In Conversation With: Graham Bates of Eddisons Residential

HE’S one half of a brother and sister team working with chartered surveyors Eddisons to assist the owners of distressed property assets to maximise their portfolios. Ian Briggs meets Graham Bates.

GRAHAM Bates admits to being a marketeer. And listening to him talk about Eddisons Residential, the joint venture company between Eddisons Commercial and him and his sister, Helen Peace, you can see why.

Not short of an opinion, Bates is an affable and knowledgable commentator on all things residential property related.

Traditionally known as a group of historic commercial property surveyors, Eddisons, headquartered in Leeds, has eight offices across the UK.

Eddisons had extended its services to cover facilities management services to residential blocks but two years ago Bates and Peace, two successful business owners and property developers, approached the firm with a plan to expand its residential offering further.

Given the economic conditions of the time, which are still prevalent today with ever increasing numbers of distressed properties owned by banks and investors, Bates and Peace saw an opportunity and launched Eddisons Residential, with the full backing of the company.

As well as continuing the residential block management service, Eddisons Residential also boasts residential property solutions and residential property management arms.

Residential property solutions offers strategic advice and management services primarily for banks and insolvency practitioners in relation to distressed residential property assets throughout the UK and overseas.

The residential property management arm is aimed at residential blocks and portfolios and its business model operates by centralising services such as marketing, credit referencing, rent collections and maintenance in its Leeds office with employees based around the country.

So how is business two years since launch?

“Helen and I are significant shareholders in the business,” says Bates. “We run the business but there is a strong day-to-day relationship with Eddisons. I think it works well.

“Eddisons know we know what we’re doing. Our first two years have been successful and we’ve proved our capability.”

Staff numbers in the division have doubled to 40 since Bates and Peace got involved.

“The first year of our involvement was very much a shake-up,” he says. “Since then we’ve been putting the building blocks in place for growth.

“And there’s another three years where we see the market being very active in terms of distressed property. We’re actively trying to be seen as a one stop shop.

“We don’t have a desire to be the biggest. That would be a very difficult job against some other players. But we’re unique in terms of structure. We want to be seen more and more as bringing practical guidance to property solutions.”

Bates and Peace have plenty of experience of working together. They built up the IFA business, Bates, which had 120 staff before its sale in 2003.

Bates says the pair work well together despite their sibling status.

“I’m a marketeer. Helen complements me and makes a great MD and operations officer. She has great people skills. You could say she does all the work and I do all the talking!

“This venture is like going back to our small business roots, but we’re now doing it with a well established brand. And we’re all a bit wiser so hopefully we won’t make some of the mistakes we did the first time round with some of our earlier ventures.”

Bates says the timing of Eddisons’ approach was perfect as it coincided with his view that the bubble was set to burst in the residential property sector and that there were set to be investors and institutional landlords left sitting on large swathes of distressed stock.

“It was very much about bringing together our residential expertise with the other commercial experts within the group,” says Bates.

“There’s a lot of distressed property out there there that is good quality stock. There is plenty of stock distressed at the moment but no real signs that this is hitting the general residential property market.

“The market is being driven by apartment blocks but why would you want to knock say 30 or 40% off your debt values? Providing you’re sitting on a quality asset there’s going to be an upside.”

In essence, Bates says, Eddisons Residential’s strategic role is to improve the future of an asset and maximise value for its owner.

“One of the benefits (of using us) from the bank’s perspective is that we can manage all the things they need,” he says. “All buildings are landlorded by default. Our job is to help the owners maximise the realisation and value of the asset.”

An example in which Eddisons Residential has been brought in is an apartment block in Elland, West Yorkshire, which saw the JV work with Deloitte, acting as receivers, to drive income. Bates says rent has increased to more than £500,000 a year following the development of a management strategy and the release of apartments to the lettings market.

Commenting on the market outlook, he says: “Would we have thought 2011 would have been better in terms of sales? Yes. But there are signs that things are moving.

“I’ve always remained optimistic about residential property. I think residential property is one of the best asset classes.

However, we’ve been in the eye of the storm and we’re still close to that storm.”

Bates says the industry has become a “generation of renters” and the strong rental market experienced over recent months is set to continue for the forseeable future.

“Institutional landlords will come back into the market and I always predict that institutional landlords will be in the market. Buildings are being acquired and there will always be rental landlords.

“Renting is all about professionsals now – white collar workers. It’s a lifestyle choice as well as a financial choice. Residential lettings markets have gone from being a cottage industry to a more professional business.”

However, he warns that an increase in interest rates will see more distressed properties coming onto the markets as lenders are unable to service their debts.

But that can only be good news for Eddisons Residential.