62 | INTER THE LAST WORD VIEW
spending that money as every pound he spends brings him in fi ve or six pounds in revenue.
Interestingly, this is not far off the
marketing budget of 15% of revenue spent by rapidly growing companies in the pre-internet era.
Robert is clearly proud of his
company. He is particularly proud of the contribution made by his team. “We are a very democratic company. Everybody has a voice. Listening to those voices has been a large part of our success.” It is not only the scale of Robert’s
operation that has increased. It is also the range of his activities. As well as selling investment properties he now also provided consultancy services for urban regeneration programmes and does some developing on his own account. The 80/20 rule will apply. “I am a great believer in the 80/20
rule – though sometimes, in real estate, it feels more like 90/10. I expect that our income from the sale of other people’s properties will reduce from 80% to 20% and that the income from development will increase correspondingly.” Why did Robert move into the fi eld
of development? It is a decision that has doomed many other agents, who have found that the whole process is much more complicated and much less profi table than they had expected. “That is true, but there have been
many who have made the transition. In our case the main reasons for becoming a developer were to do with control and the truth. By developing our own property we can build exactly what we want and make sure that it is sold honestly and consistently.” “This should mean that we do not
again fi nd ourselves in a position where we are not paid our commission by the developers whose product we have sold and so end up having to pay our sub-agents out of our own pocket. We will also be able to make sure that the products we build are actually delivered – and delivered on time – so we do not have to make refunds to clients who have, through us, bought into a failed development.” He is still very active – and has
great faith in – the UK market. His main investment focus is on Houses in Multiple Occupation (HMOs), student accommodation and what he sees as a diminishing pool of true Below Market Value (BMV) properties. But he is even more active in North
Dakota, in the USA. North Dakota, long a major producer of coal, has vast oil and gas reserves and is now at the centre of a major oil boom. Robert’s activities there centre on the provision of short term accommodation for the oil workers – basically, hotels. According to Robert, these offer
extraordinary investment potential. The oil boom is strongly supported
by the US government which is, understandably, keen to reduce or eliminate its dependence upon foreign oil.
He is aware that projects of this
kind have faced criticism. It is claimed that the promised returns are simply too good to be true. That the rates of return are not sustainable. That, if there was this much money to be made, the oil companies would be making the investment themselves as the returns could be higher than they would make from extracting the oil. So how does Robert react to these allegations? “I understand that people are nervous about projects where the returns look too good to be true but I believe that these numbers really do stack up.” How does the investment work?
“There are two main types of investment. One is basic housing for oil workers and the other more upmarket hotel accomodation, branded by a major hotel operator. “For the fi rst type of investor, the process is that the investors fund the construction of a residential unit. They then keep a room in it and rent it out to oil workers, via the oil companies. The unit is managed by Robert’s own management company. The rental income is pooled and shared between the investors. For the second type of investment, basically, the investors buy a room in a hotel. Typically, something
“By 2007 he was generating £15,000 per week with very little in the way of overheads ”
of Holiday Inn quality but with more facilities. The fi rst type of investment can generate a return of 40-50% per annum. The second generates an ongoing rental income of 20-25%” These fi gures do sound extraordinary. How can they be delivered? “The secret to getting such high
returns out of the residential units is, mainly, that the units are prefabricated and assembled very quickly on site. using the deposit monies paid by the investors. The whole construction process only takes four months. “For the hotels, the trick is that they
are more attractive to the end user (and so the investor) because they are simply better than other local hotels in terms of the facilities they offer.” For the residential units, the
investors seem prepared to accept their exposure to risk – uncertainty as to the long term future of this market – in return for the high levels of reward on offer. This is probably helped by the fact
that the entry level is as low as USD 45,000.
Liquid gold | Oil workers need accommodation and Robert Gavin can provide it
“The ongoing returns from letting the hotel rooms can be clearly demonstrated by reference to local comparators.” Will this market for short term
residential accommodation continue or will the investors end up owning redundant space in a place that has moved on and the demand is for longer term housing? Robert agrees that, long term, the
future probably lies in housing and not these residential units but that is not the market right now. As far as the hotels are concerned, he believes that their quality and facilities will ensure them an ongoing rental market. Right now, however, Robert believes
that both are good, solid – but different – products and that they offer best ways into the market. Are not these sales pretty clearly unregulated collective investments, as defi ned by UK law? How has Robert dealt with the requirements of the UK fi nancial services legislation? “We have spent a lot of money on good legal advice. We have got around the problem.” He has noticed that there are few
professional and experienced local developers in North Dakota. Whilst companies may come in from other parts of the US, he thinks that his experience of living as an expat will give him a competitive edge when it comes to the design and delivery of accommodation for this type of transient worker. They are just not looking for a place to live but also a place that will give them easy access to a full range of leisure and other facilities. “Providing these facilities makes good economic sense. Adding them puts 5-10% to the construction cost of the development but boosts sale prices by 20-25%.” Where do Robert’s buyers come from? Although signifi cant numbers
come from the UK and Western Europe, many are now based in Singapore and Malaysia. “There is a huge appetite for
“He believes that the hotels’ quality and facilities will ensure them an ongoing rental market ”
investment property in these countries. We can sell fi fty units in a weekend and now regularly sell eighty or ninety units a month. Many companies are trying to enter this market but fi nd it diffi cult to do so because they are not suffi ciently committed to it. We have credibility in that we have our own ‘real’ offi ce in Malaysia – not just a postal address like some of our competitors.” Globally, Robert’s sales come – in the main – from a network of about six hundred partner agents selling property on his behalf in their own markets. “I believe you need the local knowledge and expertise to really get into these markets. I can’t imagine how you could sell in large volumes without it.” Of course, the 80/20 rule again applies. 20% of these agents produce 80% of his sales though, he insists, the remaining agents are well worth having. As to the future, Robert intends to continue building his brand by selling in larger volumes though an expanding number of very professional local partners. However, he is also looking to make sales to pension funds and to lift the profi le of his brand through celebrity endorsement. Where will he be in fi ve years? “I want to be selling GBP 500 million
of property in a number of countries and a number of different market sectors.” Robert needs to look to the future. He is
now a family man and wants to provide for the fi nancial security of his family, so giving them a much stronger start in life than he enjoyed.
www.opp-connect.com | DEC 2012/JAN 2013
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76