Oral evidence: The Pension Protection Fund and Pensions Regulator, HC 55
Oral evidence, 28 June 2016.
Witness
Alex Dellal, Director, Allied Commercial Exporters Ltd.
Chair
Welcome to the Joint Committee of the Work and Pensions and the Business, Innovation and Skills Committees. We are looking at the sale and acquisition of BHS. Thank you very much for coming and giving us your time, Mr Dellal. We have seen evidence—your letter to the Committee.
Alex Dellal
Yes.
Chair
In that letter, you state that Lennart Henningson was “a longstanding acquaintance of the late Jack Dellal.” Do you mind expanding on that? What was the nature of that relationship?
Alex Dellal
Mr Henningson was married to my aunt’s husband’s cousin—it is a complicated one, but we had come across one another through that.
Chair
How long ago was that?
Alex Dellal
I think the initial meeting of Mr Henningson and my grandfather must have been 20 or so years ago.
Chair
And in that 20-year period, what business deals were worked on between the two?
Alex Dellal
There was a deal in Paris, which I am not so familiar with, and there were a couple of deals maybe somewhere else—I think in Tel Aviv there was one, but I couldn’t tell you. I’m not sure.
Chair
But only one or two, is it fair to say?
Alex Dellal
A few, yes, but they would speak.
Chair
On a regular basis?
Alex Dellal
No, not so much. Maybe once a year or so.
Chair
Would they be classed as friends rather than, say, business acquaintances or partners?
Alex Dellal
No, definitely not a friend; more of a business acquaintance.
Amanda Milling
To start, it would be very useful just to understand how and when you were introduced to Dominic Chappell.
Alex Dellal
It was 6 November 2014. Mr Henningson had written to me requesting a meeting about a property deal, and then he turned up on 6 November with Mr Chappell.
Amanda Milling
You weren’t aware of Mr Chappell before that, or—
Alex Dellal
I wasn’t aware that he was coming with someone else and I had never heard Mr Chappell’s name or met him before that.
Amanda Milling
When you met Mr Chappell, what were your impressions of him?
Alex Dellal
He was very driven to acquire BHS and he was trying to get his position in order, I suppose, to fulfil that acquisition.
Amanda Milling
When you say he was very driven to purchase BHS, can you describe a bit more about what that looked like?
Alex Dellal
It seemed as though he was trying to get everything in order for something that seemed to be somewhat time-sensitive.
Amanda Milling
Following that meeting, what checks did you do, in terms of Mr Chappell?
Alex Dellal
After the meeting we inquired who Mr Chappell was, and it had come out that he had been bankrupt in the past. It had been a decade or so before I met him. Past that, not so much of an impression. We did not do so much research on it because our focus was on the property component of our deals, so we were looking more at the security, based on the timelines we had. The security was the property component.
Amanda Milling
So far I’ve got that he seemed very driven to purchase BHS; he wanted to move quickly; and in your searches you discovered the bankruptcy in the past.
Alex Dellal
Correct.
Amanda Milling
What was your view of that? You had that information.
Alex Dellal
He had all the correct documentation for the properties we were discussing. He had a lot of due diligence on every aspect of the questions we were asking him. He seemed well versed, and it seemed he was in contact with the correct people to be the new owner of BHS.
Amanda Milling
I just want to ask you this: when you met him, in your first impression, did you think that Dominic Chappell and Retail Acquisitions were equipped to run a business like BHS?
Alex Dellal
I would not know. I know nothing about retail, so I am not qualified to assess whether he would have been a good new owner or not.
Amanda Milling
BHS was a big company here. Based upon the discussions you had had, did you think he could run a business like that?
Alex Dellal
I never came to any sort of question along those lines. I was very focused on—. As I said, the timeline was quite short, and we were trying to do as much due diligence on the properties as possible, because those were our securities in relation to the moneys going out.
Chair
Sorry to interrupt, Amanda, but why were the timescales so short? Why did it seem to be in a rush?
Alex Dellal
I am not sure.
Chair
Did you not question that?
Alex Dellal
It is very typical. We have been in the property market for 70 years, and typically people come to us in an off-market position, when things are quite rushed. We are usually a last contact for that kind of route.
Amanda Milling
Did you ever meet Paul Sutton?
Alex Dellal
I didn’t, no.
Amanda Milling
Did you know of Paul Sutton?
Alex Dellal
No.
