EG Interview: Why Scarborough Group refuses to stand still

At 75 and having started work aged 16, Scarborough Group International founder and chairman Kevin McCabe would be perfectly entitled to stop, but even slowing down doesn’t seem to be an option McCabe wants to ponder. As he launches yet another division of the £2bn-plus business he built from a £10,000 loan back in the mid-1970s, McCabe is preparing to jump on a long-haul flight to China, where he knows it’s both polite and makes good business sense to personally meet one of the very many businesses it works closely with. It is a classic McCabe move. It’s clear when talking to him that he hasn’t lost one bit of the drive he had when he first walked onto a construction site in Sheffield asking for work – the job he’d gone to in the morning lasted less than half a day (a steel factory wasn’t for McCabe, but he knew he couldn’t go home to his parents without another job lined up). If you want something done, you’ve got to do it. The latest “do” is a relaunch, of sorts, of Teesland iOG, a business McCabe built from almost nothing to more than £5bn of funds under management. A business he sold to Australian propco Valad in 2007 for some £865m. Scarborough Management Services, which will be led by McCabe’s son Simon, who has been chief executive of Scarborough Group International since 2006, will provide financial institutions, property owners, international investors, local authorities and occupiers with a range of services spanning development management, project management, asset management, property management and serviced office management. Opportunity knocks The relaunch of the management services offering, says McCabe, is it seizing on the opportunities today’s tougher market has turned up. As property owners seek help to repurpose, revive and recapitalise their underperforming or perhaps underwater assets, McCabe believes the firm’s boots-on-the-ground, hands-dirty approach is just what those in need require. “We’ve done this before,” says McCabe with a wry smile. “Never stand still in business. And sometimes you have got to look backwards to go forwards.” For him, the resurrection of the management services business is just the latest adaptation the business needs to ensure it continues to thrive during changing economic environments. “The keystone to success is the ability to adapt to change,” says McCabe. “I’ve never lost hold of that. When you’ve got these problems, don’t believe you shouldn’t adapt. Just think what you need to adapt to.” He adds: “At the moment we – my group – are fortunate. We’re not laden with debt. We have some wonderful projects ongoing but they are stoppable. But we don’t just sit and wait [for things to get better]. What do we do in the interim until the government sorts out the mess it has made for us all? We offer our services to other people, like banks, financiers, equity investors. If you’ve got problems, come to us. Come to people who actually understand because they’ve owned buildings. They’ve developed buildings from digging the holes in the ground.” It’s back to doing that again. How to adapt and thrive As McCabe shares his insights from his almost 60-year career and his tips on how to navigate a very different real estate market, he often comes back to hands-on experience. Getting involved from the bottom, understanding construction, understanding operations and operators and the ins and outs of the commercials of running a business are vital if you are to be able to adapt and thrive. He counts his early relationship with Bank of Scotland high among those experiences that have helped him learn so many different facets of the real estate industry. That first £10,000 loan to set up Scarborough predecessor County Properties launched that relationship. Then grew what he calls “business friendships” that started to link this “young buck” with the right people at seemingly the right time. From that loan grew an unpaid consultancy to the bank, where McCabe became a middleman of sorts, trying to make sure both customers and the bank got the best deal. And from that came opportunities to help the bank with its real estate issues and from that grew a trust and business friendship that has lasted decades. “I actually was doing so well in helping the bank,” says McCabe, “buying from some of their problem clients at property prices to suit the bank, but also at the same time procuring from the bank a facility to do something else that we were working on. So it was sort of marrying a bad acquisition at a higher price than you wanted with a bigger lump of money to do a super scheme that made a lot for you and therefore compensated.” That view that with the right partnership, you could take a different approach to the deals you were doing or the schemes you were developing is another of McCabe’s key lessons when it comes to success. “Some of that is about being sensible on timing and worrying about tomorrow, but not worrying about next year,” he says. “In other words, from tomorrow until next year, sort out what you want to build. Go through the technicalities that are all pre-development activities, including the commercial side, to get a feel.” Control the controllables and if you’re in it for the long term, just concern yourself with the day to day, because, says the man with four recessions under his belt, “What goes up, does come down.” McCabe has not been without his downs, of course – just Google his ownership of Sheffield United and the connected legal battles. But he believes his closeness to the day to day of the business he has run, his understanding of the physical side of real estate as well as the corporate side, has helped him navigate some tricky moments. Sense and sensibility He goes back to Teesland, a business he’d joined in his early career and then was able to buy in the early 1990s before building it up and listing on the London Stock Exchange in 2002. The listing was to grow the business sensibly, says McCabe. And it worked. A dawn raid on a rival company – Property Fund Management – by McCabe enabled him to force a merger, creating Teesland iOG, and gave him a platform to buy offices across Europe. The business was growing rapidly. Bank of Scotland, because it knew him so well, wanted to get involved so a 50:50 joint venture, Scarborough Continental Partners, was formed. “I was buying like topsy,” says McCabe. “It worked so well, but it worked too quickly because the market was bloody stupid. And that’s when I realised that we couldn’t stop buying because people still wanted to, but I knew we were buying in a market where the curve was going up. And I knew it wouldn’t last because I had witnessed it before as a young man.” Luckily for McCabe, there were plenty of others buying like mad and wanting to get in on the game – particularly the Australians. The market created an opportunity for McCabe to buy the company he had listed at £20m in 2002 back for £200m so he could sell it to Valad for more than £800m in 2007. McCabe says it was his concern for the volume of people he was employing that led him to sell the business as the market overheated. The fear, perhaps, that if everything went pop, he’d have been the one who caused what inevitably would have come for many of the hundreds of people he employed. Now his concern is ensuring the business doesn’t sit still, that it constantly adapts. “My attitude at the moment is just get on with it,” says McCabe. “Don’t moan and groan, don’t waste your days thinking you can’t do anything. You can. Use your own abilities. Inspire your colleagues not to worry about the situation. We’re all aware of the problems, particularly for our real estate industry, but let’s get on with it.” “Every pound is a prisoner. We are going through a rock and roll period. We can’t value our real estate in a proper way because the market is like a jelly. But accept it because we ain’t going to change it quick, sharp,” he adds. “But it will change. We’re going to come through it. We’re going to come through a better company. We are adjusting. We are going to do different things in 2024 and beyond. And by the time the market returns we will be a big company again because we won’t fail.” Building Scarborough Group International 1976 – County Properties established with £10,000 Bank of Scotland loan 1980 – Scarborough Property Group formed 1990 – Joint venture formed with Bank of Scotland 1991 – Forsyth Business Centres business launched 2000 – Teesland Group formally demerged from Scarborough Property Group 2002 – Teesland listed on London Stock Exchange and Scarborough launches in Hong Kong 2005 – Scarborough Continental Partners formed 2007 – Teesland delisted and sold to Valad 2007 – Scarborough Property Group becomes Scarborough Group International, reflecting its growing international presence 2014 – Scarborough sells Forsyth Business Centres to Regus 2021 – Scarborough re-enters serviced office market with launch of Blueprint 2024 – Scarborough resurrects Teesland-esque management services business If you’re interested in how Kevin McCabe grew Scarborough Group from a £10,000 loan into the £2bn-plus business it is today and want to hear more of his insights on how to “never stand still”, make sure you listen to the first episode of EG’s School of Hard Knocks podcast. To send feedback, e-mail samantha.mcclary@eg.co.uk or tweet @samanthamcclary or @EGPropertyNews Main portrait © Mark Newton Photography; other photographs: Scarborough International Group