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Interview with Hamilton Bradshaw RE (James Caan’s Property Company)

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In addition to his angel investment activity, James Caans’ interests in property are well recognised and look set to continue to grow in the coming years.  Please see an interview below with Faisal Butt, James’ ‘right hand man’ within the property operations of Hamilton Bradshaw where we discuss the company’s current strategy; due diligence methodology; the current market; barriers that are being faced; value-based investment amongst other topics.

1) How long has Hamilton Bradshaw Real Estate (HBRE) been established for? James’ interests in property are well established but the residential real estate arm of Hamilton Bradshaw has been in place for 7 months.

2) Do you focus on a specific type of property asset class (residential, commercial, industrial) – or do you think it is good to have a spread? Today, the group’s new investments focus in residential property. Our portfolio has recently been launched and will be geared towards the high-end luxury real estate market (£5m+) in Knightsbridge, Belgravia, Mayfair, Chelsea and South Kensington.

3) How would you describe the company’s mission statement and how you operate (on a general level)? Our residential real estate arm was born from our vision shared between James Caan  and Kam Babaee of K10 Developments (a well established high-end residential property development firm) to be seen as a market leader in luxury London property.   The partnership’s mission is to create exceptional value by identifying, analysing, and executing investments in central London luxury residential real estate stock.  We are in the advantageous position of being led by James’ high level entrepreneurial profile combined with the property development knowledge of Kam Babaee of K10 Properties (an already well established company recognised for its outstanding quality in residential finishing). The investment philosophy of HB Real Estate can be summarised as follows:

  • We bridge the gap between London dwellers ever-rising demand for modern and luxury interiors and seek properties which have the potential to meet such needs;
  • We invest in properties between 2,000 to 10,000 square feet;
  • Our residential refurbishment plans incorporates the very best in quality fixtures and fittings including high technology multi-media music systems and digital mood lighting as well as adding lateral living space through basement dig-outs wherever possible;
  • Our business model is based on generating of 50-100% ROE or project margins in excess of 20%;
  • Our residential real estate development projects typically take 18-24 months from acquisition to exit;
  • Funding is arranged for each deal through a combination of equity, mortgage finance, and construction finance.

Some examples of recent projects we have been involved with can be viewed by clicking here and a case study of one of our developments in Knightsbridge here.

4) Can you give us a brief outline of your fundamental due diligence methodology? We employ a heavily scrutinised investment analysis model focused on a stringent set of private equity processes in every stage of the investment cycle from origination through to execution.

5) What are the processes behind the ‘private equity’ approach? Our PE methodology for due diligence simply entails following our internal process when looking at real estate deals.  The steps in our PE process are:  (i) Origination, (ii) Due Diligence, (iii) Negotiation, (iv) Execution, (v) Portfolio Management and (vi) Exit.  These same 6 stages are relevant to real estate investment, but the terminology is a bit different.

6) What are the main benefits of investing at a time like now? Our view is that the real estate market has bottomed out, valuations have settled and there are opportunities to be had (across the UK).  Demand for houses at the top end of the prime London market is diverse, robust and global.  In the £5m+ category, we have found that 60%+ of the demand comes from overseas, and as developing countries get richer, high net worth individuals and their families aspire to have a London holiday home.  These families are also attracted to the lifestyle advantages of London, the healthcare system, and the excellent schools for their children.  Supply is limited for modernized houses that are fit for the end users described above, hence market dynamics look strong in the current market.  More recently, weakness in the pound sterling has propelled international demand, as overseas buyers aim to take advantage of the currency discount currently available.  Domestic demand in London is looking promising as banking bonuses make a comeback in the years ahead.

7) What are main obstacles that you and indeed investors as a whole are facing at the moment? As mentioned above, for us, the main issue is the double edged sword of London property is its limited supply – whilst this has assisted keeping the market buoyant, from a development perspective, good unrefurbished properties are difficult to come by, so deal flow remains a constant challenge.  On a general investment level, the main issue is around finance – the banks are still hurting after the effects of the credit crisis and the UK market is, in reality, only open to those who are able to meet the stringent demands of the lenders.

8)Will these hurdles disappear any time soon particularly with the increasingly austere measures by the regulatory agencies? It is fair to say there will not be a property boom as was witnessed in the first five years of the 21st century in the UK for some time.  This, of course, does not mean there is not money to be made – more detailed analysis is required and focus on fundamental investment principles and not speculation (as was becoming increasingly characteristic in the market prior to the recession).

9) What are the company’s expansion plans for the short, medium and long-term? We are in the process of raising a £100m fund targeting high end residential properties in prime London.  We aim to buy and develop 10 properties over the next 2 years.

10) How important is the concept of value investing HBRE property investment strategy? We aim to add value in every property that we invest in, that is the central tenet of our investment plan.  We usually do not adopt a buy and hold strategy here as HBRE which is perhaps where a value investment model would be of more significance.  However, despite our projects following a short term cycle, our strict due diligence enables us to foresee risk and manage project costs (and therefore cash flow) accordingly.

11) Do you have a standard yield level you adhere to?  Under what circumstances, if any, would this level be deviated from? We gauge properties more on price per square foot valuations, relative to market levels.

12) And what about gearing and yield levels? Our aim is to get up to 60% LTV on our development projects.  For new investors who are looking to enter the property field, what would be you essential recommendations / suggestions?  Be very cautious on estimated end values when entering any development project.  You’re always safer forecasting end values conservatively, and then working backwords from there.  Team up with a very good surveyor who can help you project manage and monitor the costs of your developments.

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December 2019

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