Golden opportunity

Seven years ago a then 33-year-old Elliot Lipton left the family business to strike out on his own. Not just any old family business, mind. This was Stanhope Plc, the development behemoth founded and majority-owned by his father, the highly respected Sir Stuart Lipton. Nor is it entirely true to say that he struck out on his own - his father’s company was the key backer for First Base, the venture he left to start. But strike out he nonetheless did.

In the intervening years First Base set about developing and investing in affordable housing in London - long before it became fashionable. The company’s pride in delivering high quality housing for 15 per cent less than the going rate has proved well-founded. In development circles its managing director, Mr Lipton, has earned a reputation for combining passion for design with business accumen. And he’s won admiration from the public sector in the process. Scheme by scheme - and there have been 10 to date, three of them complete - Mr Lipton has been emerging from his father’s shadow.

Today, the man before me is on the cusp of escaping it altogether. Earlier this year a First Base joint venture with housing associations East Thames and Southern Housing Group, beat off competition from the likes of Barratt and Bovis Homes to clinch arguably the hottest property deal going. Triathlon Homes, as the partnership is known, will buy, own and manage 1,400 affordable homes in the London Olympics athletes’ village.

The properties, of which Triathlon will take ownership after the 2012 games, will be the most scrutinised in the land. Get it right, and the First Base approach will enjoy the ultimate vindication. Elliot Lipton will have made it. Get it wrong, and the failure will be witnessed by the world.

The unassuming Mr Lipton isn’t leaving anything to chance. ‘As Triathlon, we have people who are onsite alongside the Olympic Delivery Authority and [lead contractor] Lendlease, just making sure our requirements are being met,’ he reveals. ‘We are a large purchaser, and as such we want to make sure we are getting what we pay for.’

The equal three-way partnership between First Base, East Thames and Southern Housing is typical of the public-private model that Mr Lipton has honed from day one.

First Base was still the newest kid on the block when the fresh-faced managing director began laying the groundwork for the £268 million Olympic deal - described by London mayor Boris Johnson as ‘landmark’-in 2002. With three years to go until London even secured the 2012 games, the company began talking to East Thames, one of the first associations to collaborate with First Base, about taking on the affordable housing portion of the athletes’ village after the games.

Southern is understood to have been part of these early discussions, but walked away until tempted back in 2008 by improved terms. The move brought with it £110 million in Homes and Communities Agency grant, bailing out the ODA which was struggling to finance in privately in an on-off deal with Lend Lease.

Mr Lipton’s spin is that Southern - with which First Base has a ‘longstanding relationship’ working on several of its London developments - came on board when the original pair decided it wanted a ‘bigger piece’ of the Olympic action. The original bid to buy around a third of the village’s 2,818 homes - those designated as affordable under a section 106 agreement - was upped to almost half that total.

‘We felt it would be helpful to bring in a third partner, so we brought in Southern as a third partner that East Thames and First Base work really well with, and who share our ethos and values,’ says Mr Lipton, his sentence ending as many of his do, with an upward inflection. The only third partner considered, Southern’s sound finances, development skills and emphasis on quality ‘bring a lot to the party’, he adds.

Olympic designs

Despite the long gestation period, it wasn’t until June this year that Triathlon’s pre-sale agreement with the ODA went public. Its partners have aired few details of its plans - until now. ‘Right now our focus is to ensure that we get the right quality of product that we’re actively looking for, and that we have no surprises there,’ says Mr Elliot.

First Base’s track record to date certainly suggests that standards will not be allowed to slip. Perhaps another indication of Mr Lipton’s pedigree - his father is a former chair of the government’s design watchdog the Commission for Architecture and the Built Environment - the niche developer has won awards both for the design and sustainability of several schemes. A quest for quality is certainly evident in the firm’s design-conscious offices, all coffee table tomes and muted wall hangings, in London’s Soho. As Dale Meredith, development director at Southern, puts it: ‘[First Base] haven’t finished much yet, but certainly what they’ve done has been of a high standard.’

