Real Estate Reflections for a New Year
A review of The Two Tycoons: A personal memoir of Charles Clore and Jack Cotton
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As we enter a new year, it's an opportune moment to reflect on the lessons of the past and the ever-evolving nature of the real estate industry. I don’t know who its attributed to, but someone once said “The road to wisdom is paved with the bricks of past experiences.” Through the lens of Charles Gordon's memoir, The Two Tycoons: A personal memoir of Charles Clore and Jack Cotton published in 1984, we are transformed to the post-war era and the individuals, innovations, and risks that defined the sector during its most transformative decades.
Post-war Britain was defined by bold entrepreneurship, risk-taking, and visionaries who reshaped urban landscapes. Figures like Jack Cotton of City Centre Properties and merger partner Charles Clore of City and Central Investments, were instrumental in driving the property boom of the 1950s and 1960s. Cotton in particular exemplified the modern post-war property man, capitalising on opportunities to redevelop city centres through speculative developments that prioritised profitability over architectural distinction.?
Cotton’s approach relied heavily on his judgement. As he explained in a 1962 Sunday Times profile, “The Americans want complete security before they will start a building. They want the tenants all tied up. I prefer to rely on my judgement, and if there is no tenant on the doorstep, I still go ahead and build.” Meanwhile, Clore combined financial acumen with an ability to adapt to changing market dynamics. Both relied on strong relationships with banks, institutions, and local authorities to fuel their success. However, by the early 1970s, shifting political and economic climates, including Edward Heath’s Conservative government’s restrictive legislation, curtailed the fortunes of many such figures, turning public sentiment against them.
The memoir highlights the pivotal role of real estate agents, whose expertise often rivalled that of the developers they served. Developers like Jack Cotton turned almost exclusively to Aubrey Orchard-Lisle, just as Charles Clore relied on Douglas Tovey – both of whom were working at Healey & Baker – recognising that trusted agents could provide comprehensive solutions encompassing acquisition, letting, and funding strategies. Agents like Douglas Tovey and Archie Sherman (who worked for Clore) possessed encyclopaedic knowledge of shop properties across the UK. One anecdote illustrates their unique expertise. They would test each other’s knowledge by naming shop addresses and recalling precise rental values, tenants, and histories. Gordon recounted that Tovey and Sherman would spar thus, “163 High Street, Slough?” and the other would reply with the exact rent figure and tenant details and so on throughout the country. Their depth of knowledge created immense value, not just for themselves but for their clients and partners. While the role of agents has evolved with the rise of technology and data-driven platforms, their importance remains. Market intelligence, negotiation skills, and a deep understanding of client needs are timeless attributes.?
Rent reviews, lease structures, and sale-and-leaseback arrangements, many pioneered during Clore and Cotton’s era, have since become industry standards. Several people claim to have initiated or invented the rent review but Gordon recalls its early adherents was the National Coal Board and its pension fund as well as George Ross Goobey of Imperial Tobacco Pension Fund who implemented it across their portfolio. Gordon also maintains George Bride of Legal & General created the sale-and-leaseback, and in fact spawned the early success of L&G’s entrée into property investment. Bridge was supposedly infuriated by the long term fixed rent forcing the landlord defenceless in the face of inflation and militated against growth. Similarly, Edward Lotery was the pioneer of the out of London growth of shops and uppers, “constructed as parades with flats above”, catering for the needs of the new suburbs built round the London Underground system and so on.?
The legal framework of real estate has undergone significant evolution, but its importance was as evident in the 20th century as it is today. The memoir highlights figures like Leonard Sainer, whose intellect and methodical approach exemplified the best legal minds of the time. Sainer is described as a modern product of the ancient rabbinical tradition, where dialectical discipline and interpretive precision were honed to extraordinary levels. He served as a trusted advisor, counsellor, and executor, always close at hand, faithfully following orders while offering his own sharp insights. His strength lay in his deep self-awareness, understanding both his limitations and his capabilities, making him an immensely capable and dependable "Number Two".
