Growth brings a new lease of life
City Marque's serviced apartments business was given the scope to take advantage of market growth.
- Company turnover: £5.8 million (£1 million revenue in September 2014)
- Sector: Real Estate
- City Marque is a London-based business renting serviced apartments to business people, and domestic and overseas visitors.
- MD Derek Gallimore knew finance was required to take full advantage of the rapidly growing market for serviced apartments in London.
- City Marque does not own its properties, which was hampering its ability to raise traditional bank funding for expansion.
- Growth Capital Director Martyn Drake looked beyond the value of the company’s assets and took a more personal approach, examining the company’s market potential, business performance and the strength of their management team.
- City Marque is now confident it can grow to operate over 500 apartments with £30 million turnover by 2017.
It’s a truism in business that fast growth is a nice problem to have, but a problem all the same. And it's one that City Marque, which offers serviced apartments to tourists and business travellers, can testify to.
The serviced apartment sector is still immature in the UK, but well-established in areas such as North America, the Middle East and Hong Kong, where growing visitor numbers to London seek out such accommodation. City Marque saw this trend and wanted to capitalise on the growth opportunity.
“The industry is growing in the UK and our objective is to grow with it," says City Marque Chief Executive, Derek Gallimore. “Ultimately we want to become one of the top five businesses in the sector.”
City Marque’s vital statistics show it is a business with scope. It is thriving in a burgeoning market, with 30 UK employees and a further 40 administrative staff in an office in Manila. At the time of writing it has 225 apartments in over 15 locations in London.
The business turned over more than £5 million in the year to March. In June it took £800,000 in revenue and another £1 million in September (an annualised figure more like £10 million), showing its steep growth curve and potential to scale up fast.
City Marque wanted to increase its debt facilities to help it invest in more apartments and expand its infrastructure. A lack of tangible assets meant it had nothing physical against which to secure a loan. “We don’t own our properties so the value of our inventory doesn’t provide very strong collateral for a loan,” says Derek. “We needed a bank that would take into account our revenue and our proven growth potential.”
“It was hopeless. Some time ago we managed to agree a £100,000 loan from our old bank but the process took more than 10 months. By the time the deal had been concluded our business had already outgrown the need for the loan. Clearly, we needed a change.”
Good on paper
When Derek started to research the market, he realised that Santander could be the answer. He was referred to Martyn Drake, Growth Capital Director at the bank. “City Marque looked good on paper, but I had to investigate the market,” he explains. “London is the most visited city in the world, which is a plus, but we also looked at occupancy rates, average day rates and other aspects of the market potential.”
“I met with Savills [estate agent] to help me better understand the market and City Marque’s potential opportunity within it. The growth projections were huge – so much so that big hotel chains such as Holiday Inn and Marriot were getting into this sub-sector.”
The extra mile
Once the two parties agreed that a deal could be done, the process was “fairly plain sailing” according to Derek. It started in November 2013 and, after a brief hiatus for Christmas, the money was delivered the following spring. “Working with Santander has introduced me to relationship banking,” he says. “They establish a relationship with you and then look to develop it, because a big part of their function is to grow with business customers as they achieve success.”
“The total funding package of £2.1 million comprises an amortising loan, a Growth Capital loan [available via the Breakthrough programme] for expansion and an overdraft facility,” explains Martyn.
“City Marque would generally be viewed as a small entity,” he says. “Although they may have managed to secure funding elsewhere, within a bank they would traditionally have fallen into the hotel and leisure team, who would take a very formulaic approach with loan-to-value lending and probably not take the time for a business of this size to research and analyse a new market development, but perhaps lumping them in with small hotel operators”.
Martyn adds. “Going the extra mile is about spending the time to thoroughly understand their business.” Derek agrees. “It’s [Santander’s] interest in the long-term and the future needs of the business that is very different,” he says. “It is very novel and very exciting. A lot of banks will say that, but then they revert back to ticking boxes.”
And for Derek the benefits of the package are even greater. “This deal will allow us to achieve our dreams. We want to have 550 apartments on our books and £30 million in sales by 2017; now we are very sure we can get there. We just have to knuckle down for the journey – it has been an absolutely fantastic experience so far and it has been a pleasure to work with Martyn and the team.”
All lending is subject to status and lending criteria.
What is Breakthrough?
Breakthrough is a programme of funding, business support, events and consultancy to help high-performing small and medium-sized enterprises (SMEs) leap to the next level of sustainable growth. Taking part in Breakthrough does not guarantee access to all elements, as each programme is tailored to meet the individual requirements of the business. To find out more, register your interest, and to see if you are eligible, visit the Breakthrough website.
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Relationship Director Comments
We have worked closely with Derek and his team to properly understand the business and to take a pragmatic approach to the risks involved.