All of which will be music to the ears of an ODA driven by the mantra ‘legacy is everything’. But physical development is merely the foundation of that legacy. Nurturing the community that comes to the east London site once 17,000 Olympians and the admiring crowds have left is another matter entirely. That’s something Triathlon’s board - its nine members split equally between the three partners - is just starting to consider.

‘We are beginning to think about some of the social issues that the site will give rise to. We are thinking about our occupations strategy, what we are going to do about a local lettings plan. All of these things will be formulated with our relevant stakeholders,’ explains Mr Lipton, his effortless use of public sector jargon evidence of the territory he occupies between the state and private enterprise.

The tenure mix of Triathlon’s 1,400-homes will include ‘affordable rented, intermediate rented, part-buy, shared ownership and shared equity’ choices.
If Mr Lipton’s dogged refusal to confirm or deny it is anything to go by, it seems highly possible that Triathlon’s directors are also discussing whether or not to invest in more than the current 1,400 homes, which account for just less than half of the site’s total.

Since the government has already had to make an unplanned dip into the public purse to finance the athletes’ village, after failing to attract 100 per cent private funding as planned, and buyers for the balance of homes are hardly in ready supply. ‘It’s not in our nature to rule out anything,’ hedges Mr Lipton. ‘We’d need to have a proper conversation [with the ODA] - which we haven’t had yet,’ he adds, pointedly.

The race is on

Yet he is certain the Triathlon model has a future. ‘There’s absolutely no reason at all that the [Triathlon] members can’t use the same approach and philosophy to work together on other projects going forward,’ he says, declining to comment on rumours that First Base and East Thames are to be named preferred partners to regenerate east London’s notorious Ocean estate.

His ambitions don’t rest there. Already working with landlords across London (see box) and with Newcastle, and Barking and Dagenham councils on their local housing companies, Mr Lipton is keen to forge new relationships. ‘We are starting to talk to other housing associations who share our ethos and values,’ he says. ‘That has been the way First Base has done business all its life. Whether with English Partnerships under the London-Wide Initiative or with the ODA in Stratford… with other central London boroughs with the same ethos: how do the public and private sector partners bring out the best in each other?’

While First Base is proving a hit with the public sector - Barking’s housing chief Ken Jones calls the company ‘significantly different’ from other developers, describing ‘a complete relationship of equality’ - Mr Lipton is eyeing the private sector with equal fervour.

Talk of yields as high as 6.5 per cent and a government drive to attract institutional funds through the Homes and Communities Agency’s private rented sector initiative have his attention. ‘The other great tenet we’re seeing is some of the focus on the private rented sector and whether there are new sources of capital available from UK institutions that historically have not been able to access residential investments in the same way that they have been able to access commercial investments,’ he says.

Is First Base talking to such institutions? ‘Absolutely.’ But he senses the UK housing market remains too uncertain to tempt the big money quite yet, despite last month’s 1.6 per cent rise in the average house price. ‘If I was a betting man, I’m afraid I would be against it [rising house prices] carrying on, and I would say it will have a small second dip,’ he ventures.

Mr Lipton’s sheer congeniality makes it easy to forget that he is exactly that: a betting man. Southern’s Mr Meredith is right to say: ‘Elliot has got a very easy manner. He is very approachable, responsive and co-operative. But beneath all that is a very astute business man.’

The Liptons’ punt on First Base seems to have come at the right time. ‘The really interesting thing from a First Base perspective, is that this sort of market requires innovation,’ Mr Lipton suggests.

Certainly, its private/public brand appears to have sealed the success of Triathlon’s Olympic bid as its purely private rivals faltered.

Triathlon’s Olympic coup puts the company firmly on the map. Mr Lipton’s fervour is convincing as he avows: ‘Triathlon is a really good example of an investment innovation. £110 million is the largest single grant award from the HCA, and it’s the largest private sector one. Triathlon is a private vehicle. It’s not a charitable RSL and, as such, it’s setting the way for a whole new generation of working.’

There’s a sense that Mr Lipton, Jnr has finally arrived.

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