INTERVIEW: Stuart Pender, Lomond Capital

‘People have gone, but this is about realigning the business’


stuart pender 5Stuart Pender sounds like a man in a hurry. Five years since he launched Lomond Capital and began mopping up businesses in the private rented housing sector, he has just completed a big restructuring of the company and is planning its next move.

There have been whispers of cost-cutting, discontent, senior people leaving, offices closing. Some claim the company is over-run with insurance experts and that it ignored advice on a new IT system.

Pender says someone has got their wires crossed. Yes, people have gone, but that was part of necessary changes required to put the company on track for its next phase of growth.

“This is not about cost-cutting, or being in difficulty. In fact our costs will be 40% higher this year than last,” he says. “There was a restructuring of the top team, but it was about realignment for our big push into England.”

Malcolm CannonNonetheless, eyebrows have been raised in property circles. Malcolm Cannon (right), who was hailed as a “key appointment” when he was lured from ESPC to head up Lomond’s Edinburgh business in 2013, left the company at the end of June, unannounced. JP Martins, a key adviser, has also gone.

Pender explains that the changes have created a more streamlined company which will prepare it for its assault on the south of England, expanding on its presence in Edinburgh, Aberdeen, Manchester and Birmingham.

“The PRS (private rented sector) markets we want to get into are Brighton, Bristol, Reading, Oxford and Cardiff. This is why we realigned the team,” he says.

The growth will be part-funded by private equity following a deal with MML Capital in August last year. The size of deal was not disclosed at the time but he reveals that the company invested £17.5 million for a 25% stake, leaving him with almost all the remaining shares.

With the money in the bank he set about rebuilding the top team, bringing in the extra expertise he wanted to tackle its expansion. He laughs off suggestions that the firm is run by insurance people.  “I am the only one from the insurance industry” he says.

Three partners have been appointed: Ivor Dickinson, Michael Groves and Simon Smithurst. Together they will build the business around its core property and investment management divisions, the latter being expanded to provide investors with new opportunities in the sector.

Malcolm Cannon’s departure from the Edinburgh business was related to “skill sets” required to move the company to where Pender wants it to be. Ian Lawson, with experience of property and investment management, was brought in from Grainger.

“It was not a nice process to go through but we felt the business would be stronger led by Ian,” says Pender.

Lawson has set about reorganising the Edinburgh business, run from offices in Orchard Brae. One divisional finance director has left and the other has moved into another role. Finlay McNaughton was appointed to the combined role.

The Dundas Street office in Edinburgh has closed because it was in the wrong place and a new office is being sought. Pender’s preference is Queen Street but he has failed to secure the unit he wants as the current occupier doesn’t want to move.

Edinburgh was where it all began in 2010 with the acquisition of Braemore and it remains the mother ship to a company that has bought 26 businesses, financed until now by the partners.

Pender made his money by selling Payment Shield to insurance industry consolidator Towergate, later adopting its model for Lomond Capital. He won’t disclose the size of that deal, except to say: “We did okay.”

He led a management buy-in of Payment Shield with advice from his former Scottish Amicable boss James Crosby who had become CEO at HBOS. The subsequent sale of Payment Shield provided Bank of Scotland’s integrated finance business with its highest ever return.

Lomond is now looking at “bigger acquisitions”, says Pender. The private rented sector is growing to meet an acute housing shortage which is providing huge opportunities for management companies and investors.

He spells out the shift in housing trends. In 1990 two-thirds, or 64%, of those aged between 16 and 34 were owner occupiers. By 2010 that figure had fallen to one-third or 35%. The average age of a first-time buyer is now 38.

The UK has a huge shortage of homes but lenders require high deposits for buyers and there is not enough money being invested in social housing, he says. Private rented homes are filling the gap.

Pender reveals that Lomond is looking at setting up a fund that will provide a facility for investors wanting to get into the market. In the meantime, he has his eyes on a number of targets that will give it a firm foothold in the south.

“Next year there will be a step-change in the business because of the acquisition pipeline.”


Birthplace: Glasgow

Age: 50

Lives: Bridge of Allan

Education: Mearns Castle; Glasgow university (maths)

Career highlights: trainee actuary at Scottish Amicable; commercial director Bankhall (IFA); chief executive Payment Shield; sold company to Towergate

What makes you angry?

I am fairly pragmatic, but I don’t like it when people take too long to get to the point.

What makes you tick?

I like taking businesses and processes that are broken and putting them back together.

What could the government do to help your sector?

Streamline the planning process and free it up to get more houses built. They should also provide more incentives for investors to help get things moving.

What is your advice to a young person?

Get the strongest possible training you can. There is no question that I am a product of the opportunities I was given.


Main photo: Stuart Pender (by Terry Murden)

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