Bouncing back from adversity

NOT LONG AFTER BEING RECOGNISED BY HIS PEERS AS THEIR ENTREPRENEUR OF THE YEAR, PROPERTY DEVELOPER IAN BAGGETT FACED THE BIGGEST CRISIS OF HIS BUSINESS LIFE.

NOT LONG AFTER BEING RECOGNISED BY HIS PEERS AS THEIR ENTREPRENEUR OF THE YEAR, PROPERTY DEVELOPER IAN BAGGETT FACED THE BIGGEST CRISIS OF HIS BUSINESS LIFE. PETER McCUSKER DISCOVERS HOW A DIVERSIFICATION STRATEGY HELPED HIM PROSPER

IAN Baggett is not someone to spend too much time in reflection, he prefers to focus his efforts and creativity on new adventures. But that restless pursuit of new opportunities had left him sitting on a £40m debt pile at the start of the credit crunch, with a 100,000sq ft speculatively-built Sunderland office complex to let.When pressed, he elaborates on the challenges he faced. “We had a £40m war chest we were going to use to make our mark on the region’s commercial property scene. It was easy to get the money from the banks back then. But when the credit crunch came we were over-geared. It was the worst experience of my life.“We were living in rented accommodation. I had £40m of debt, 70 staff to pay and 100,000sq ft of property to let. It was a make or break time for us. It was a time when we had to put in some hard graft. We rolled up our sleeves and did deals to get tenants into our properties.“It was a horrendous time. I’m not singling myself out, there were plenty of people in the same position as myself, but we had seen £10m wiped out of the value of our assets almost overnight.”Baggett’s entrepreneurial eye for an opportunity, which he first identified and utilised as a landlord and property developer while at Durham University, also helped insure him for the credit crunch and ensuing recession.“I like to view Adderstone as a mini conglomerate. We have other businesses and all the businesses work and fit together,” he says.“We had the cashflow from the other businesses, such as the property management and construction, to meet our liabilities.“A lot of people had said to me during the property boom years that I should just stick to property, but we were in the fortunate position of having companies without debt that were able to generate cash when we needed it.” In 2006, Baggett had joined forces with Jason and Richard Wood, sons of John Wood, the chairman and founder of successful Gateshead builder Tolent, to relaunch the Brims Construction brand.Its most recent results for 2010 saw it boost its revenues by 50% to £12.5m and, at a time when many construction firms are struggling, it has cash balances of £3m. Baggett later joined forces with millionaire inventor Gary Hosmer, the founder of the price comparison website concept, and experienced IT developer Gary Boon, who built the software behind the chip and pin payment system, to launch Gosforth-based Shout Digital.The Adderstone group now incorporates a raft of disciplines across the property spectrum including investment, construction and management.Its most recent diversification has seen it secure the freehold ownership of blocks of residential property, which provide a regular, fixed ground rent income stream with regular upward revisions.Baggett continues: “It has been difficult to develop property for the last two years. We have been focusing on freehold investment and building up a ground rent portfolio. We get to own these big beautiful buildings for a fraction of their true cost.”As well as collecting ground rents, Adderstone works the assets though an active management policy. This can include simple things like putting in cash machines to installing photo-voltaic equipment or creating additional car parking space.Adderstone is continuing to invest in this portfolio, currently managing scores of properties, with Baggett describing its potential market as “huge”. “It’s a safe income stream. It may be dry and boring, but dry and boring is good at the moment.”Even so, Adderstone has been one of the few North East property companies to continue with speculative commercial property developments since the market crashed in 2007. Last year, work began on an £8m business village which will provide 40,000sq ft of new office space in Gateshead. This development, known as 3 Acre Park, is on the site of the former open-air school at the junction of Durham Road and Joicey Road in Gateshead.Adderstone now has over £20m of commercial property assets which include Quay West, Keel House and Maling Court on Newcastle’s Quayside, the former BT telephone exchange, where it has its headquarters in Jesmond, properties on Newcastle Business Park and a retail portfolio in Alnwick.It has also continued developing high-end residential property with a scheme coming forward in Gosforth with units in the £500,000 to £900,000 price range.Three student flat schemes are under way, or on the way, including a 180-bed scheme near the Biscuit Factory at Shieldfield, Newcastle.“Over the last three years, we have continued to develop and are looking at taking on the next stage of the Quay West scheme. We have started work on 3 Acre Park and there are still opportunities for development in niche sectors.“There is still a demand for business parks or villages for small businesses who want their own front door. We are continuing to develop high-end residential schemes and student accommodation.“I don’t know if the market will ever come back in the way it once was. I doubt developers will ever have the confidence they had four to five years ago.”Baggett, a former professional tennis player who served in the Royal Navy and has a PhD in geo-politics, was named Entrepreneur of the Year in 2007.It is said that one of the marks of true entrepreneur is their ability to overcome adversity; if so, then Baggett was a worthy winner of that title.AN Baggett is not someone to spend too much time in reflection, he prefers to focus his efforts and creativity on new adventures. But that restless pursuit of new opportunities had left him sitting on a £40m debt pile at the start of the credit crunch, with a 100,000sq ft speculatively-built Sunderland office complex to let.

