Real Business - The Champion of UK Enterprise

Mark Stott – Select Property

By Rebecca Burn-Callander, published 1 year ago in Leadership.

Real Business first met Mark Stott during the golden days of off-plan sales. He was holding a lavish party for Select Property at a celebrity trap in west London last year. The no-expense-spared bash was celebrating the launch of the firm’s new Aquitania development: the acquisition of the islands of France and Spain in Dubai’s “The World” for £98m.

Guests were treated to a performance from A-list songstress Kelly Rowland and Hollywood honey Hilary Swank was present via video link on a huge screen. Orlando Bloom sashayed around the room, shaking hands with dignitaries and smiling at swooning socialites. And there was even a bespoke Aquitania cocktail making the rounds. It was a terrifying shade of blue. No frills the evening was not. But eight months on, Stott admits it was a complete waste of money. “I learned so much that evening about working with celebrities,” he says, ruefully. “I’d use Kelly again but I was completely disappointed with Orlando. It was £75,000 for him to walk around the room, have a couple of drinks and then skulk off.”

Rowland cost a whopping £100,000 for her performance. Swank, who was primed to be an ambassador for the Select brand, cost “even more” admits Stott. But the Boys Don’t Cry star was struck down by a health scare and had to pull out.

It was an expensive lesson for Stott: just a few, short months later, when the Sunday Times turned up to poll Stott’s employees for this year’s Best Companies to Work For supplement, he had been forced to lay off staff. “We had just made 16 redundancies,” he says, forlornly. “It was the worst experience I’ve ever been through in my life in business.” Despite the lay-offs, Select Property came eighth in the ranking. Stott scored highest for his inspirational leadership.Real Business caught up with the Cheshire-born entrepreneur at the Select headquarters in a Wilmslow business park. It’s a pretty low-key setting for a firm founded to sell off-plan properties. Where are the flashy premises on Mayfair? The hard sell trips overseas to view show homes? The champagne on tap? During the past seven months, since the market fell off a cliff, Stott has turned his business model upside down: no dangling off-plan mansions in front of bored fat cats. Instead, he breaks down the cost of owning your own slice of the Dubai coastline into a lengthy payment plan option that “costs less than a cappuccino every day”. They are pitched at families, not playboys. And all the selling is done over the phone; low overheads, minimum fuss.

The concept is, in essence, time-sharing with equity. Rather than purchase a property outright, investors buy a “fraction” of an apartment in Dubai, Turkey, Spain and now Orlando, and pay off their chunk over a 15-year period. These properties are ready-built and the fractions broken down into two-week slots. You basically own a portion of the property that equates to a fortnight stay there every year. Select Property is still making good on former off-plan investments but this new model is integral to the firm's future. “What we’re trying to do – in a tough climate – is make property investment available to absolutely everybody,” explains Stott. “And, at £69 a month for a fully furnished, two-bedroom unit on the beach, we’ve made it ridiculously affordable. I’ve lost count of the number of properties I’ve sold to taxi drivers, to business owners, to teachers...” At the end of the investment plan, you can then sell off your share and make a killing.

“It’s a lot more reliable than the stock market,” says Stott. “Absolute worst case scenario it’s going to be worth what you paid for it. And it’s definitely a lot more fun than leaving your money in a post office account.” He says it’s a win/win model: customers get a place in the sun and Select gets a steady, guaranteed stream of cash over the next 15 years and an ever-increasing customer demographic.

This revenue model has proved the salvation of a company that should be seeing sales dying. The firm pulled in a £17m turnover last year, trousering profits of £5m. And Stott won’t be losing any ground in 2009. “I want 10,000 customers this year,” he says. “In terms of turnover, that might bring me £10m, it might bring me £50m. But this model will allow us to bring in ten times more customers than we usually do in a year. Within five years, I plan to have a quarter of a million customers.”

Stott also maximises margins at every turn. “Because of the climate now, we buy property cheaper,” he says. “And we sell it over the phone, which takes our cost of sale down to 10 to 15 per cent. Traditionally, it’s more like 60 per cent.”

Moving away from the off-plan strategy has also allowed the canny Stott to set up a whole raft of complimentary businesses: Select Furniture kits out all the apartments and a new cleaning company keeps them spick and span. The opportunities are seemingly endless. “I know where these guys are going on holiday every year for the next 15 years,” he says. “I can get them great deals on flights, travel insurance, currency exchange.”

