The EG Interview: Opportunity knocks again for Neil Sinclair

Is Neil Sinclair a glutton for punishment or is he a man so intent on establishing a regional investment company that he just won’t quit? Last month Sinclair teamed up with his Palace Capital co-founder, Stanley Davis, to have another go a building a regional real estate investment firm. The pair founded Palace Capital in 2010, building it from a business with a market capitalisation of just £100,000 to £125m by 2022. Sinclair, 80, stepped down in June 2022 after more than 12 years growing the business. His departure came after shareholder pressure to change the strategy of the firm to avoid a “very average performance”. But now he is back and ready to go again. “People do say to me ‘why are you doing it?’. Well, my mum died at 93 and she said to me, ‘what’s important is that if you are lucky, you will keep your health and if you can keep your health, keep your brain active’.” For Sinclair, building and running a business is how he keeps his brain active. And, he says, if it has been working for Warren Buffett then why shouldn’t it work for him? “Warren Buffett is 93,” says Sinclair. “I haven’t got his money, but he’s 93, and his partner was 99 before he passed away. And that’s because they kept their minds active.” On the hunt To keep the grey matter in top physical shape, Sinclair and Davis, 85, have bought into More Acquisitions via a £312,240 placing of shares at 1p per share. The acquisition of the shell company is step one of the exercise – after a protracted warm-up to fund it. Step two is finding the assets to build the company and finding a suitable chief executive to run it. While Sinclair may well be able to take a knock or two, he’s not prepared to be a chief executive again. Someone else needs to hold that mantle, he says. “I don’t think a listed company wants someone my age being a CEO,” says Sinclair. “So I’ve been talking to quite a few people who may be interested in coming in with us.” The new firm will have the same ambitions as Palace Capital, namely to buy well and grow. “In our view, 2024 closely mirrors conditions in the real estate market in 2013: there is great opportunity,” says Sinclair. “At that time, we acquired a £40m portfolio from Quintain and subsequently created a portfolio of £280m within a decade. We have the same ambitions for our new venture.” [caption id="attachment_1224019" align="aligncenter" width="1000"] 2 St James’ Gate, Palace Capital’s 82,500 sq ft office building in Newcastle[/caption] More Acquisitions now has to complete a reverse takeover over of at least £30m so, fresh from signing the deal last month, Sinclair and team are on the hunt for potential targets. He is eager to hear from property owners both offshore and onshore, family offices, wealth managers, agents, restructuring consultants and insolvency practitioners, but intends to bide his time. “You have to find the right target and you’ve got to get your investors lined up,“ says Sinclair. “I’ve told everybody this doesn’t take five minutes.” While Sinclair won’t be rushed on finding the right deal, he’s not overly fussed if the firm jumps a little too early in the property cycle. “We might be a bit early [with the vehicle] but both my partner and I said we don’t want to be too late, so if we’re a few months early, fine. And I do think that we can repeat what we did with Palace.” Track record Sinclair has definitely got history when it comes to buying and building businesses. He has more than 60 years’ experience in the sector and has had his fair share of ups and downs. But a lesson learnt early – to keep trying until you get there – certainly seems to have done the trick. He credits a tip from his dad for his resilience. On failing to find a job in surveying, Sinclair turned to him for advice. “He said, Son if you want a job, you’ve got to knock on the door. Pick out all the firms that you might want to work for, jump on a Tube, go up to the West End or City and walk in and ask for a job. Out of every 10 you walk in to, six will throw you out, two will tell you to write to them, one will hum and hah, but one will see you because you had the audacity to walk in and ask for a job. And that’s what I did.” We acquired a £40m portfolio from Quintain and created a portfolio of £280m within a decade. We have the same ambitions for our new venture He got a job, obviously, and so began a career in surveying that eventually led to him launching his own surveying business Sinclair Goldsmith in 1970. The firm, which he ran with Peter Goldsmith, was one of the first surveying firms to be listed and in 1993 merged with Conrad Ritblat. Conrad Ritblat eventually became what we know today as Colliers International. After more than three decades in surveying, Sinclair moved into property investment and set up business with his daughter Emma. Mission Capital was launched on the Alternative Investment Market in 2005 with a market capitalisation of £4.25m. Its mission was to invest in property-backed trading businesses such as car parks, property-related businesses and directly in real estate where active asset management could increase values. Unfinished business The business started well, but eventually crumbled with a shareholder rift seeing the Sinclairs ousted from the business. It was a messy end to best laid plans. After 17 months of litigation, Sinclair and his daughter settled. He can’t say how they settled, of course, “but we came out of that litigation pretty well”, says Sinclair. “I look back at Mission and, as a family, we stuck together,” he says. “My wife, my daughter and my son. We were all in it together and I said, we’re going to win this thing and get over it. And then the people who backed me at Mission said: ‘You haven’t finished what you wanted to do. Why don’t we find another vehicle?’ And we did.” That was 2010 and the vehicle was Leo Insurance. Sinclair and his former Mission Street backers did a deal to buy 29.9% of the company and changed its name to Palace Capital. And so began the growth of Palace Capital as a listed regional investor. [caption id="attachment_1224020" align="aligncenter" width="900"] Palace Capital’s mixed-use development, Hudson Quarter in York[/caption] “London was moving in 2010, but the regions weren’t,” says Sinclair. “Our view was that it was going to be a year or two before that happens, but my partners and I have always been countercyclical and we knew it would come back.” Growth wasn’t easy in 2010, however. The global financial crisis had the banks still holding on to assets instead of pushing them to market, but never one to let a current situation dictate the future, Sinclair and crew went door-knocking again. Eventually, with the help of EG, Sinclair found his first acquisition. A quarter-page ad in EG magazine listed a property company for sale in Newcastle. Sinclair swooped. The £1.8m deal was enough to keep the minnow that was Palace listed. For a while. But a bigger deal was needed. And it was here that Palace really came to life. After a lot of negotiation, Sinclair was able to buy a portfolio of regional assets from Quintain. The £40m portfolio seeded Palace Capital and enabled it to establish a £280m portfolio of regional assets. Sinclair clearly has a lot of love for the work done at Palace and the portfolio he helped build. He talks about the cities he loves investing in – Manchester, Newcastle, Liverpool, Leeds, Birmingham and the smaller places too. “We had this wonderful property in Leamington Spa,” he says. “Half an acre in the middle of Leamington Spa. An absolute cracking spot. They call it Silicon Spa now, you know.” And there’s a touch of sadness in his voice when he talks about his departure. Officially, the notice said Sinclair “considers this the right time” to be stepping down, but it’s clear he hadn’t quite finished what he wanted to do there either. “I stayed there until June 2022, when we announced the best results we’d ever done,” he says. That set of results saw the REIT report a 12% increase in net asset value to £177.2m and a reduction in drawn debt from £128m to £101m. Its most recent results, for the full year ended 31 March 2023, saw its net asset value drop by 27.5% to £128.5m. Whether Sinclair has the bank balance of Buffett or not, he clearly aspires to keep active in investment and building businesses for just as long as the Sage of Omaha. But first he’s got some doors to knock on, a chief executive to find and a £30m-plus portfolio to acquire. Images © Fuse Studios and Palace Capital