Amanda Milling
Okay. There were initial requests for a loan that was going to be secured against Marylebone House, North West House and Oxford Street.
Alex Dellal
In the first meeting, they wanted to borrow £120 million against various properties. We made it clear at the time that we were not interested in any money at that point. We were very focused on acquiring a property in Marylebone. We had moved our offices from Knightsbridge, where they had been for 60-odd years, to Marylebone about a year prior to that. Our focus was purely on those properties.
Amanda Milling
I know we will come on to properties in a bit more detail. Thank you.
Richard Fuller
I forgot the family relation, Mr Dellal—was it your uncle’s wife’s cousin?
Alex Dellal
Uncle’s wife’s cousin’s ex-husband. It’s a complicated one.
Richard Fuller
Okay. I just want to get that close family relationship down on the record. You just said you were kind of rushed. You met Mr Chappell on 6 November—
Alex Dellal
Correct.
Richard Fuller
And you lent to him for the first time on 4 February?
Alex Dellal
I did not make a loan to him. Initially, it was a deposit for the purchase of Marylebone House.
Richard Fuller
But the first time money changed hands was 4 February?
Alex Dellal
Changed hands? It went into a lawyer’s escrow account.
Richard Fuller
Okay, so you were not even at that stage happy to give him—
Alex Dellal
Well, no, I was trying to buy a building at that stage.
Richard Fuller
But it was organised with him?
Alex Dellal
He was the intermediary of—
Richard Fuller
That does not sound very rushed to me. We have heard evidence earlier on that the management of British Home Stores were given four weeks to work out a business plan. All you are doing is working out whether you want to buy a building or not. Why do you say you were rushed?
Alex Dellal
Because there was lots of due diligence to do on those properties—both Marylebone House and North West House—and I had to get comfortable with the prices we were agreeing to.
Richard Fuller
I just want to check this. I don’t know much about property deals, but it takes three months to work out the details on two particular properties. Were they unusual properties?
Alex Dellal
They were unusual to me because I had never been inside them or really focused on them. I had known about them because they were on Marylebone Road, but it took some time to get comfortable.
Richard Fuller
Were you trying to get comfortable with the buildings or with the person?
Alex Dellal
With the buildings, because our focus was the buildings.
Richard Fuller
You didn’t really care about the individual?
Alex Dellal
To say I didn’t care would not be correct, but that was not our area of focus. We were looking at what we were trying to acquire.
Richard Fuller
Over the course of that rushed three months, did the terms of the deal change significantly, and in what ways?
Alex Dellal
They did. We were attempting to buy Marylebone House, and at the last moment that deal came off the table. The owner of that building changed his mind, and then Mr Chappell asked if we would be interested in buying North West House.
Richard Fuller
And you said yes?
Alex Dellal
We said yes.
Richard Fuller
And then you had to go through your due diligence again on that one?
Alex Dellal
We had no time for due diligence on that. I think it was about a two-week period, so our due diligence for North West House was off the back of the due diligence that we had done on Marylebone House.
Richard Fuller
The money was already in escrow at that stage, wasn’t it?
Alex Dellal
£35 million was in escrow, yes.
Richard Fuller
Did you know how Mr Chappell was representing that money? Did you have any discussions with people closer to British Home Stores, closer to Arcadia Group and closer to Sir Philip Green?
Alex Dellal
No, it was towards the purchase of Marylebone House. That had been made clear on various documentation that I think you have already seen—it might be on the website.
Richard Fuller
Right. So you know that it was contingent on him succeeding in his transaction with Sir Philip Green?
Alex Dellal
Exactly. It was contingent on him buying BHS.
Richard Fuller
Okay. From your point of view, would it be appropriate for Mr Chappell—I don’t know if he did—to have represented this as a sign of his voracity as a buyer?
Alex Dellal
If he had, that would have been totally wrong, because those moneys were intended solely for the purchase of Marylebone House and thereafter North West House.
Richard Fuller
Because it does appear that that was the case, doesn’t it? I don’t know if you’ve been following—
Alex Dellal
From what I’ve followed in the news, yes.
Richard Fuller
What are your thoughts about that? Now that you’ve seen what’s been said, what are your thoughts about that transaction and how it was handled by them?
Alex Dellal
It was very frustrating to read, obviously, but I am here today hopefully to clear that up.
Richard Fuller
What would you say, then?
