composed of food and drink stalls of this or that standard, through to restaurants and bars and onto clothing and fashion brand stores. It's more kind of experimental entertainment. It's not like coming to buy a bag or clothes in a store. It's more of an experience with people spending half a day or a day in Camden. 700 small businesses are located there with a wide range of offerings."

He adds, "It's clear that theoretically anyone can come along and rent a store but we are building a mix. For example, last year we took one avenue in the market that was completely retail and we transformed it into an avenue specializing in Italian food and we brought over vendors from Italy in order to open their first stores in London. We devote a lot of thought to the customer journey. It's important for us to understand what the visitor sees. It is absolutely not random."

"Camden market is located just north of Central London in one of the most accessible points for transport. We are two minutes from Kings Cross and there are two Underground stations within walking distance. It's not a mall out in the suburbs and you don't go there especially to buy something or to see a movie and then go straight back home."

"Within the market, we have office buildings and we see that the customers, mainly tech companies, enjoy the proximity to the market because of public transport."

Preservation regulations in London are very strict. How do you cope with that?

"In London the regulations require real estate developers to preserve not only the buildings but also the social fabric. The entire market is a fabric for preservation so that we are forced to comply with very strict regulations. We have daily contacts with Camden Council, the borough council where we are located."

What does social preservation include?

"We are attentive to demands from the residents and share our development plans with the local council. We discuss what we want to achieve with the residents and the authorities. What mixtures of uses are involved, what percentage retail, business, entertainment, residential, and how everything will link together and how it will influence the existing population."

An example of this cooperation is the promotion of the Skyline railway project. "The Skyline is meant to end up, or begin, right in Camden. We are financing the architectural activities which are designed to undertake all the examinations and to ensure a budget to realize the project. It's clear that there is a profit in this for us because when the line opens it will very much enlarge traffic between Kings Cross and Camden. But beyond this we see it as our obligation, as partners, or as tenants in Camden."

"We are the biggest land and real estate owners in the area, and we are part of the population and the social fabric. When we contribute that is also part of the matter. Among other things, we built a school that serves the neighborhood's children and we contribute to schools that emphasize arts and music. The British government doesn't finance those areas any more."

From talking to Shahar, it becomes evident that beyond the business aspect of things, he particularly loves Camden Market. "Camden is part of the historic English and London culture. Amy Winehouse and many other good artists developed there. We are trying to create magic."

Published by Globes, Israel business news - en.globes.co.il - on May 17, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Yaron Shahar  / Photo: PR
Yaron Shahar / Photo: PR
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