The world of finance in Clore and Cotton’s time was often personality-driven, with relationships and reputation playing outsized roles. However, the contrast between the UK and US approaches to lending was striking. English institutions maintained a culture of discretion and detachment, avoiding open discussions about their transactions or plans, even regarding competitors, considering it bad manners. This reticence was rooted in a Victorian mindset, where borrowing was viewed almost as a moral failing. By contrast, American institutions embraced lending as a core purpose, rolling out the proverbial red carpet for borrowers and encouraging financing for acquisitions and new developments. Architecturally, UK Head Offices were designed “to look like gloomy cathedrals, extoling their bureaucratic faith in savings” whilst in New York, the Lever Brothers building, completed only a few years earlier, was already middle-aged and hardly recognisable among the thrusting, lively sparkle of Seagram's. In New York, as in London, “the buildings reflected the strengths of these huge hierarchical corporations.” In 1959 Cotton purchased 50% of the Pan-Am building in New York, then the largest office building in the world. These buildings, “in its way representing their own personal wealth and strength to powerful rich New Yorkers, motivated all their responses.” It was the domineering personality of Big Bill Zeckendorf of Webb & Knapp who sold the Pan-Am as agent to Cotton. Zeckendorf, Gordon recounts, was more obsessed with making deals than making money. “Finance is oxygen; it creates and sustains the bones of assets and the flesh of earnings”, and it was Zeckendorf’s insatiable desire to overborrow that catalysed his collapse once he turned investor.?
In the UK, a loan on a building was made on the “inherent rental value”, which formed the basis of the value of the building, whilst in the US, a loan was made “against the covenant of the tenant” with no concern about what rent was paid: “If General Motors wanted to borrow on a building, the loan was fixed on the covenant of General Motors, it was not fixed on the size or the location or the market value.” Parenthetically, Harold Samuels of Land Securities famously raised the largest ever equity placement in the late 1950’s of ￡20 million without any inclination of how the capital was to be repaid (certainly not from existing income), whereas in the US investors could raise enormous sums of money if cash flow could service the debt. Gordon noted that when it came to taking an international view, US institutions were extremely narrow-minded - a trait he believed still persisted when he wrote the book (and perhaps it still does). He observed a blinkered short-termism and a total lack of interest in anything outside America. Their attitude seemed to be, "why bother about overseas?" Very few American funds, at the time, held equities or other interests beyond North America. Unless U.S. investors lay down deep roots in the UK and the Continent, they often retreat back to the States. ?
Gordon also noted the vast difference in scale between the financial institutions of Europe, the UK, and the United States. For example, at the time, the largest pension fund on the continent of Europe was the Dutch Mineworkers Pension Fund, which held assets of about ￡100 million. The world-famous Shell Pension Fund stood at around ￡80 million, as did the Montedison Pension Fund in Italy, making it the largest in that country. Nestlé’s Pension Fund was the largest in Switzerland, holding approximately ￡60 million. If one were to combine the total assets of all the major continental institutions, their sum would still fall short of the Prudential, the largest UK insurance company, which managed approximately ￡2 billion. Yet even the combined funds of all major UK insurance companies paled in comparison to a single American institution, the Metropolitan Life Insurance Company of New York, whose assets at the time stood at an astonishing $20 billion.
Despite the size differential, it was the UK industry that established itself as the global leader, setting the gold standard for professional practices and investment structures. British developers and financiers were instrumental in exporting their expertise across Europe, particularly as post-war reconstruction efforts gained momentum. The industry's sophistication and professionalism contrasted sharply with the fragmented and less developed markets in Europe at the time. Prominent figures like Cotton and Clore, alongside Hambros and Schroders, showcased British expertise by forging partnerships and advising European investors eager to emulate the UK’s success. As Charles Gordon observed, the knowledge and techniques exported from the UK played a pivotal role in kickstarting real estate development across the continent. British practitioners were widely regarded as the best in the world, and their influence cemented the UK’s role as the international standard-bearer in real estate. They were the first to devise the strategy to JV with a Bank and their subsidiaries in the Continent, who fronted almost 100% of the properties and the capital, and Cotton and Clore of City Centre Properties would supplement the JV with know-how.?
Charles Gordon himself was a highly creative venture capitalist in the City of London, backing diverse businesses such as National Car Parks (now “NCP”) and renewable businesses. However, prone to hubris, Gordon made and lost several fortunes, ultimately dying penniless at 87, reliant on family and benefactors. His most innovative venture, Spey Investments, founded in the mid-1960s, reflected his insight into the rise of pension funds and their inability to finance small, growing businesses. Spey aimed to bridge this gap, recognising that many pension funds had ample capital but lacked managerial expertise.?
Despite his financial struggles, Gordon’s ability to identify and act on market gaps, such as his creation of Spey Investments, illustrates the power of vision and persistence in overcoming adversity. The stories of Clore (the numbers guy), Cotton (the property guy), and Gordon (the innovator) offer enduring lessons for today’s real estate professionals: the importance of relationships, the value of boldness tempered by prudence, and the need to adapt to shifting market dynamics. As we move into the new year, let these reflections inspire us to embrace both the challenges and opportunities ahead.?