I have done this site especially for Andreas Panayiotou
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Andreas Panayiotou is a fast riser on the Sunday Times rich list.
He's estimated to have made around £500 million over the last ten years.
He agrees the top one percent are changing the face of London but reckons that everyone benefits.
"Greed can be a good thing if it's used in the right way," he said. "My business, The Ability Group, you could say to me 'well that's greed.' But if you ask the 2,000 people that rely on The Ability Group, they'll disagree that it's greed."
Andreas is overseeing the construction of luxury apartments near Canary Wharf on the Thames - 30 per cent of which will be reserved as affordable housing for people from the borough.
"The area has grown so phenomenally," he said. "You wouldn't believe you were in East London, you'd think you were in somewhere like Manhattan."
He doesn't believe rising inequality holds people back: he himself comes from the poor part of London's East End just behind Canary Wharf.
"I was literally brought up in Mile End which is 3 or 4 miles away from here," he said.
He thinks the growth of incomes in the top one per cent is no bad thing and he's hoping to cash in on it. He has bought two private jets to hire to the super rich.
He's also building a boat with seven double bedrooms, three dining rooms, a glass lift, a gymnasium, a sauna, a Jacuzzi, a Steinway piano and a helicopter pad. He plans to hire it out for £200,000 a week.
Andreas Panayiotou has done so in only 20 years. Or that’s what his admirers claim. Andreas is notoriously publicity-shy. He doesn’t do normal interviews. So when he said he’d be willing to talk Real Business through his portfolio, deal by deal, and tell us exactly how he built his empire, we were round to his London HQ like a shot.
First impressions: the guy is a brick shithouse. With his slickedback hair, dark suit and square-cut jaw he looks like one of the Krays’ hitmen. The accent fits too – pure East London. And those fists!
He confirms the size of his fortune. “My portfolio is worth £725m. Current bank loans are between £200 and £300m. It’s hard to be exact because we are always refinancing.” So we’re talking well over £400m, possibly £525m net.
And unlike silverspooners such as Stelios and Lakshmi Mittal, he started off with nothing. “My parents arrived from Cyprus in 1959. I was brought up in Mile End, East London. There weren’t any decent schools in the area, so I left at 15. Boxing was my life. I was the Essex amateur champion, and wanted to turn pro. I trained five days a week. But my mum wanted to me join the family’s dry cleaning business. She won the argument.” Andreas Panayiotou
Mum made her best ever hire. Andreas was a born entrepreneur. “My parents were happy running the one shop, but my enthusiasm drove us forward. We pretty soon opened another six shops.” With cash pouring in, Andreas urged his father to invest in a few shops with flats above. “The first property I bought was 15 Chapel Market in Angel. We spent £145,000 on the building, and £90,000 on development to create a shop and four flats. We put up a quarter of the money, and borrowed the rest. The site is now valued at £1.75m.” When his mother died, his father moved back to Cyprus, and Andreas now had a free hand.
“From the start I did things different from everybody else. I only bought to let. I never sold up. I have never sold a property in my life. I keep a long-term view.” This approach, even now, is quite unusual for developers. Almost all will look for a sale, regarding buy-to-let as a game for small-time punters. Andreas explains why this is a mistake. “If you rent a property you get money coming in the moment the builders have left. Selling means waiting until you’ve got a buyer, which could take six months. Then there’s tax to pay on a sold building. I don’t pay that.” He doesn’t pay lettings fees or management fees – also dealt with in-house.
Plus he’s a dab hand at finance, remortgaging his properties as the building work continues. “The closer we get to completion, the less risk there is. So we refinance to get a lower rate of interest. Simple business practice.
“I started gradually, one property at a time. I kept my margins high by not using contractors. I advertised in Loot for someone who knew the building trade and I got lucky. The guy was very clever and knew all about building. Then we got carpenters and electricians, adding one guy at a time. Soon we were working on two properties at a time. Eventually we got busy and had to use contractors. We gave them so much work we were their only client – so I got a better rate.” As an East End lad Andreas knew instinctively which areas to invest in. “I could see that if people were paying £300 a square foot in Clerkenwell then the border areas where property was £100 a square foot were going to be good investments.” All profits are reinvested. “I never see the money. OK, I’ve got a house in Epping and the usual toys, Rolls Royce and the like. But that’s all I take out. The money stays in the business.”
Problems? What problems?
