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Why one man's share sell-off could mean that UK property is doomed
Tony Pidgley's Berkeley Homes is going great guns, so why did he just cash in 750,000 shares?
Is the UK housing market in peril? Photo: Marco Secchi/Alamy
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By Ben Marlow
1:54PM BST 20 Jun 2015
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Worried that the housing market is about to pop? Maybe you should be. The man who has called the peaks and troughs of the past few decades better than anyone else is showing signs of doubt about the sustainability of the current cycle.
Six weeks ago, veteran housebuilder Tony Pidgley quietly cashed in 750,000 shares in his company, Berkeley Group, banking a cool £18.75m in the process.
Pidgley has a remarkable nose for deals and an unrivalled ability to predict the property market.
The former Barnado’s boy liquidated assets in the run up to the housing crash of 1989, and was among the first to spot that people were moving back into city centres in the early Nineties.
He was at it again after the financial crisis. Berkeley, which focuses on expensive properties in London and the affluent South East, managed to sidestep the turmoil that swept through the broader housing market, where rates of building plunged by more than 30 per cent between 2007 and 2012.
He also spent the downturn snapping up prime sites in places such as Battersea and Wapping in London, and is now sitting on a vast land bank acquired at knockdown prices.
So when Pidgley offloads a big tranche of shares, some experts interpret it as a sign that the housing market is close to overheating. Berkeley managing director Rob Perrins followed his chairman’s lead, selling 250,000 shares for £6.25m, strengthening the suspicion that the company’s executives were bracing for a fallout.
However, it would seem such concerns were premature, with Berkeley showing no signs of slowing down. Last week, the housebuilder posted a stonking set of figures, with annual profits rocketing 42pc to £540m and revenue jumping 31pc to £2.1bn on the back of strong demand in its core markets in and around the capital.
Tony Pidgley, the chairman of Berkeley Group
It now seems that the real concern on Pidgley’s mind, like many other prominent businessmen, was in fact the election and the prospect of a Labour government.
Pidgley arguably had more to fear than most. Ed Miliband’s proposals for a mansion tax would have hit Berkeley harder than most of its rivals, given its focus on the luxury end of the market and his own fortune is closely tied to that of Berkeley’s.
Pidgley was among more than 100 business leaders to sign an open letter to the Telegraph backing the Tories in the weeks leading up to the election.
The group warned that a Labour government would “threaten jobs and deter investment” in Britain.
With the uncertainty out of the way and David Cameron in power, Berkeley’s shares have surged 40pc since the Conservatives’ election victory.
For Pidgley, that is hugely welcome news. Adopted by travellers at the age of four and raised in an old railway carriage in Surrey before his family could afford to build their own bungalow, he set up Berkeley in 1976, and still owns 6.4m shares, equivalent to 4.7pc of the company.
Last week’s bumper results sent Berkeley’s shares soaring more than 10pc to a record high of 3481p, valuing Pidgley’s stake at £221.7m.
Yet, remarkably, he and four of his fellow senior managers have further skin in the game thanks to what is thought to be the most generous incentive scheme outside the FTSE 100.
Under the pay plan, rubber-stamped by shareholders in 2011, Berkeley’s bosses will be awarded 19.6m shares if they achieve a target of distributing £1.7bn to investors by 2021. Pidgley and Perrins both stand to collect 5m shares each.
However, they will only collect the windfall if the company succeeds in making the payout in three special dividends of £13 a share in 2015, 2018 and 2021.
Having met the first of those earlier this year, management are on course for a £670m payout based on today’s share price.
So what was Pidgley preoccupied with last week as he moved closer to this eye-watering payday? “Political uncertainty” over Europe and “over-regulation”, he grumbled. There’s no pleasing some people.
Tony Pidgley's Berkeley Homes is going great guns, so why did he just cash in 750,000 shares?
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Is the UK housing market in peril? Photo: Marco Secchi/Alamy Premier League clubs hit profit high Revenue growth pushed the 20 top football clubs to a record collective result last seasonSponsored by Standard Life Investments
By Ben Marlow
1:54PM BST 20 Jun 2015
Follow
Comment Worried that the housing market is about to pop? Maybe you should be. The man who has called the peaks and troughs of the past few decades better than anyone else is showing signs of doubt about the sustainability of the current cycle.
Six weeks ago, veteran housebuilder Tony Pidgley quietly cashed in 750,000 shares in his company, Berkeley Group, banking a cool £18.75m in the process.
Pidgley has a remarkable nose for deals and an unrivalled ability to predict the property market.
The former Barnado’s boy liquidated assets in the run up to the housing crash of 1989, and was among the first to spot that people were moving back into city centres in the early Nineties.
He was at it again after the financial crisis. Berkeley, which focuses on expensive properties in London and the affluent South East, managed to sidestep the turmoil that swept through the broader housing market, where rates of building plunged by more than 30 per cent between 2007 and 2012.
He also spent the downturn snapping up prime sites in places such as Battersea and Wapping in London, and is now sitting on a vast land bank acquired at knockdown prices.
So when Pidgley offloads a big tranche of shares, some experts interpret it as a sign that the housing market is close to overheating. Berkeley managing director Rob Perrins followed his chairman’s lead, selling 250,000 shares for £6.25m, strengthening the suspicion that the company’s executives were bracing for a fallout.
However, it would seem such concerns were premature, with Berkeley showing no signs of slowing down. Last week, the housebuilder posted a stonking set of figures, with annual profits rocketing 42pc to £540m and revenue jumping 31pc to £2.1bn on the back of strong demand in its core markets in and around the capital.
Tony Pidgley, the chairman of Berkeley Group It now seems that the real concern on Pidgley’s mind, like many other prominent businessmen, was in fact the election and the prospect of a Labour government.
Pidgley arguably had more to fear than most. Ed Miliband’s proposals for a mansion tax would have hit Berkeley harder than most of its rivals, given its focus on the luxury end of the market and his own fortune is closely tied to that of Berkeley’s.
Pidgley was among more than 100 business leaders to sign an open letter to the Telegraph backing the Tories in the weeks leading up to the election.
The group warned that a Labour government would “threaten jobs and deter investment” in Britain.
With the uncertainty out of the way and David Cameron in power, Berkeley’s shares have surged 40pc since the Conservatives’ election victory.
For Pidgley, that is hugely welcome news. Adopted by travellers at the age of four and raised in an old railway carriage in Surrey before his family could afford to build their own bungalow, he set up Berkeley in 1976, and still owns 6.4m shares, equivalent to 4.7pc of the company.
Last week’s bumper results sent Berkeley’s shares soaring more than 10pc to a record high of 3481p, valuing Pidgley’s stake at £221.7m.
Yet, remarkably, he and four of his fellow senior managers have further skin in the game thanks to what is thought to be the most generous incentive scheme outside the FTSE 100.
Under the pay plan, rubber-stamped by shareholders in 2011, Berkeley’s bosses will be awarded 19.6m shares if they achieve a target of distributing £1.7bn to investors by 2021. Pidgley and Perrins both stand to collect 5m shares each.
However, they will only collect the windfall if the company succeeds in making the payout in three special dividends of £13 a share in 2015, 2018 and 2021.
Having met the first of those earlier this year, management are on course for a £670m payout based on today’s share price.
So what was Pidgley preoccupied with last week as he moved closer to this eye-watering payday? “Political uncertainty” over Europe and “over-regulation”, he grumbled. There’s no pleasing some people.