Cobalt Developments

Background:

In 2003 I set up Cobalt Developments, a property development and investment company that I still run today. In the years leading up to the company’s formation, I’d sold Finelist (1999), Springboard (1999) and Media Square (2003), so I was ready for something new.

While running Finelist, I’d operated 800+ commercial properties, split evenly across retail and distribution with a few factories too – so I had this experience to take into my venture.

Operations:

From the outset, my main focus has been on developing commercial property here in the UK, although I have also had developments, including some residential, in the USA too.

With our small team of skilled construction staff and trusted subcontractors, we generally buy greenfield sites to develop new-build office parks and warehouses, and existing buildings of all types, in need of refurbishment or with the potential to extend. Occasionally, we’ve also purchased distressed properties from banks and completed sale and leaseback arrangements, where it has suited us and the other party.

At each end of our development process, we have trusted partnerships with acquisition and sales agents too.

Most of our many developments are sold on completion with a few, where yields are high, retained and added to our own portfolio of rental properties.

Overall, our 20+ years in this business have been and continue to be hugely successful but we have had our challenges too, not least on one residential development of 50+ homes in Charleston, South Carolina, which we were working on as the global financial crisis of 2009 hit and the US housing market collapsed.

We had bought land in the regeneration area created following the withdrawal of a large navy base, employing 100,000 people. Our scheme was for just over 50 homes, which were to be ‘stick-built’ on-site, using timber, which is the traditional construction method in the States.

However, when the financial crisis hit, house prices plummeted by 50% and our challenge was to drastically reduce build costs to sell at these new discounted values. To do this, we re-engineered the construction process.

We built our houses in factories in box sizes of 16 foot by 72 foot, which was the most cost-effective size for transport costs, as well as drastically reducing waste to make savings there too. On the assembly line, we fitted everything, including electrics, plumbing, kitchens, bathrooms and carpets.

Our ‘boxed’ houses were then transported to our development and assembled on piers – as the site was only 10 feet above sea level – then to finish, wrap-around porches were fitted.

This re-engineering of the construction process to sell, enabled us to cut 50% out of the development costs and with the market slowly improving we were able sell and exit with a 15% return on investment. Not great but it could have been so very much worse! We were faced with a severe global situation, that nobody had faced before. I’m proud that my ability to think differently and make brave decisions enabled us to come away from the development ahead financially.

Outcomes and numbers:

• Cobalt Developments continues to build its investment property portfolio, which achieves significantly higher-than-average yields.
• Apart from the occasional exception (as outlined above), sales of our developments have consistently given us circa 50% return on investment.