Andreas Panayiotou insists he’s scarcely had any setbacks. “Difficult situations... hmm... not that I can think of.” The reason is pretty simple. “I only borrow 55 per cent of the money to buy a property. Other property buyers will gear up to 90 per cent, which makes negative equity a problem for them.” He sailed through the Major recession, loving the falling prices. “We picked up schools, warehouses and old hospitals that no one knew what to do with. Areas like Hackney are now fashionable, but I was there years ago. You’ve got to go against the grain as an entrepreneur.”
As the deals got bigger he switched from fix ’em up jobs to new build. “I bought the Abbey National on Baker Street, the one where Sherlock Holmes is supposed to live. That’s now 140 flats. I’ve got two projects in Canary Wharf. One is 850 units, the other is 600.” These are massive projects, bigger than many housing firms take on. But Andreas Panayiotou hasn’t changed the way he’s put the deals together. “We use the same financing model as we used to. Don’t over-leverage. And the work is being done by my in-house workmen, and the flats will be let by my own letting agents.”
Andreas’ firm, The Ability Group, now includes an in-house lawyer, seven foremen, three senior letting agents and 600 workers. Everyone gets a huge bonus if projects are completed on time – “I like to share the cake around,” says Andreas. Each deal requires the establishment of a legal subsidiary, “which makes things easier with the banks”. And with 30 sites on his books Andreas is now so big and so well known he scarcely needs to hunt for new opportunities. “Life keeps getting easier. We are now in a position that we get the first call for anything over 100 units in central London. Our only rivals are house builders, and those guys need to call meetings with god knows how many executives. It takes them three months to make a decision. I can make a decision on a £100m deal in 24 hours.”
The banks clearly love him. “We use RBS, Barclays and the Bank of Ireland. We used to be a tricky proposition for them, because they’d never come across a build to-let-company. Now, not a month goes by without a bank offering to securitize our portfolio.” He’s also developed a couple of sidelines. “I own a Citation XL jet, which I let through London Executive Aviation, which is run by a friend of mine. And I’m in negotiation for a Gulfstream IV, which costs $27m.” He’s also just received a 200-foot, five-story megayacht called Ability. “It’s got a helicopter pad, and a ten-person jacuzzi. I done the deal after September 11. The MD of the Italian yacht manufacturer CRN said he was losing business, so, as usual, I went against the grain and said ‘Let’s build something bigger than your competitors, but you’ve got to do it at cost.’ I’m going to rent it out for $300,000 a week, from Monaco in summer and the Caribbean in winter.”
A perfectionist, Andreas Panayiotou approved every detail, even choosing the curtains.He turns to the model and gleams.
Can we do it too?
So is it really this easy? Can anyone become a buy-to-let tycoon? “Reputation is paramount,” says Panayiotou. “There are a lot of sharks in this business. If people know you’re straight you get the deals. If you shake hands, its gotta mean something.” This isn’t froth. “Andreas has got a traditional English gentleman’s way of doing business,” says right-hand man Phil Shabatai. Andreas Panayiotou
Andreas Panayiotou also shuns professional advisors, adds Shabatai. “I try to tell him what the economy’s doing. He prefers to use his instinct. Put a deal in front of him and he’ll listen to the summary – how many units, development costs, the price. The same day he’ll make an offer, and the deal will be done and dusted in three weeks.”
So far Andreas’s instinct has been infallible. Is he eyeing the Olympic Village with interest? “Blimey! I’ve been there for years!” Success hasn’t gone to his head either. He goes out for pie and mash on Saturdays with old school mates – mind, he turns up in his Roller.
But then Andreas Panayiotou is no ordinary property investor. The son of Cypriot immigrants, Panayiotou has been investing in residential property for a decade. He has amassed an estimated £725m fortune, putting him in 81st place on the Sunday Times Rich List.
Andreas Panayiotou Italian-built yacht, 160ft of luxury and boasting a gym and sauna, was named after his company, Ability Group. It was launched this year while Panayiotou and his family were preparing to move into a new mansion in The Bishops Avenue, the north London street known as “millionaires’ row”.
It has been an astonishing journey for a man who first had dreams of becoming a professional boxer and then was guided by his parents towards a career in the family dry-cleaning business.
