Despite having the majority of his estimated £800m fortune tied up in bricks and mortar, Sir Alan Sugar has never given an interview about property before.
The topic makes him rather amicable. He hardly swears. He smiles. He is polite and rather charming — a very different character from the belligerent, snarling monster who turns contestants into quivering mush on his BBC TV series, The Apprentice.
However, he quickly loses patience with the demands of EG’s photographer. “Why don’t you take a couple of passport photos for me while you’re at it,” he snaps. When asked to perch on a window frame he is decidedly curt: “No. I’ve got groin strain.”
Until he was beamed into the sitting rooms of millions of viewers as the face of The Apprentice, the Hackney tailor’s son was best known as the former chairman of Spurs and for building Amstrad into a leading electronics group in the 1980s.
He still has stakes in both — a £47m interest in Amstrad and a £6m stake in the Premiership football club — but they are a tiny fraction of his wealth compared with his £480m property portfolio.
Sugar’s property investments started more than 20 years ago with the purchase of a high-street parade in Barkingside, Essex. Since then he has amassed half a billion pounds of property — according to the latest research by Dr Philip Beresford of The Sunday Times Rich List — but still claims he knows as little about the industry as he does about the 4.30 at Newmarket.
Ever since Amstrad’s retail business started losing its way 10 years ago, exacerbated by competition from the Far East, Sugar has been putting far more of his wealth into bricks than chips. The initial strategy was to offset the risky “gambling” in the electronics sector, the business he knows inside out, by picking up “really safe” West End and City trophies through Amsprop and other companies under the Amshold umbrella. “Gambling with electronics generated spare cash, which I flung into real estate,” he says. “We’ve been in this position for 10 years, with loadsa money in loadsa property.”
While Sugar was selling cheap and cheerful computers and fax machines, his youngest son, Daniel, a director of Amsprop, started buying buildings. One of these was 149 Old Park Lane, which was converted into exclusive apartments that sold for record prices. He starts to describe the deal, but his father interrupts and finishes the story. “It took my belligerence to force the value up after we bought it,” says Sugar.
Now he says he’s ready to become much more adventurous in property.
“Amstrad has become an industrial supplier rather than a consumer product supplier. As far as manufacturing for retail trading is concerned, we’re out of it. It’s a sign of the times. We had to move on,” he announces in his Brentwood boardroom, which is disappointingly unlike the glamorous set of The Apprentice.
“We’ve decided we want to make property the core business for the group rather than a peripheral one,” he says.
Happy to gamble
“We entered this market to be safe with flagship buildings and reliable covenants. That’s what we did, but now we’re happy to gamble,” he says. “We’ve got cash and our buildings and we’ll let the grass grow under our feet if we don’t do something with it.
“Our main focus now will be to become a traditional property company. We’ll be buying investments and working them hard, possibly breaking them up and trading them on. It’s time to get more involved.”
To make the shift, Sugar has brought in Steven Lewis as an executive director of Amsprop Estates.
Lewis has spent the past 20 years working closely with John Anderson, first at Cyril Stein’s Ladbroke Group Property Company and then at Burford, where Anderson led the £500m buyout of the company in 2001.
At Burford, Lewis worked on the purchase, development and eventual £300m sale of the 230,000 sq ft Mayfair Place to Middle Eastern investors and BP Pension Fund in 2002, and the acquisition of the £385m Green Property portfolio in 2003. But once most of the Green portfolio had been sold, “the time was right for me to go my own way”, he says.
The new arm of the Amsprop business will start trading on 3 July in a 2,000 sq ft office at Bennet House at 54 St James Street, SW1, a building it bought from Standard Life about five years ago. The move is the first time Sugar has set up shop away from the security of his native Essex. Daniel will continue Amsprop’s traditional acquisition work of snapping up “sensibly priced” trophy buildings but will split his time between the new office and Brentwood, where Amsprop’s seven-strong estates management team is based.
Sugar cuts in again. “Daniel has been managing the existing portfolio for the past six or seven years. I’m not undermining that.
“He has picked up a lot of the tricks of the trade and knows the Mayfair market and Mayfair traders and agents or villains — or whatever you call them — very well, but we are ready to broaden our horizons into dealing and development. We’re open for business. There’s no deal that would be too big for us to handle.”
The existing portfolio has almost no gearing and Sugar plans to keep it that way. “If we applied the same gearing ratio that most other developers/traders have, we could buy £2bn-£3bn,” says Daniel. “But using very prudent gearing and some of the cash we have in the business, we believe we can comfortably purchase up to £1bn of assets.”
They are considering every sector, with the exception of high street retail, where Lewis does not see much underlying value.
“We’ll be looking for value creation through asset management. Values have been improving purely through yield movements, but that yield play is coming to an end,” says Lewis. “We’re not averse to making a quick profit where we can see it, but because of our lack of dependency on gearing we can hold on to properties and asset manage them.”
The minimum lot size is likely to be £15m-£20m. While a maximum figure has not been set, Sugar says the firm has already been offered lots of around £450m.
Every deal — however small — will have to be approved by Sugar. “I’m always the last one in the chain. I have the authority. No one is going to buy anything without my go-ahead. But that’s a pretty quick process.”
However, Sugar’s well-known scorn for property agents has not softened one bit. Harking back to the Old Park Lane deal, he derides the agent who told him, in an Eton accent, that he’d never get the prices he wanted for the apartments.
“I said to him, in my Hackney accent with a few expletives added, that when the right person comes along and falls in love with the place then they’ll pay anything for it. That’s exactly what happened.”
For someone who professes to know nothing about property, Sugar has done some canny deals. “One of the greatest buildings I ever bought was a warehouse on the intersection of the M25 and A12 15 years ago. I paid £800,000 for it. My advisers told me I was stupid, and my Jewish advisers called me a schmuck. But for 10 years it has been paying me more than £500,000 a year in rent.”
After 20 years of being on the periphery of the property business, Sugar is finally getting serious about it.
He wants to staff up the new office. “It may be that Steven needs a sidekick at some point. We may have that sidekick come in at a young age,” says Sugar.
This will be welcome news for any applicants for series three of The Apprentice.
