Trio hope downturn will have an up side

Published on Monday 1 September 2008 20:16

WHEN Tom Laidlaw, head of property at the Scottish Widows Investment Partnership (SWIP), left the company after more than 19 years to set up his own business with two colleagues he accepted that Scottish Widows would not be too happy about it.

The burning issue was the UK Balanced Property Trust, a 417.5 million property fund which had been managed by SWIP. The trust transferred its fund management mandate over to Laidlaw's new Edinburgh-based company, Cordatus Partners, as soon as the three Cordatus partners had finished their six-month gardening leave.

The Scottish Widows reaction was to take them to court, accusing them of breaching their contracts by pitching for the business before the end of their leave.

The legal action eventually fizzled out and, looking back, Laidlaw states: "We accepted that Scottish Widows would not take it lying down but we did not expect the personal vehemence that was directed at us.

"They sent people to our houses and the office to get evidence they thought we had. In fact, it was the UK Balanced Property Trust which approached us – not the other way round."

With all that behind him, Laidlaw, Michael Channing (former deputy head of property at SWIP) and Michael Cunningham (former investment director at SWIP) are getting on with building the Cordatus business and racking up the deals.

Laidlaw says he left Scottish Widows because he felt he had been there long enough and did not feel he was being rewarded properly. He explains: "I don't mean money – I mean recognition, the correct reward for what we were doing for the business."

The Cordatus trio is managing on behalf of GE Real Estate – which bought the UK Balanced Property Trust – a portfolio of 85 properties worth more than 300 million and they now have their sights set on an opportunities fund.

According to Laidlaw: "Part of the reason we wanted to do this opportunistic thing is that we believed the market would take quite a severe downturn. It took a year longer than we thought it would. Because we were focused elsewhere, we are 18 to 20 months behind where we wanted to be with raising money for an opportunities fund and it is a wee bit harder today."

Cordatus has appointed Jones Lang LaSalle Finance to help it raise more than 150 million for a property opportunities fund, asking investors to commit to probably a minimum of 5 million, probably over an investment period of 12 to 18 months.

The fund will concentrate on UK properties, taking advantage of the downturn in the market to pick up income-earning bargains on behalf of investors.

Laidlaw explains: "This will be about getting back to the basics – buying income. This is a great time to be buying income and if you are equity-driven from the start you are different from other buyers.

"We will probably be looking at European institutional investors, people who understand investments and have investments in real estate. We will be looking at second or third tier institutions. We might go to the Middle East and the Far East but primarily the market will be European institutional investors."