Money Matters - Single Deals to Make you Millions

By Shelley Mackay

Oct 10

I'm going to talk to you about single deals to make you millions of pounds.

Very often, people ask me, "Paul, well, how did you get into property?" What I want to talk about today is I want to give some really good insight into single deals to make you millions of pounds for people that are already in property and they want to take that next step. I think this should be interesting for everybody because whether you're in property or not at the moment, I'm sure you want to know what happens next. After you've done your first five, 10, 15 deals, many people don't carry on doing the relatively small £50,000 - £100,000 deals all the time. Many people will go upper level.

Let me tell you first about a 60,000-square-foot warehouse that I took on in Hillington, which is just outside Glasgow, round about 10 years ago now. Now you might be thinking, how big is 60,000 square feet? Well, I don't know if this helps, but an acre is 80,000 square feet. So, it's kind of three quarters of an acre of building. So, that's a relatively large building by some standards. Hopefully, when you get far enough on in your journey, you'll think, oh, that's quite a small one. So, it's a 60,000-square-foot building. What was it used for? Well, it was a failing business. It was a business that was breaking even.

So what did I do? I got involved with that business. And as soon as you start talking about buying a commercial property, as soon as you start talking about buying a business, it's not about the bricks and mortar. It suddenly becomes about the value of the books. You need to move on from just bricks-and-mortar valuation on buying to let, and you need to start to learn about balance sheets, and profit and loss accounts, because that is the basis on which a business is valued.

Now, this particular business wasn't making any money. It had turnover, but it wasn't making a profit. Now, I could see how it could make a profit, but it wasn't. It was an old business, and to explain a little bit more detail about it, it used to be called Bottle Recovery Scotland. The basis of the business was, do you remember there used to be like, returnable beer bottles, returnable soft drink bottle? So, this business would drive around the pubs and clubs of Glasgow, collect up all the empty bottles, clean them, and then sell them back to the bottlers that would refill them. And that was a great business for many years, and it still had the bottle washers, but over the years, as it became less normal to have a refillable bottle, because what do we have these days? Too much plastic and cans and all that sort of thing, so the old glass refillable bottles are just not used anymore. But I could see that a warehouse that size, where it was, in the middle of the industrial heartland, then more specifically, the spirit bottling industry of Glasgow could have a great future servicing the drinks industry, but just in a different way. It still had the context of all the businesses, because in a small way, we're still working with them. So, how could you take that business relationship and grow it? And one of the things that I knew was there was a shortage of contract bottling in that area. So, that means, I don't know if you know this, but if we pick spirits, for instance, and I'm sure you'll know that an awful lot of whiskey, and vodka, and products like that, are bottled in Glasgow, but specifically in that area of Glasgow. I don't know if you know this. The average person consumes two bottles of spirits a year. One of those is at Christmas. So, you've got 50% of your demand in like eight weeks of the year because people don't, people tend to get their stuff, get their drinks in before Christmas, and that means the demand for bottling isn't like that all year. It goes massive spike and then it falls away again.

So, in the busy times, the big bottling plants want little bottlers to help them out with special runs of this, or, you know at Christmas, you'll get like a bottle in a tin or something, or it'll be in a cardboard box, you'll have a couple of glasses with it, that sort of thing, and that, in the industry called contract packing, or repacking. Now, you need specific niche industry knowledge to be able to do deals like this, but almost always, there's an opportunity to leverage the property. So, how did I leverage that property? Well, in order to purchase the business, I got a Regional Selective Assistance grant. So, that's not cheap money. That's free money. So, I got an RSA grant, Regional Selective Assistance grant, and you need to know what you're doing here, but I got an RSA grant, it cost me nothing, a £415,000. I was then able to go to, at the time, the Royal Bank of Scotland, but any bank would have done it. They could see that I had the grant of £415,000, so then they gave me match grant funding for another £415,000. I then went to rent-through-your-council, and got another £35,000. So, one way or another, I'd have a £900,000 of grant money, or really cheap money from the banks. And that is what I used to buy the business with the building. We then ran that business. I didn't; I put in a manager, guy called Andrew, and Andrew ran that business for me for three years. Three years later, it was profitable, and when a business is profitable, you can sell it for multiple of its profit. Typically, for a business like that, it's between two and three times. That business was making a roundabout a million pounds a year.

So, it was sold for two to three times. Would you like to go and buy a business like that, it's got a whacking great warehouse, and bottling facility by the time we finished with it, it makes a million pounds a year, sell it for two and a half million pounds, but it has not actually cost you one penny? Neither, neither have you had to spend any of your time doing it after the end of your analysis, because you've put a manager in there to do the business for you. Now, I appreciate that this isn't your first property deal. Now, why do I feel drawn to talk to you about this now? Because this is the elite level of property deal.