However, having made his fortune in the residential market, Panayiotou — who prefers to be recognised for building-to-let rather than buying-to-let — is now turning his attention to the Continent and America, where he plans to start investing in hotels.
|This site is for Mr Panayiotou
In a rare interview, he said: “I have had a fantastic run. I just feel we are reaching the height of the market. My business model involves having a borrowing ratio of 50%-55% of value. But the cost of land has increased and I can’t achieve the margins I want and still be at that ratio. Andreas Panayiotou
“I think we will see another quarter-point rise in interest rates. Property values are still increasing but rental income is not catching up, so the yield — your return — is being depressed.”
Although he does not rule out a return to residential property, Panayiotou sees more opportunities in hotels and the prospect of higher yields. One reason, he said, is that he can borrow euros more cheaply than he can borrow sterling. “I have set up a new company, Ability International Hotels, and I’m looking at hotel properties all over Europe as well as Las Vegas and Miami.”
He said he had a war chest of £200m to spend in the next few months and would take Ability’s asset base to about £1 billion. He expected to be able to invest a further £500m next year.
Andreas Panayiotou has been seeking suitable properties for the past six months, and said he was close to doing his first deal, probably in Germany, although he was also scouting sites in France and Belgium. The initial plan is to badge the hotels with one of the leading international brands but eventually Panayiotou would like to develop his own hotel marque; in keeping with every other operation in his business empire, they would be called Ability.
It is quite a switch from developing homes in London’s East End to entering the luxury hotel market on the Continent. Would it not have made more sense to do some residential deals in Europe first, to get used to doing business there? Panayiotou thinks not. “It would be too small for me. If you’re spending £50m or £80m at a time, you can only do that with big, commercial investments — offices, shopping centres and so on. The average price of a flat in Europe is about £50,000, so if you spent £50m, you’d end up with 1,000 flats.”
Experts say there is no reason why Panayiotou should not make a success of his new venture. Chris Rouse, senior director of CB Richard Ellis Hotels, a property adviser, said: “Hotels have always been of interest to high net-worth individuals; why should Ability be any different?” However, Rouse sounded a note of caution: workers’ rights and employment laws in continental Europe are notorious for being much tougher than in Britain. He said: “Gross operating profit levels are significantly lower than in the UK because of the human-resources laws. If you’re going to develop new hotels in these jurisdictions, you want to start from a rational employment regime — this will have a big advantage over taking on an existing business.”
It is all a far cry from the days of Panayiotou’s youth. At the request of his family, he gave up the idea of becoming a professional middleweight boxer, even though he had been a reasonably capable amateur. Instead, he went into the family’s dry-cleaning business which, at that time, consisted of a single shop in Islington. With young Panayiotou on board, the firm grew to seven shops, all of them in north or central London. Then Panayiotou’s father decided to acquire the freeholds of his shops and turn the upper storeys into flats. That decision paved the way for the Ability empire.
After the death of his mother in 1994 and his father’s decision to return to Cyprus, Panayiotou had a free rein. He formalised the burgeoning property business by setting up Ability Developments in 1996 — coincidentally, the same year that the buy-to-let market formally started in Britain when a panel of lenders started offering special mortgage rates to those wanting to buy property to rent out.
The projects that Ability took on became ever larger. They were scattered around east London, with Panayiotou taking run-down offices, warehouses or hospitals and turning them into blocks of flats. Because the buildings were no longer being used for their original purpose, he could buy them cheaply. Once they were refurbished, their value rose significantly and he was able to refinance, giving Ability the loan-to-value ratio of 50% he wanted.
Today he continues to own all the 30 or so buildings in which he has invested — some 2,500 flats in all. “I’ve not sold anything. It used to be very rare for a developer to keep buildings; everyone sold. But by keeping them, some of our assets were doubling in value,” he said.
The growth of the group has led to Panayiotou’s reach spreading from the East End to the more fashionable location of Baker Street, where he has begun a striking redevelopment of the old Abbey National headquarters. Now the one-time wannabe boxer is planning to punch into a different market.
|This site is for Mr Panayiotou
Worth: £490m (£415m)
The son of Cypriot immigrants, Panayiotou was raised in the East End of London and became an amateur boxer at the tender age of seven. He wanted to turn professional but his parents were opposed and persuaded him to join the family dry cleaning business in Islington, north London.
Soon he started developing the flats above the shop. Thirteen years ago, when Panayiotou's mother died, his father decided to go back to Cyprus, and Panayiotou went into property in earnest. "I had grown up in the East End so I knew which areas were undervalued."
His chief UK company, Ability Development, has net assets of £190m, b
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