A thirst for top profits

A chance conversation in a bar led a residential investor into a brave new commercial world, says Christopher Browne
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Chris Stace commuted for 15 years. "I travelled with the best of them, poring over my newspaper, my briefcase of spreadsheets, forecasts and plans at my side," says the 34-year-old former investment manager. Then one day Stace stopped catching the train and started working for himself.

For 18 months, he had been building up a portfolio of 20 buy-to-lets in the towns around Kent. Some were in Ramsgate, and Stace and his twin brother would often enjoy a drink in a wine bar that overlooked the harbour. "The bar had a buzzy atmosphere and one day I was chatting with the owner when he said he wanted to sell. When he gave me the price, I decided to go ahead and buy it," says Stace. Although he had never bought commercial before "the idea really appealed as I knew I could get far bigger returns than with residential investing".

Stace had no experience in retail, however, and to the bank that was funding his venture this was crucial. "It meant I had to produce several business plans backing up the wine bar's cashflow and likely returns, instead of turning up and saying, 'Look, I've been doing this successfully for six years. My track record speaks for itself.'"

His broker Clive Smith adds: "It was a far-from-easy ride. Because we wanted a commercial mortage, the bank needed a far more rigorous approach than with a residential one - with higher costs, business plans and costings supporting the cashflow, and a far longer delivery rate."

Stace put down a £30,000 deposit and asked the bank for an £80,000 mortgage to buy the business and its 10-year lease. Three months later, after a flurry of meetings, faxes, e-mails and phone calls, Stace and his broker clinched the deal - with Stace spotting two flats-to-let just 50 metres from the bar and buying those, too. His property empire now consists of 22 letting units and a thriving business.

The one thing almost every lender or bank needs for a commercial property deal is a rental agreement. This was a deal with a difference, however. "I didn't have one, as I was buying the business assets plus a 10-year lease," says Stace. All the wine bar had to show was a short trading spell following its conversion from an internet cafe 20 months before. Backed by his own brief but successful term as a part-time investor, Stace bought a limited company and recruited a bar manager and seven staff. "That's what clinched it for the bank. They knew I was serious, that I had left a full-time job, and that, with my stock of properties, I had enough collateral for the loan."

Now, instead of a monthly PAYE cheque, Stace's salary will come from his bar profits. "I feel that every pound I earn is worth double the amount it did when I was a fully fledged wage-slave," says Stace, whose wife Nicola works for his former employer as a training and development manager.

Based on the wine bar's buoyant record, Stace is aiming for an annual yield - or, more technically, internal rate of return - of 25 per cent and year-end profits of £50,000 to £70,000. "Instead of the slow but steady income I get from residential investment, I am now depending on healthy cashflow and high, short-term profits," he says.

"I like the risk element of going it alone in commercial investment, and if this venture goes well I intend to try other, similar ones. My home town of Orpington, for instance, is literally crying out for a bar like this," he says. The fact that a leisure complex of designer flats, hotels, restaurants and cinemas is about to be built next to the harbour is another bonus for Stace's bar.

The new venture won't effect his residential ambitions, however. "I intend to carry on with my buy-to-let interests, adding more flats and houses to my portfolio during good buying periods, until I have about 50 of them."