Matthew Molding: The Curious Case of THG Founder’s Real Estate Business | THG – To the world

he is the online shopping tycoon who is considered the British answer to the tech titans of Silicon Valley – with a personal one Fortune valued at more than £ 2 billion last spring and his penchant for showing his well-toned upper body at pre-pandemic yacht parties has anchored many tabloids from rags to riches.

But for Matthew Molding – founder, CEO and chairman of e-commerce company The Hut Group (THG) – 2021 was a humbling year.

The applause that greeted his £ 4.5 billion IPO in London Vaporized in Fall 2020 in 2021 when parts of the City of London turned on the company, which owns online beauty and nutrition brands like Espa and Myprotein, as well Providing e-commerce technology to companies like Unilever.

THG shares, which soared after the group went public, plummeted 71% between January and December. That decline cost its investors, of whom Molding is the largest shareholder, about £ 6.9 billion in paper losses.

A company that doesn’t shy away from giving critics targets to shoot at has examined the reversal even more closely: Group companies have done significant donations to the Conservative Party; while THG tied a snook ahead of its IPO at the City Convention by keeping Molding as both chairman and CEO.

The board also signed a pre-flotation deal in which Molding will acquire the offices, warehouses and leisure facilities from THG – before immediately leasing the company by letting those buildings back to the company an annual rent of £ 19 million.

That real estate deal was frowned upon by city characters at that time, but justified by the company that it had reduced the debts of THG.

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Still, some investor questions remained unanswered, including: Should the company have sold the buildings to its founder before the surge? What was the exact value of this deal and the price paid? And why didn’t THG make all the relevant figures more transparent?

The company does not seem to have explicitly disclosed how much molding the real estate portfolio cost.

But a Guardian analysis of THG’s accounts, which rounds up the numbers in THG’s annual report, suggests the deal was worth £ 297 million – but molding may not have separated from cash at all.

Instead, the entrepreneur could have waived £ 76million in GHG shares that he was supposed to receive and assumed £ 221million of the debt and other liabilities of the property portfolio.

The company didn’t deny the numbers.

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And if they’re right, it could raise new questions for THG – as a £ 297m price tag doesn’t seem to reflect the company’s own historical record of the value of individual properties in its portfolio.

For 14 of the 18 properties in the portfolio, THG published specific individual values ​​in a collection of its own annual reports and companies house accounts between 2015 and 2020.

Historical records suggest the 14 properties were valued at £ 295 million at the time – just £ 2 million less than what Molding appeared to be paying for all 18 buildings.

Of course real estate values ​​rise and fall. The value of any of the 14 may have changed.

But what about the four outstanding properties in the portfolio? According to calculations by the Guardian, their current value could be up to £ 55 million.

This includes a new 56,873 m² warehouse near Wroclaw in south-west Poland, for which THG claims to pay an annual rent of € 3.7 million (£ 3.1 million) to Molding.

Such a rent – the third highest in the portfolio – would imply a property value of around £ 50m, after research on typical yields, compiled by the statistical website Statista and Real estate company Cushman Wakefield. According to THG, the building is valued at £ 43.3 million.

Matthew Molding continues to serve as both chairman and chief executive at THG. Foto: Thg Holdings Plc/Reuters

Three other offices in Northwich, Cheshire, are asking for rents, according to finance and real estate experts, suggesting the buildings combined are worth up to £ 5 million.

Richard Kleiner, managing partner of the auditing company City Gerald Edelman, said: “I agree with the Guardian’s analysis … presumably THG can explain the accounting more precisely, so that the analysis can be interpreted differently.”

Molding had a mixed relationship with supporters of his company, criticizing the city and financial journalists for their reporting and analysis, going as far as to argue that he was regrets ever listing the company.

At the weekend it turned out that he submit a dossier to the supervisory authorities about what THG called a coordinated attack on the stock price.

However, the entrepreneur has never fully explained why he became the landlord of THG at the time the company went public, Although the company said last January, “The transaction instantly raised more than $ 200 million.

The online retailer also previously said that a CEO who acts as a public company landlord was “not an isolated incident,” adding that the property sale was “on market terms with the supervision of independent non-executive and professional shareholders. Mr. Molding paid the fair market value independently assessed by a top global accounting firm appointed by THG on behalf of all shareholders. “

Even so, THG declined invitations to comment on the Guardian’s recent questions in December about the value of the real estate business.

The transaction was perfectly legal, was only finalized after extensive advice from a number of real estate and financial experts, and the company denies that the 14 properties were valued at £ 295 million.

It said the Guardian’s calculations were incorrect but did not respond to repeated requests to provide a breakdown of property values.

THG added that the valuation of the portfolio of “[Royal Institution of Chartered Surveyors] accredited experts according to the recognized global standard “Red Book”.

The 2020 annual report also announced that the Board of Directors’ related parties committee – established after the real estate deal was closed – had “identified no material matters … as part of this subsequent review” [of the property sale]“.

Still, THG did not respond to additional questions about the identity of the companies it hired to conduct the Red Book assessments or when the research was completed. Neither would she clarify her position on certain buildings that have seemingly legitimate questions to be assessed unanswered.

THG built Icon, a new logistics and global content creation studio at Manchester Airport. Foto: Christopher Thomond/The Guardian

For example, the most valuable property in the portfolio – at least from a rental perspective – is a four-story new build project called Icon, which the company built at Manchester Airport to “accommodate 2,000 people and … focus on video production and photography, which is part of THG’s digital offerings and customers should be used “.

THG pays Molding an annual rent of £ 7.78 million to use these buildings, according to the company’s prospectus, which also describes the site as a “modern facility”. Meanwhile, THG’s 2019 annual report informed shareholders that the Icon buildings were “a £ 135 million GHG investment”.

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Icon houses THG Studios, which handles Video production and photography for the digital offerings of THG and customers. Foto: Christopher Thomond/The Guardian

These numbers would imply a yield – or yield – of around 5.8% for molding, which real estate and financial experts say is the market price for properties that are predominantly rented to a public company tenant on 25-year leases.

However, THG told the Guardian that Icon was actually valued at £ 62.25 million when it was sold to the company’s founder. It didn’t explain why the company would pay the tycoon the 12.5% ​​annual return on its investment that such a valuation would imply.

Molding has also pledged all of its annual profits from its GHG real estate business to charity, though the company said it would “hardly generate any income” in the first year due to the debt in the portfolio.

THG has stated that it has not endorsed any political party and has also donated to the Manchester Mayor’s office and the Labor Party-controlled Manchester City Council.

Reference-www.nach-welt.com

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