Alex Dellal
I would say categorically that those moneys were for the purchase of Marylebone House and thereafter North West House.
Richard Fuller
Do you think that there was misrepresentation by Mr Chappell to Mr Green, or do you think it was a nod and a wink between the two and they all knew what was going on?
Alex Dellal
I couldn’t comment. I wouldn’t know.
Richard Fuller
My colleague may want to come back on some of the details, but on the £35 million, in the end what was the value of that to you? Have you sold North West House?
Alex Dellal
We have sold North West House, yes.
Richard Fuller
And how much money did you make on that?
Alex Dellal
On the sale of North West House?
Richard Fuller
Yes.
Alex Dellal
It was around £6 million, it worked out.
Richard Fuller
£6 million profit?
Alex Dellal
Give or take, yes.
Richard Fuller
And that was sold how long after you lent the money?
Alex Dellal
Are you asking how long after I acquired the building did I sell it?
Richard Fuller
Until you put the money in escrow. I’m just trying to work out what your rate of return was.
Alex Dellal
I’m sorry, I don’t understand—
Richard Fuller
What was your rate of return on the transaction of £35 million, which you put into escrow and was subsequently used for the purchase of North West House?
Alex Dellal
Well, only £32 million of that went towards North West House, and then it was subsequently sold for £38 million or thereabouts—so, yes, £6 million.
Richard Fuller
Okay. That is about a 20%-ish return.
Alex Dellal
Give or take.
Richard Fuller
I’m not very good at maths. Then you had another loan, didn’t you, to your uncle’s wife’s cousin’s ex-husband of £5 million. Why did you decide to double down?
Alex Dellal
Because Mr Chappell and Retail Acquisitions had said that they needed the £5 million loan to push forward the transaction of selling North West House.
Richard Fuller
Okay. And that was on 10 March 2015?
Alex Dellal
It was.
Richard Fuller
I’m just trying to check this. At that stage, had the transaction gone through—10 March 2015? I don’t think it had, had it? It was 14 March.
Chair
It was the day before.
Alex Dellal
It was 11 March that it went out.
Richard Fuller
So you were prepared to lend him another £5 million, even though at that stage he still had not secured the transaction.
Alex Dellal
No, but it was secured against Atherstone and it was conditional on his purchase of BHS.
Richard Fuller
I don’t know what you do after you have doubled down when you go down again, but then you did another £25 million loan—is that right?—in June when he had secured the business.
Alex Dellal
Correct.
Richard Fuller
Sorry, just to go back to the £5 million loan, how much did you make on that loan?
Alex Dellal
We made a £1 million fixed fee.
Richard Fuller
And any interest, or was it interest-free?
Alex Dellal
No interest, no. It was a fixed fee.
Richard Fuller
So it was £1 million back. I thought Mr Hitchcock told us that the loan got £2.2 million in interest and fees.
Alex Dellal
That’s because we carried over an unsecured portion of the North West House deal into the Atherstone deal, but that had nothing to do with the £5 million loan.
Richard Fuller
Okay. So the £6 million is correct for the first loan.
Alex Dellal
Correct.
Richard Fuller
And then there is an extra £1 million in the second loan, but that relates to the first loan.
Alex Dellal
Correct.
Richard Fuller
And then there is £1.2 million made on the second loan of £5 million, in fees.
Alex Dellal
Well, no. In fees we made £1 million, plus I think £75,000 in legal fees.
Jeremy Quin
May I ask a point of clarification on the £5 million loan? Alex, £5 million was made available on the day before the deal was signed up, so it came across on 10 March, prior to the 11 March conclusion. We know from evidence elsewhere that Mr Chappell was required to produce £5 million of equity, and that was it—you were the providers of the equity. Were you aware of what he was using that £5 million for?
Alex Dellal
I wasn’t, no.
Jeremy Quin
So as far as you were concerned, you were lending him £5 million conditional on him being able to provide security over an asset he would be acquiring the next day. So basically, while he says it is 10 March, it is really 11 March I suppose that he got his hands on the £5 million. He had to say to the vendor, “I’ve got £5 million of equity.” The vendor apparently did not know that that was where the money was coming from. That is your understanding.
Alex Dellal
My understanding was that he borrowed £5 million. I do not know what the moneys were for.
Jeremy Quin
Thank you. That is all I needed to know.