When pressed, he elaborates on the challenges he faced. “We had a £40m war chest we were going to use to make our mark on the region’s commercial property scene. It was easy to get the money from the banks back then. But when the credit crunch came we were over-geared. It was the worst experience of my life.

“We were living in rented accommodation. I had £40m of debt, 70 staff to pay and 100,000sq ft of property to let. It was a make or break time for us. It was a time when we had to put in some hard graft. We rolled up our sleeves and did deals to get tenants into our properties.

“It was a horrendous time. I’m not singling myself out, there were plenty of people in the same position as myself, but we had seen £10m wiped out of the value of our assets almost overnight.”

Baggett’s entrepreneurial eye for an opportunity, which he first identified and utilised as a landlord and property developer while at Durham University, also helped insure him for the credit crunch and ensuing recession.

“I like to view Adderstone as a mini conglomerate. We have other businesses and all the businesses work and fit together,” he says.

“We had the cashflow from the other businesses, such as the property management and construction, to meet our liabilities.

“A lot of people had said to me during the property boom years that I should just stick to property, but we were in the fortunate position of having companies without debt that were able to generate cash when we needed it.”

In 2006, Baggett had joined forces with Jason and Richard Wood, sons of John Wood, the chairman and founder of successful Gateshead builder Tolent, to relaunch the Brims Construction brand.

Its most recent results for 2010 saw it boost its revenues by 50% to £12.5m and, at a time when many construction firms are struggling, it has cash balances of £3m.

Baggett later joined forces with millionaire inventor Gary Hosmer, the founder of the price comparison website concept, and experienced IT developer Gary Boon, who built the software behind the chip and pin payment system, to launch Gosforth-based Shout Digital.

The Adderstone group now incorporates a raft of disciplines across the property spectrum including investment, construction and management.

Its most recent diversification has seen it secure the freehold ownership of blocks of residential property, which provide a regular, fixed ground rent income stream with regular upward revisions.

Baggett continues: “It has been difficult to develop property for the last two years. We have been focusing on freehold investment and building up a ground rent portfolio. We get to own these big beautiful buildings for a fraction of their true cost.”

As well as collecting ground rents, Adderstone works the assets though an active management policy. This can include simple things like putting in cash machines to installing photo-voltaic equipment or creating additional car parking space.

Adderstone is continuing to invest in this portfolio, currently managing scores of properties, with Baggett describing its potential market as “huge”. “It’s a safe income stream. It may be dry and boring, but dry and boring is good at the moment.”

Even so, Adderstone has been one of the few North East property companies to continue with speculative commercial property developments since the market crashed in 2007. Last year, work began on an £8m business village which will provide 40,000sq ft of new office space in Gateshead.

This development, known as 3 Acre Park, is on the site of the former open-air school at the junction of Durham Road and Joicey Road in Gateshead.

Adderstone now has over £20m of commercial property assets which include Quay West, Keel House and Maling Court on Newcastle’s Quayside, the former BT telephone exchange, where it has its headquarters in Jesmond, properties on Newcastle Business Park and a retail portfolio in Alnwick.

It has also continued developing high-end residential property with a scheme coming forward in Gosforth with units in the £500,000 to £900,000 price range.

Three student flat schemes are under way, or on the way, including a 180-bed scheme near the Biscuit Factory at Shieldfield, Newcastle.

“Over the last three years, we have continued to develop and are looking at taking on the next stage of the Quay West scheme. We have started work on 3 Acre Park and there are still opportunities for development in niche sectors.

“There is still a demand for business parks or villages for small businesses who want their own front door. We are continuing to develop high-end residential schemes and student accommodation.

“I don’t know if the market will ever come back in the way it once was. I doubt developers will ever have the confidence they had four to five years ago.”

Baggett, a former professional tennis player who served in the Royal Navy and has a PhD in geo-politics, was named Entrepreneur of the Year in 2007.

It is said that one of the marks of true entrepreneur is their ability to overcome adversity; if so, then Baggett was a worthy winner of that title.

A lot of people had said to me during the property boom years that I should just stick to property, but we were in the fortunate position of having companies without debt that were able to generate cash when we needed it

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