You’d be forgiven for getting déjà vu with this business model. It sounds a lot like the timeshares of old or Grant Bovey’s dream for a mini monopoly before his property firm, Imagine Homes, went bust last year. But unlike Bovey, Stott has tiny overheads: 80 per cent of the properties are sold over the phone. And Select’s apartments are second homes in the sun, not overpriced mansions in the UK.

“The Imagine Homes model encouraged people to highly leverage themselves to earn income on buy-to-let products and allow that income to fund future purchases in turn,” explains Stott. “This was similar to the Inside Track model, which would always come down like a house of cards when market sentiment changed and negative equity was quickly created. The fact is, most of our customers don’t use financing. They don’t pay over the build period or put in a minimum of 30 per cent over the first six months. This means that even with the most severe economic downturns, they are unlikely to walk away from their investment.”

However, his updated model has not been without its casualties. It’s sounded the death knell on the marketing spend. From being accustomed to blowing six grand a week on big budget PR, Stott is having to dramatically down-scale.

Salvation appeared at the end of last year in the form of Sarah Ferguson, Duchess of York. “Our chairman [ex-MD of retail banking at RBS, Mike Hutchins] knows her,” says Stott. “One day I just had the phone passed over to me and this voice I immediately recognised said: ‘So you need some help out in Dubai, do you?’ We partnered with her to push her charity at an event out there. She only took one person with her, no security, none of that. She was so down to earth – especially after Orlando.”

Now, the Duchess fronts Sarah Selects, a partnership that sees the property firm auction off the occasional luxury pad to raise money for her worthy causes. It’s a great opportunity for Stott. “The Duchess took Weight Watchers from about three million to 30 million users in the US,” he says. “She’s a woman of the people over there. She could help me take this to the States, too. There are millions of people over there who only get a very short holiday period – two weeks, that’s it – and most go to the same place every year. That’s ideal for us.”

Schmoozing with starlets. Chilling with the Duchess. Not bad going for a man who says his only brush with celebrity before Select was flogging David Beckham’s Bentley. “I was a car salesman for ten years,” explains Stott, laughing.

Stott’s zero-to-hero tale is more extreme than most: “I left school after my A-Levels and sold cars for a guy called Graham Knight. But I set up my own garage when I was 20. I saved up a very small pot of money and built businesses off that. Within four years I had a bar and a restaurant, I’d invested in a florist and a marketing agency – I even had a software company.”

But every venture failed, bar the car dealership. “The car business bankrolled everything,” says Stott. “It was always the thing I wanted to get away from and the business I never saw any value in. I always thought the big ticket would be the software business or the bar. As it turned out, those just lost me £1m and the car business plugged away, bailing out the debts.”

Unsurprisingly, when Stott decided to found his next ambitious venture, Select Property, in 2004, the banks refused to cough up. “They’ve never backed me,” he says. “You always need an asset and to get an asset you need money in the first place.” Stott turned to angel investors and raised £7m for his first property acquisition, locking them into specific projects without giving them any share of the holding company. This is how Stott still retains 80 per cent of the business (the only other shares belong to four of the other directors).

It was a challenging time for the first-time property entrepreneur. “Dubai was probably the fastest-growing city in the world. You learned on your feet,” he says. “It’s an incredible place to do business; regulatory changes every month; the government growing; playing catch up with the speed of growth of the marketplace.” During that time, Stott sold 6,000 properties. “I bought an answering machine, plugged it in, put an ad in the Sunday Times and went home for the weekend,” he recalls. “When I came back in on Monday morning, there were 30 messages on the machine.”

Three years later, while other players in the market were exercising caution, Stott’s appetite for risk forced him to make the high-stakes acquisition of Aquitania that could have sunk the firm without a trace – instead, it made Select Property one of the largest players on the Dubai investment property market.

In a few short years, the Cheshire-born entrepreneur has been involved in projects in Dubai, Spain and Turkey worth £1.3bn. The firm has sold £750m worth of property to date and still shows no sign of following the market into the doldrums.

But after so many busts, Stott is still endearingly baffled by his success. “It’s been the most surreal thing,” he admits, sheepishly. “The other day I was on this island four miles out to sea being photographed with all these famous people. The photographer was a guy from Ashton, not far from here. We both thought we were dreaming.”

Related articlesPaul Barry-WalshTony DeepLuke Johnson