Richard Fuller
Moving to the third loan, Mr Chappell now owns British Home Stores and he comes back to you again. How happy were you to see him the third time?
Alex Dellal
The third time being Oxford Street?
Richard Fuller
Yes, the £25 million Oxford Street loan.
Alex Dellal
He had expressed that they were having cash-flow difficulties and sort of a teething process of new ownership; he was looking to refinance in a longer term scenario and that he required a bridge loan for rent payments and salary payments of the BHS staff. Initially I did not want to do the loan, and then we found a way by which we would be happy moving forward. We took a risk, being that we were on the hook for the rent of Oxford Street should he have gone into default. Then past that we had a profit share component, because they were having offers of around £30 million, I think, for the Oxford Street lease. Being that we were more familiar with the property market, we thought that number was way lower than it should be.
Richard Fuller
They were bullish?
Alex Dellal
Quite bullish from the freeholder. Based on that, we offered them some support in better understanding that lease and we gave them a loan to give them some time to negotiate that sale.
Richard Fuller
You are quite experienced in property transactions and Mr Chappell has come to the Committee and presented that he was fairly experienced in them. At this stage, where you have had deal No. 1, deal No. 2 and now deal No. 3, would you have assessed Mr Chappell as an expert in understanding property deals or would you have thought that he was pretty out of touch?
Alex Dellal
I would not like to comment. I am not sure. We were focused on our deals.
Richard Fuller
The numbers comment for themselves, don’t they? You made £6 million on the first deal, you made £1.2 million on £5 million in the second deal, and you just realise that he is out of touch in the third deal. Isn’t he the gift that keeps on giving?
Alex Dellal
The £6 million that we made on the sale of North West House was not our intention; we bought that property to turn it into a shared workspace and hotel. Around that time the MIPIM property fair was going on in Cannes, and half my office were over there. We had been very focused on Marylebone and we had some very good contacts with both agents and potential buyers in Marylebone and we got an offer we could not refuse. Personally I think that was a very bullish offer, and it was a number we thought we could not say no to.
Richard Fuller
The reason I say that is that we have seen a number of witnesses—I cannot speak for the Committee; I can only speak for myself—and while many of them said that they were experts at this, they did not present that they actually knew what they were doing. To be frank, you are one of the first people we have seen who seems to know what he was doing, and fairly methodically doing that, as we have gone though. It seems in sharp contrast with others, and particularly with Mr Chappell, but you did not seem to have that view.
Alex Dellal
I did not seem to have that view. We were too focused on what we were doing. The timelines, as I said, were very short. We are a very small team in my office.
Richard Fuller
But by the time you had the third loan, you had been through not just that rushed process from November of last year. We are now in June—so seven months and three deals with Mr Chappell—and you know about British Home Stores. Everyone knows about British Home Stores. It is a big company with £600 million in revenue and lots of people work for it and lots of people shop there. Had you created an impression about whether he was at that point up to the job?
Alex Dellal
My understanding at that point was that he had bought a company that had management in place. It seemed more of a management buyout from my loose perspective at that point. I did not give much thought to the inner workings of BHS because I don’t understand retail. It would be far too much of a learning curve for me to start from scratch to try to understand the inner workings of such a big company.
Richard Fuller
But you moved assets out of that business. This is more a theoretical question really that we are trying to wrestle with. You used the phrase—I don’t mean to use it in a pointed way, but it is actually quite descriptive of a number of people—“I didn’t give much thought to—” Mr Chappell’s expertise in property, and then you just said you didn’t give much thought to the retail operations that were behind those properties, which was perfectly reasonable from your point of view.
Alex Dellal
It would be better maybe to word it as, “I was concentrating on my portion of the deal,” if that makes sense.
Richard Fuller
Yes, exactly, but we have Mr Chappell running this £600 million business, where there are 11,000 employees, and the turnaround plan was dependent, from what we have heard, on property transactions occurring successfully. What message do you think that sends to employees who are now looking for new work? I am not talking about your role, because you seem to have managed your job very expertly, but don’t you look at the system of how business operates with these different pieces, and do you have any conclusions now, looking back?
Alex Dellal
It’s on a scale, quite frankly, that I have no experience in. I have never worked with or for a company of that size—of the size that BHS was. I have never had 11,000 employees, so to get my head around that would be—. I am quite young and I am somewhat inexperienced, to the extent that I have been doing this five or so years, so it is not an area I necessarily understood, but what has happened is a terrible tragedy. My thoughts are with all the people who have lost their jobs.
