Capital investments; The Insiders; Profiling the business leaders who make the capital tick; One-stop shop model aims to attract landlords and private and institutional investors alike; STUART PENDER LOMOND CAPITAL.
STUART Pender is a man with a mission. Since setting up Lomond Capital four years ago, he and his team have bought 16 letting agents - and counting.
The plan is to forge a new model of one-stop shops that will appeal to landlords, institutional investors and high net worth individuals alike.
"We set up Lomond Capital in 2010 basically to consolidate lettings agents," said Pender, an actuary and insurance industry veteran who is the company's chief executive.
"Our strong belief is that the quality asset management capability in the UK sits in good quality regional firms, so we're looking at the main private rented sector markets outside London.
"We've acquired 16 regional asset managers since 2010 and we now manage PS1.5billion of assets (value of property under management) and employ 250 people. We're number one in Edinburgh, number one in Aberdeen and top five in Manchester. But we're growing rapidly and looking to go into Birmingham and Leeds by quarter two of this year."
lomond capital has consolidated seven letting agents in Edinburgh from its North Charlotte Street base - Alba Residential, Braemore Property Management, Woodstar Property Management, The Letting Service, Slater Hogg & Howison, James Gibb and Charles White.
The aim is to map developments in the US and Europe, where institutional investors - who include pension funds and large companies - are looking to invest in residential property through specialist funds and asset managers.
"Institutional funds are now interested in investing in the sector, but they're looking for quality asset management," Pender said. "Our belief, supported by a lot of research, is that the quality asset managers are the likes of Braemore and Alba in Edinburgh, Simpson Brebner in Aberdeen and Thornley Groves in Manchester. So we purchase a regional firm of scale and then buy other firms to consolidate into that.
"Phase one is about building scale and phase two is about broadening the range of services.
"These are insurance, mortgages, in-house maintenance and quite an important one around the investment management side. That's looking at providing a number of routes into the market for investors and also looking for suitable stock. For example, we know that 65 per cent of our 7500 landlords would like to add to their current portfolio over the next two years.
"We've set up an investment management division that goes out and looks for suitable properties for these investors to purchase and we manage those for them.
"Investors will also be able to invest in residential assets through a fund structure, and we're also looking at a syndicated model, for example where a group of 10 or 20 high net worth individuals will be able to invest in a portfolio of assets through a syndicate." Coming from an insurance industry background of analysing trends, statistics and probability, the property sector was a natural next step for Pender and his eight co-directors, five of whom previously built up and sold company called Paymentshield.
It sold household insurance and mortgage payment protection policies through mortgage advisers.
"When we bought that business in 2004 it was making PS4million," Pender said. "By the time we sold it to Towergate (a major insurance broker) in 2010 it was making PS45million and was the biggest return on a single investment for Bank of Scotland's integrated finance team."
On the attraction of the UK's PS893billion private rented sector, Pender explains that it has grown by about 50 per cent over the last five years and is very fragmented, with private individuals owning fewer than five properties accounting for 95 per cent of the market.
"What we see happening in the sector is very significant growth, but also a change in the profile of the people investing in it," he adds. "There are two key drivers of change. One is the significant housing gap in the UK - the UK is currently short of two million homes and needs to generate another 300,000 a year over the next 20 years to keep up with demand from the ageing population for single occupancy housing.
"The second driver is the drop in owner occupation due to poor mortgage availability, coupled with lack of funding for social housing.
"This means the government is looking to the private rented sector to plug the gap, and we've had things like the Montague Report, to look at ways of incentivising the private rented sector to stimulate builders to build more private rented housing.
"So it's an interesting market, a growing market and one which is attracting larger institutional investors in the US and Europe, where it's the norm to go to one organisation for all the various services you require as landlord or investor."
Born in Glasgow but brought up in Grantown on Spey, Pender studied maths at Glasgow University before joining Scottish Amicable as an actuarial trainee.
He progressed to senior sales and marketing roles and after ScotAm's acquisition by Prudential, ended up as commercial and finance director of the group's independent financial advisory (IFA) business.
He went on to join the leading UK IFA network Bankhall, where he sat on the board leading acquisitions and overall strategy development.
It was here that Pender spotted an opportunity to grow Paymentshield.
When Skandia, Bankhall's Swedish owner, declined to fund the venture, Bank of Scotland stepped in to finance the management buyout following a chance meeting with former HBOS chief executive James Crosby - Pender's former boss at Scottish Amicable.
Having started Lomond Capital with their own funds, Pender and his team have now secured a finance package from banking and asset management group Investec.
After expanding into Birmingham and Leeds this year, the plan is to continue southward. An estate agency arm is in the pipeline, and Financial Conduct Authority approval for the firm's mortgage and insurance business is underway.
"We're very busy and we're very pleased with the acquisitions we've made," Pender says. "The vision for the business is basically to establish the best quality asset management capability in key private rented sector markets in the UK."
In Scotland there are approximately:
|1.5 million owner-occupied homes
305,000 privately rented homes
277,000 homes rented from housing associations
319,000 homes rented from local authorities (Source: Shelter).
According to the 2011 census, there are 37,000 second and holiday homes in Scotland, comprising 1 per cent of the total housing stock.
The average house price in Scotland has increased from PS103,570 in 2003 to PS179,067 in 2013, an increase of 73 per cent.
There are an estimated 1.3m landlords in the UK with 3.8m properties - 17 per cent of the nation's housing stock (Source: BDRC Continental)
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Private sector is needed to plug gap Stuart Pender
Going for growth Lomond Capital has now consolidated seven letting agents in Edinburgh
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|Publication:||Daily Record (Glasgow, Scotland)|
|Date:||Feb 26, 2014|
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