13th April 2007
Property Week – RESI made easy
Doug Morrison hears how Grant Bovey built a £170m property business in three years
BUY-TO-LET HAS NEVER SOUNDED SO SAFE, SIMPLE and rewarding as it does when listening to Grant Bovey, the multi – millionaire who made his fortune in the media but whose conversion to property borders on the evangelical.
‘I grew up in Nottingham in the 1970s and when my parents had friends round I can guarantee that conversation about investment property was never on the agenda because in that era it just didn’t happen,’ he recalls.
‘If you did have a second property you were perceived to be very wealthy, but I think the psyche of the British people has changed fundamentally. That’s why the sector is not only here to stay but will continue to grow.
‘Nowadays when you go to people’s homes, invariably the conversation comes up about the buy-to-let investment arena . Half the people I know have other investment properties,’
There is evident merit in what he says. We are sitting on a luxury yacht, moored in Cannes during MIPIM. In the background , a few of London’s top agents are lapping up the sun or talking to Bruce Ritchie, Bovey’s friend and fellow residential investment luminary, with whom he has chartered the yacht for the week.
This part of Cannes – the big boat end of the harbour – feels like buy-to-let central. Extreme wealth is no perception. It’s a reality. What’s more, Bovey and his main backer, Bank of Scotland, have advertised their arrival here with the intention of buying £1bn of residential property over the next two years. It is certainly a long way from 1970’s Nottingham.
As far as the tabloid press is concerned, Bovey, 45, is best known as the husband of TV presenter Anthea Turner. For large sections of the property community, however, he commands respect for what he has achieved in barely three years in this sector.
Bovey has ridden the residential investment boom to such good effect that his buy-to-let management company, Imagine Homes, has a 130 strong workforce, a turnover of £170m and a plan to float on London’s main stock market early next year. Hawkpoint and Collins Stewart have been appointed as financial advisers and at this stage expect Imagine to be worth at least £170m at flotation.
Imagine is like a one-stop shop for the buy-to-let brigade. The company buys blocks of flats in bulk – always new-build, often off-plan – and sells most of them on to individual investors. It finds the tenants and guarantees a 7.5% annual rental yield for the first two years. Its even kits out the flats, courtesy of a furniture business run by Turner.
Use Your Imagination
In terms of taking the hassle out of residential investment, Imagine is a great idea put into practice nationwide. As a show of faith in any given location, those flats that are not sold to individual investors are bought by Veritas, Imagine’s £250m joint venture fund with HBOS.
The suppliers of such residential property increasingly see Imagine as a good outlet. ‘All developers, large or small, like to pre-sell a certain percentage of what they’re doing. It’s what makes the world go round.’ says Bovey. ‘In the last 12 months we seem to have become significantly better known in the industry, and I’d like to think that we have a good reputation.’
Bovey admits that until forming Imagine he owned the homes he lived in but nothing more. ‘I always considered myself a risk-taker but I never bought an investment property because I thought it was too risky.’’ He says.
The wonder is that no one has done it before. In the main, Bovey attributes this to developers’ glaring lack of knowledge about the status of their properties as investments. They were geared up to deal with the demands of owner-occupiers rather than tackling questions on rents, voids or the cost of the furniture.
The Imagine service, Bovey says, is what he would require as a prospective investor. ‘I want someone to prove to me they’ve done due diligence on location, the growth potential, the rental sector.’ He explains. ‘I don’t want to go out and buy paint and sofas. I want someone to do that for me. I want to take all the drudgery away from it and, if possible, most of the risk. That’s essentially what we do, but it’s all done in-house.
‘We take the risk. We guarantee you a return on your investment and if we have made a mistake with regards to the choice of location or the strength of the rental market then we will lose money. It’s as simple as that.”
With this formula, Imagine started out as a means for novice investors to break into the market. But judging by the testimonials on the company website, experienced buy-to-let investors are turning to this service too.
The company also has sales offices in Ireland, Singapore and Dubai. As Bovey says: “There are lots of people globally who want to take up a residential position in the UK.”
BIG BANK BACKING
There are others, of course, who struggle to see buy-to-let as a one-way bet, especially after a decade of extraordinary growth. Even those investments that have won widespread acceptance can go down as well as up. Bovey insists that only ‘a significant rise’ on the prevailing 5.25% interest rate could upset his plans for Imagine.
The presence of Bank of Scotland is an added comfort. Its Uberior joint venture arm also backs Ritchie’s Residential Land in 1bn fund (residential + regeneration, 16.03.07) and it is clearly making a big commitment to buy-to-let.
“When I first took them the concept they got it straight away,” says Bovey. “They like the fact that what we do is slightly unusual. It’s not rocket science but it’s quite cute.”
“From a stock market shareholder perspective, the cutest thing about Imagine Homes is that it is a service business. Strictly speaking, it options the new-build flats and the individual investors complete on them. At no point do those properties sit on Imagine Homes balance sheet and, therefore, if the buy-to-let sector does wobble, the company’s exposure is restricted to two-year rent guarantees.
Bovey believes Imagine can get to £1bn turnover in the next few years, possibly by replicating the formula overseas. “We could put stock in almost anywhere and probably sell it.”
Even so, given his unwavering belief in the strength of the sector, it might seem odd that he wants to float a service company rather than the asset-backed Veritas. “The bank itself has plans for that business,” he says.
It perhaps seems stranger still that he should crave a public floatation at all, given the scrutiny that comes with it. Tabloid coverage of the break-up of his first marriage and subsequent marriage to Turner has, he admits, left him a touch ‘paranoid’ about the press. But adds: “I’m ambitious by nature. I’m in a fortunate position where I’ve created and grown a company that could potentially become a public entity, and I could become the person that runs the company at the point of floatation. I may never get that opportunity again.”