Richard Fuller
The reason that I want to pursue it is that we have seen a number of people here who are very powerful people and fairly rich people. They have got money and have positions of authority. Almost every single one of them has made money out of British Home Stores, including yourself. The 11,000 employees are looking for a job and 20,000 pensioners don’t know if they are going to get their full pension. The system in which companies like yourself and others operate, which is this free market system, relies upon people doing the right thing and knowing some of the consequences of the actions that they take and not just looking at their piece of the whole. Do you think there is some validity to that point of view?
Alex Dellal
From my perspective, we did an arm’s length transaction. We are a property company. We were focused on buying a property in Marylebone. The whole year before we had been fighting against marketed properties, in that big funds that were usually in much higher categories of property valuations were going down a tier, so the competition was immense at that point in the market. We were very focused on the fact that we had an opportunity to buy a property off-market. Valuations of those properties aren’t an exact science; they are more of an art, I would say, so it is very difficult to value. At one stage, I was looking for a potential partner. Not everyone agreed with my £32 million valuation, and then, I think today would show that is probably not about there even now.
Richard Fuller
Thank you.
Jeremy Quin
Taking you back to the due diligence on Marylebone House, how did you execute that?
Alex Dellal
We did a survey. We did lots of comps in the area. We approached it almost as a residual valuation, which means that we start at the end and we work our way back to find the price that we are willing to pay.
Jeremy Quin
And that price was?
Alex Dellal
For Marylebone House, it was £45 million.
Jeremy Quin
That is what you thought was a fair market value—a value that you were willing to pay.
Alex Dellal
That was what we were willing to pay, yes.
Jeremy Quin
I understand. Did you have a view as to what you could on-sell it for?
Alex Dellal
I didn’t want to sell it. As I said, my intention was that I am involved in a shared workspace business and I wanted to put them as a tenant into that building.
Jeremy Quin
So as a buy and hold proposition—
Alex Dellal
Correct.
Jeremy Quin
—you got to £45 million. Thank you. In doing your due diligence, you must have had interactions with the owners of Marylebone House to execute the survey and so on, I presume.
Alex Dellal
I didn’t have direct contact with any of them, but we arranged for a survey to be done and Retail Acquisitions allowed that surveyor to come in and do it. I’m not sure how they got—
Jeremy Quin
You say Retail Acquisitions allowed that to happen, but they didn’t own the building.
Alex Dellal
They must have been in discussions with the owner, because they got access, ultimately.
Jeremy Quin
So all of your access to Marylebone House was via RAL.
Alex Dellal
Correct: through Mr Henningson and Mr Chappell.
Jeremy Quin
So there was no direct contact with—
Alex Dellal
None whatsoever.
Jeremy Quin
So your professional advisers—surveyors, et cetera— were going in. It was like using RAL as an estate agent: they went in, they did all the work—you didn’t have direct contact. Did you think it strange that all your discussions were with RAL rather than with the owner of the business?
Alex Dellal
I didn’t, because it seemed as though that was part of a conversation that had been happening before they had even met us. It seemed at the time that there was some sort of understanding between Arcadia, the owners of Marylebone House and potentially whoever the owner was going to be.
Jeremy Quin
On the suggestion of putting in £35 million, was there a reason why £35 million was put in as a deposit, rather than £45 million? It feels like in the past you would say, “£45 million is the price. Can we see the £45 million in the escrow account?” I don’t know why you put in £35 million rather than £45 million.
Alex Dellal
Well, that’s what was asked. As I said, the timing was quite tight, so they wanted evidence that we could complete the transaction.
Jeremy Quin
And there was no doubt in any way that this was held to your account—
Alex Dellal
It was held to our order.
Jeremy Quin
—at Olswang. And that was clear to Olswang?
Alex Dellal
It was.
Jeremy Quin
You had arrangements in terms of a fee to be paid in the event of the £35 million. You were paid £1 million, from memory.
Alex Dellal
Yes, it was £1 million.
Jeremy Quin
Which is strange in the context of a deal being done. You are buying a property for £45 million but you get £1 million back.
Alex Dellal
Well, it was the opportunity cost of putting £35 million in escrow for such a long period of time—it was out for around five weeks, and those were the conditions we asked for.