This is the Formula One level of property deal. And I'm out here, in Italy, near Monza, and I'm actually going off this week, so Saturday morning, I'm going off this weekend to spend two days in the Paddock Club, hanging out with the people at the top of their game. I'm an engineer. There is no other sport for me that comes close to Formula One, in terms of the amount of money that gets spent on it, the technical excellence, and the human excellence, in terms of what those drivers do. So, for me, it's the absolute pinnacle of man and machine working together in perfect harmony. They have to have systems. They have to have big teams. And it isn't the first thing you're going to do. As many people that get into Formula One would have started off by racing go-karts, the little thing, the cheap thing, the few-hundred-pound thing. So, if you want to end up doing big, multi-million-pound deals, like I've done, you're going to need to start somewhere, and that somewhere is very often your first £50,000- or £60,000 buy-to-let, but many people don't do it, because they want that first £50- or £60,000 buy-to-let, Lewis Hamilton didn't get into kart-racing because he wanted to be a kart racer. He always wanted, always wanted to be a Formula One racer, and specifically, he always wanted to be a world champion, which is what he now is, five times over, and hopefully this year, six times. But I want to give you a couple more examples of how you can take relatively small amounts of money, because this is the thing. The bigger the deal that you do, you don't actually often need more money. What you need is more contacts. You've heard this before, I'm sure. Your network is your net worth. What you need is more knowledge. What you need is more support. What you need is more mentoring. And that's why I'm so passionate about helping people that want to do these big deals. So, if you're looking to do big deals, you need to get yourself involved with people that have got a knowledge of doing that, and they've done it before.

I want to give you some insight into some of the biggest corporate deals that I've done. The biggest corporate acquisition that I've done, the biggest brand acquisition that I've done is I've bought Malibu from Diageo. Now that was an £850,000,000 transaction. The biggest disposal I've done, I was part of a team that sold Allied Demac to a consort team of companies that bought it, and that transaction was almost 18 billion. So, I've got the knowledge, I've got the insight at the very top level of the game. And I'm delighted to share that information and that knowledge with everyone that's watching this video. So now, I want to give you a kind of a medium-sized deal, to give you a feel for the kind of deal that you can do with some money, not no money. And then, I'm going to finish up with one that I'm looking at right now. And you'll appreciate, I can't really give you the full details of the one that I'm looking at right now, because I'm in the middle of buying it. Happily tell you about it afterwards. So, and now I want to tell you about a four-acre site. See how I'm moving from square feet or square meters to acres and hectares? Well, as you do bigger deals, they physically get bigger, often. So, this one was getting disposed by a pension fund. It was four-acre site, and on it, it had over 100,000 square feet of buildings. It was light industrial. It was warehouses, it was workshops. Let me give you a feel for the kind of property it was. I'm sure there'll be ones near you. There was quite a lot of parking. It was kind of an industrial site that was past its hay day. The anchor tenant was Howdens, the kitchen people. Kitchens and bathrooms. So, they had about 30,000 square feet, which is kind of one corner, if you can imagine it, of the building. But then, the rest of the building was little units. There was a guy doing MOTs. There were two guys that were doing alloy wheel refurbishment. So, all little bits and pieces, and there was a couple of burger vans. So, I'm sure you can visualize the kind of property that it was. Now, the sale price for this property was just 400,000 pounds. That's a lot of property, that's a lot of real estate for 400,000 pounds.

Now, why did the pension fund want to get rid of it? They're too small. They're little itty bitty thing, because pension funds will very often not touch anything that isn't in the millions. And they bought this portfolio, and then, they were getting rid of the little bits and pieces. So, they wanted to keep the big, multi-million-pound things, because that's what pension funds like, but they wanted to get rid of the smaller things. So, many of you, many of you will see houses. Many of you have probably got houses that are worth more than 400,000 pounds. So, this was an entire, almost an industrial estate for 400,000 pounds. What was the income from this complex of industrial estate? Well, it wasn't fully let. This was the other scary thing. But even though it wasn't fully let, it was about 75, 80% let, so there were a few vacant units, it was still bringing in, still bring in 125,000 pounds a year.

So, imagine that. 400,000 pounds to buy it, and bringing in more than 10,000 pounds a month. So, what was the additional complexity? What was the additional difficulty in this case? Well, the tenants, apart from Howdens, weren't on proper leases. So, you needed to go in there, and you needed to sort out the tenancy agreements. So, they're on things called licenses to occupy. Now I know I'm getting a little bit technical, and that's not really the point of this video. The point of this video is to show you a pathway where you can go from deals that maybe give you a few hundred pounds a month, to a few thousand pounds a month, to in this case, ten thousand pounds a month. And you can do this with the right knowledge, support and education. But we are now moving towards the elite level, the Formula One level of property. The final deal that I wanted to share with you today is a deal that I'm looking at, and this is an office complex. It's got five office blocks. Five individual office blocks, all of which are quite big. So, one of which is let to the BBC. So, they've got four of them that are let to big institutions like the BBC. The purchase price, well, the advertised price is 3.2 million. So, we're going up the grades here. We're going up the pay scales here. Now, how much money do you think you would need to do that deal? You can't possibly tell me because I've given you nowhere near enough information about the deal. The income from it is more than £400,000 each year. The challenge, because there's always a challenge, which is an opportunity, the challenge is that the fifth office block, you've got four that are let out to good, strong covenants, to good tenants. The fifth one is a bit of a mishmash. So, you've got a constituency MP's office in there, you've got all sorts of little bits and pieces. Now, I don't know if you've ever seen a tenancy agreement out to a constituency MP, but it says this. It says, "A five-year term or a general election", and who knows when the next general election's going to be, "or the death of the MP." Because if the MP dies, obviously he doesn't want the office anymore. If there's a general election, he or she might lose their seat. So, there's a complexity in this deal. It's sorting out those tenancy agreements. But if you sort them out, and you can with the right help, you can move that 400,000 a year closer to 450. Now, if you've got 450,000 pounds a year coming off a good select of good covenants, long leases, the value of that property is going to be between four-and-a-half and five million pounds by the time that I finished with it. So, if I get it for anything like three, but I'll make it worth five, well, that's a two-million-pound deal.

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