SATURDAY INTERVIEW

by  SIMON BAIN

 

When Eric Adair moved from the finance department of Telford College to take over Edinburgh’s ambitious property development arm EDI in 2006, he little suspected how quickly the dream job would change.

“It seemed almost impossible to go wrong,” he says. Like the capital’s other big-spending developers, EDI had been bankrolled by Bank of Scotland to do what it liked, and it was over £50m in debt. From its beginnings in 1988 turning a few council-owned fields into the highly successful Edinburgh Park, through the piloting of the Exchange financial district, via the failed attempt to build a mall underneath Princes Street, EDI had prospered – and had even tried to roll out its model into the rest of Scotland. It was unique in the UK, and a string of high-profile projects were in the pipeline.

“I had about 18 months of the good times – and then the world changed pretty significantly overnight, and that was pretty tough,” Mr Adair recalls.

From an empire spanning eight companies with assets put at over £100m, the council found itself reduced to a rump of assets which today are on EDI’s balance sheet at barely £20m.

Mr Adair recalls: “EDI faced the same difficulties just about every other property company faced at that time, squeezed at both ends from the bank suddenly being much more unwilling to lend through to end users not being willing to buy. Pretty much overnight we effectively stopped development.”

But thanks to its public shareholder, EDI had not over-reached. “We never reached the crisis of negative equity, though our equity became very small. What we were able to do was use the council’s borrowing capacity and effectively replace Lloyds. The council took a different view than the banks could take, and it worked out quite beneficially for the council as the rental income stream was actually greater than their borrowing costs.”

The £62m bail-out saw EDI return its assets to the council, and enforce deep cuts. “We went from 30 staff to 15. It was painful emotionally and painful in terms of colleagues we had worked with for a number of years. But in comparison with a number of companies who no longer exist, half the size was better than no size. We were able to survive the immediate crisis and we have slowly worked to build back up our financial strength, we are very pleased that we have managed to do that, and take forward projects much more slowly and cautiously. We have managed to keep things going.”

Out of town regeneration continued, in Granton and notably Craigmillar, where EDI rescued a local landmark for use as a community building and completed three housing projects. A key city centre project was patiently developed - at Market Street close to Waverley station, where an awkward site derelict for 50 years will become a hotel. Most impressively, the old Fountain Brewery site just beyond the capital’s Exchange district and beside the canal is to become India Quay, with a £100m rented housing development at its core.

Mr Adair says: “At one point the council was saying that was just a surplus site. But we were able to demonstrate that it was a pretty important site for the city. We are getting back into a place where we are beginning to work on the council’s corporate property and identify these strategic sites.”

Even a small site takes 18 months to two years of thinking about, with one at Kings Stables Road close to Princes Street reluctantly relinquished, and put onto the market, due to lack of EDI resources. “There are other sites like that which we are actively discussing,” Mr Adair says.

EDI, unlike a private developer, has community and sustainability objectives hard-wired into it, with its motto ‘creating inspiring places’ and a mission that is not purely financial.

That is manifested in its pioneering plan for India Quay, where EDI is seeking private backers for a £100m investment into the capital’s first private rented housing development. “We had to do the blue-sky thinking and ask what can we do with it that will be good for the city,” Mr Adair says.

He explains: “We want to create this alternative option in the housing market of multi-family housing, corporately-owned, high quality of building, rented accommodation, for people who can’t get onto the housing ladder.” It has precedents in the north of England, where several councils are working on regeneration schemes created by Edinburgh-based Sigma Capital and funded by Shariah bank Gatehouse.

“We are currently in discussions with a number of people. Some very good financial institutions from London, Edinburgh and Europe, are really excited about Fountainbridge (India Quay) and want to be part of this. Institutions are needing to put their money into places other than bonds and many are beginning to see something like multi-family housing as a good option because it is effectively a steady income stream.”

Mr Adair admits: “Previously we would have gone round the corner, literally, to the bank and said I want some money for this.” Now the council itself is looking for private backers to complete a total 12 infrastructure projects, creating a city investment fund and hoping to follow Manchester’s ‘city deal’ allowing it to borrow against future tax rises.

For Mr Adair, 56, who as finance director at Telford masterminded the college’s £60 move to Edinburgh’s Waterfront, good times are returning.

EDI may have abandoned its Scottish ambitions after one project in North Ayrshire, but its model still has few imitators. “Edinburgh council has got some trenedous sites which merit the sort of attention to the long-term value that EDI can give,” Mr Adair suggests. The Market Street hotel, for instance, will be within the Old Town world heritage area and needs a building worthy of the streetscape and the skyline, but on a cramped and difficult site. “We put a huge amount of effort into this and it has been tough going,” he adds. The project is due to be finally approved next week, when the hotel operator will be unveiled.

“We had to satisfy a whole series of views about what a new building should look like, we have found an operator who doesn’t currently have a base in Edinburgh and who operates high-quality hotels in Europe. It encapsulates what we are trying to do. Some people would just walk away, we see it as part of the city and the kind of issue EDI has to take on and crack