Jeremy Quin
And there was no certainty, I suppose.
Alex Dellal
Correct, and £35 million was pretty much the bulk of our working capital, so it put us in a stagnant position, where if another deal had come along or if anything had come along, we wouldn’t have been able to do it.
Jeremy Quin
I understand. You were then told that Marylebone House had gone away. Were you told why it had gone away?
Alex Dellal
My understanding was that the owners had received a better offer.
Jeremy Quin
Do you know what that better offer was, which was not executed until July?
Alex Dellal
I didn’t find out until recently and I’m still not sure of the number.
Jeremy Quin
I can help you. It was £53 million. Does it surprise you that it was worth £8 million more than you had valued it at?
Alex Dellal
I wouldn’t have paid that much, no.
Jeremy Quin
Thank you. You were a clear buyer at £45 million. It was taken off the market because there was a better buyer. Were you invited in? “Go on, we know you’re keen on this property, put your best foot forward—give it another go.”
Alex Dellal
I was, and my best foot forward was £45 million.
Jeremy Quin
So you were re-approached subsequently. After the deal had fallen through—
Alex Dellal
Not formally, per se, but it sounded as though if I had been willing to put more in I would have had an opportunity to say so. But I didn’t.
Jeremy Quin
Were you aware of any others in the industry who were keen to acquire Marylebone House?
Alex Dellal
There was lots of talk over the industry. I had heard through the grapevine that other people were looking and that details had been sent out to various parties.
Jeremy Quin
I wouldn’t embarrass you by asking you to name them in this session, but perhaps privately you could reassure us with some of the names that you were aware of and what you thought they might have been bidding. I am just curious. The ultimate bidder was BHS, as you know.
Alex Dellal
I never received that information directly, but various advisers had been telling me that they had had contacts mentioning that they had seen the property, or details of the property, and were looking into the possibility of buying it. The message I received was clearly that other people were looking at the building.
Jeremy Quin
Just to correct my comment for the record, it wasn’t BHS that bought; it was Arcadia.
Alex Dellal
Sorry. Excuse me.
Jeremy Quin
It was my fault; we can all get jumbled with this structure. So you had heard that there were people out there who might be looking at it or that it was being marketed.
Alex Dellal
I am not sure if it was being marketed, but the property world is a small world and people talk a lot.
Jeremy Quin
Were you just given that from advisers or from—
Alex Dellal
From advisers. There was a moment when we weren’t sure whether the deal was necessarily going to happen, as it got closer to the moment when it didn’t. In our in-house conversations, we mentioned the possibility that outside interest may have steered the property away from us.
Jeremy Quin
Thank you. You bought North West House instead as a consolation prize.
Alex Dellal
We always had an option on North West House in the original agreement to buy Marylebone House, so we had already expressed some interest in buying the property.
Jeremy Quin
And that was £30 million, wasn’t it?
Alex Dellal
The price was £30 million in our original dealings.
Jeremy Quin
And you paid £37 million?
Alex Dellal
£32 million.
Jeremy Quin
Of course. You had to do the due diligence and everything else. Weren’t you slightly surprised that you weren’t being put through a process with other people, when you were competing against other people for North West House? Were you surprised you weren’t put through a sales process for the sale of North West House with other competitors?
Alex Dellal
I’m not sure that we weren’t. There may have been other potential people, but we had our £35 million ready to go in escrow and the price we had agreed was £32 million. And then the transaction happened.
Jeremy Quin
I suppose you were there, ready and available, and you had the cash sitting there.
Alex Dellal
We were, and we had been disappointed about losing out on Marylebone House, which had played a great part in our plans moving forward over the next three or four years—we had planned to occupy the building and put various projects that we were involved in within it. So yes, we were very disappointed. North West House was a silver medal, essentially.
Jeremy Quin
Given that you were disappointed and that they hadn’t been able to honour the Marylebone House agreement, why did you pay the extra £2 million? You had agreed £30 million. You strike me as a very canny businessman. They managed to get you up an extra £2 million to £32 million.
Alex Dellal
We agreed to £32 million. That is what they asked for, and we thought about it and it was a price we were still willing to pay.
Jeremy Quin
Understood. You were able to sell it on at a profit quite shortly, which I don’t object to—you have done well out of it, which is fine—but I am surprised that in quite short order, within two months, you were able to make that turn and create the value that the owners of the asset were unable to do themselves, particularly given that they had a desperate requirement for cash.
Alex Dellal
There was an element of timing to it. The MIPIM fair had just happened around that time. Marylebone was the fastest growing area in terms of price per square foot in London at the time. A lot of people in the market knew that we were particularly focused on Marylebone. We had had various conversations, we had had some very close relationships with agents in the area and we were offered a deal that we couldn’t refuse. They paid more than we valued the property at—[Interruption.]
Jeremy Quin
I will ask one last question before you are saved by the bell. At any stage did you discuss Marylebone House and North West House with Sir Philip Green and BHS, or were your relationships with RAL?
Alex Dellal
I didn’t, no.
Jeremy Quin
They were purely with RAL?
Alex Dellal
Purely with RAL.
Chair
There is a Division in the House so we have to go up and vote. Sitting suspended for a Division in the House. On resuming—
Chair
Jeremy, do you want to continue with your line of questioning?
Jeremy Quin
You were putting the money into escrow and it just remained in escrow, so when Marylebone went away you kept the money in the escrow account.
Alex Dellal
We prepared a letter to ask for the moneys back, and then just before we sent it the conversation about North West House began.
Jeremy Quin
Okay. You can’t remember the timing of that, can you?
Alex Dellal
I can’t remember the exact date, no, but it would have been about a week or so before the purchase and two weeks before North West House.
Jeremy Quin
Would that have been before 11 March?
Alex Dellal
Let me double-check. The letter would have gone out before 11 March and the discussions were really started before that, because on the 11th we paid the £32 million.
Jeremy Quin
Can you remember when you agreed the North West House deal? Was that prior to 11 March, from what you remember?
Alex Dellal
Yes, the negotiations and the details would have gone through before the 11th, and then I guess the completion date was the 11th.
Jeremy Quin
You have answered the question. I just wanted to know whether that money was sitting in the account for no apparent purpose when the deal was executed.
Alex Dellal
No, we would have called the moneys back immediately, and the reason we did not decide to do that was that the conversations about North West House had begun.
Jeremy Quin
Thank you. When you completed the deal, clearly the money was still at your order in the Olswang account and you were asked to transfer £25 million of those funds, I understand, to a BHS account and had no immediate instructions on the remaining £7 million.
Alex Dellal
No, that is not the case. On the £32 million, our order had been released, so it was in Olswang’s account, held to Retail Acquisitions’ order, I suppose. What they did with the money thereafter we have no idea.
Jeremy Quin
Thank you. That is very clear. That is it from me.
Alex Dellal
Could I just make one point? I would like to clarify that the family relationship—the distant relationship—was with Mr Henningson, not with Mr Chappell.
Chair
Yes, thank you. Amanda.
Amanda Solloway
Can I just come back to July 2015, when you lent £25 million—is that right? I think you mentioned that it was a bridging, or bridge, loan and that you had to be happy moving forward. I just wondered what those terms were that you were happy with for moving forward. What was the agreement that you had?
Alex Dellal
We had security over the Oxford Street lease and over the Manchester property. That gave us satisfaction in terms of security, but then we still had the risk of the potential rents and the fact that the rent was going up in 2017.
Amanda Solloway
You felt satisfied that you were secure and that you would be safe in that deal?
Alex Dellal
Close enough, but there were no guarantees because, as I have said, this was done quite quickly. We had a view but there was an element of risk that we were prepared to take at that point.
Amanda Solloway
As a snapshot in time, at that moment did Mr Chappell seem in control of the situation, or did you think he was spiralling out of control?
Alex Dellal
From my perspective, it seemed that they had a short-term cash flow issue and that long-term things seemed to be on track. I had no reason to believe otherwise.
Amanda Solloway
So you actually believed that, even though this was the third loan, he was actually on track to turn around that?
Alex Dellal
I think so, yes.
Amanda Solloway
Think so?
Alex Dellal
As much as I could understand. As I said earlier, I am not a retail expert. I had no reason to believe otherwise.
Amanda Solloway
You believed he had a credible case, okay.
Alex Dellal
Yes.
Craig Mackinlay
Mr Dellal, what is your understanding of your grandfather’s relationship with Sir Philip Green?
Alex Dellal
I think they had a loose relationship. They were never friends per se. I didn’t see him in a social context or anything like that. They had almost done some deals in the past, in the early ’90s or so. He was not a family friend or social acquaintance of ours as a family.
Craig Mackinlay
Do you know how they first got together all those years ago?
Alex Dellal
I’m not sure. I think they were in a group of Jewish businessmen in London at the time and must have come across each other at some point.
Craig Mackinlay
But you don’t know any further than that really. It’s all rather in the mists of time, I suppose.
Alex Dellal
Exactly.
Craig Mackinlay
Looking at your own company for a moment, if I may, your Allied Commercial Exporters Ltd is 100% owned by Allied Commercial Holdings Ltd.
Alex Dellal
Correct.
Craig Mackinlay
I did a little bit of research on that. It has got a share capital of one million shares.
Alex Dellal
Correct.
Craig Mackinlay
Of which you own 100,000.
Alex Dellal
Yes.
Craig Mackinlay
You have got Guy Dellal who has the majority—633,000, of the shares.
Alex Dellal
He does, yes.
Craig Mackinlay
There is another company in that share mix, according to the annual return, a company that owns just over a quarter of the entire share capital, at 265,000 shares. That is a company called Rockmoor Ltd. Can you tell me anything about that company? It doesn’t seem to be a UK company.
Alex Dellal
It is a company owned by my late grandmother’s will trust.
Craig Mackinlay
Do you know where that company is registered?
Alex Dellal
I don’t, no.
Craig Mackinlay
So, quite categorically, that is your late grandmother’s will trust. Fine. That has cleared up something that I found earlier on. Relating to yourself and your more current knowledge, have you had dealings with Sir Philip Green or his associates or companies?
Alex Dellal
I have not, no.
Craig Mackinlay
None of his companies during your—
Alex Dellal
None.
Craig Mackinlay
None at all?
Alex Dellal
None whatsoever.
Craig Mackinlay
It just seems that there is this relationship with your grandfather and your company then becomes involved with this potential buyer of BHS. How did he find you, as it were? There seem to be quite a number of companies.
Alex Dellal
How did who find me?
Craig Mackinlay
Mr Chappell.
Alex Dellal
Through Mr Henningson. Mr Henningson knew we were in the market. We are a property company. He might have suggested us to Mr Chappell.
Craig Mackinlay
So the old-fashioned family link—brief as it is—with Sir Philip Green is purely coincidental.
Alex Dellal
Purely coincidental, yes.
Craig Mackinlay
That’s fine on that point of questioning. Looking a bit further on, in February 2016 you advanced Mr Chappell an unsecured personal loan of £150,000.
Alex Dellal
I did, yes.
Craig Mackinlay
He must have given you a reason for that. One can come to a conclusion as to what the reason might be, but perhaps you could tell us.
Alex Dellal
He said he had received a tax bill and that he had had cash flow problems, and that he needed a two-week loan.
Craig Mackinlay
Two weeks?
Alex Dellal
Correct.
Craig Mackinlay
You would have known that he was a previous bankrupt if you had done a fairly simple CallML search.
Alex Dellal
I did, yes.
Craig Mackinlay
So you did that type of check and were still happy to proceed on that basis.
Alex Dellal
I was, because it was a long time before. There are many bankrupts who have gone on to be very successful businessmen. At the time he was the owner of BHS, and he seemed to be in a position to pay me back.
Craig Mackinlay
Did you find it slightly odd that this man, who was the head of BHS and who seemed to be showing to the world that he had quite some substance, was struggling to find £150,000 for a tax bill? What does that say to you?
Alex Dellal
I didn’t overthink it. It seems that lots of people have cash-flow problems at different points. It didn’t seem out of the ordinary to me at the time. We have done similar types of loans in the past.
Craig Mackinlay
What were the terms of that loan? For just two weeks, what were you going to charge him?
Alex Dellal
I was going to charge him 1% a month, and those were the terms.
Craig Mackinlay
I understand that some of that money is still outstanding. Is that the case?
Alex Dellal
That is correct. He paid back 75,000 of the 150,000. There is 75,000 due and it is now in lawyers’ hands.
Craig Mackinlay
In lawyers’ hands. Is there much progress with that?
Alex Dellal
It seems that we have come to an agreement to pay £10,000 a month until it is paid off.
Craig Mackinlay
So you are doing that as an informal arrangement rather than pursuing it any further?
Alex Dellal
I am due an update tomorrow regarding the situation, but up until today that is the information I have got.