PROPERTY tycoon Paul Mugnaioni is to unveil a £100m expansion plan for his Quality Street group which will see it move into England.
It follows the success of the residential investment arm of the Glasgow-based company, which has generated returns for wealthy private individuals and syndicates averaging 25% on the first £50m of developments it has completed.
Now the five-year-old company, whose backers include John Boyle’s Hamilton Portfolio, is to take advantage of a strong investor appetite and the continuing buoyant housing market to roll out its concept outside the central belt, where its current developments are focused.
Quality Street develops upmarket apartments and housing on behalf of investors. The completed properties are then either sold or rented, depending on local market conditions.
Mugnaioni, a former director of housing at Glasgow City Council, who sold his lettings business to Nationwide six years ago, said work on the expansion programme had been going on behind the scenes for the past year.
The company is about to raise around £20m from investors as part of the £100m investment programme.
"It will be the first time we have actively sought investors rather than them just coming to us," he said.
New joint ventures with local property developers will be established in Scottish cities including Dundee, Aberdeen and Edinburgh, with similar partnerships in England planned for next year.
Mugnaioni said Quality Street’s residential investment service was unique in Scotland. "We are able to give people a turnkey opportunity to get into the residential development market and achieve returns of 20-25% annually.
"We used to invest in buy-to-let property to play the long game. That gives you 15% a year if you are lucky, but development can give you much higher returns."
He said key to its success was Quality Street’s knowledge of the market and its ability to identify the best opportunities.
"We would look at maybe 30 possible projects for every one we eventually go for. We have a very small team and it is a very niche market we are operating in."
The joint ventures in a number of Scottish cities will operate under the Quality Street brand, but local partners will have a stake in the business.
"It is vital to have people on the ground in an area who really understand the local property market, the people in it and the opportunities there," Mugnaioni said.
The company’s strategy of developing high quality apartments and homes had paid off over recent years as the nature of the market had changed, he added.
"There has been a step change from where houses used to be commodities and companies like Barratt really dominated the way people thought about where they lived.
"Low interest rates have led it to be a much more lifestyle-driven thing and people are looking for much more individualistic properties."
So far Quality Street has completed projects worth £45-50m and achieved average returns of 25%. It is currently working on a further £50m of projects. Mugnaioni believes there is still "some way to go" for house prices in the UK.
"I don’t think prices will accelerate as fast as they have done recently, but I believe the normal cycles seen in the property market have changed because of the low inflation and low interest rate environment we are in," he said.
The company’s developments so far have included Academia, a 33-apartment development in the Yardheads School, and later St Mary’s RC School building in Leith, which was funded by John Boyle’s Hamilton portfolio. It also developed 16 homes on Queen’s Gate in the Woodlands area of Glasgow.
Mugnaioni left his job as Glasgow Council’s youngest ever director of housing 17 years ago to start up a business to both redevelop and build quality homes for rent.
He sold the business to Nationwide in 1997 in an undisclosed multimillion pound deal before taking time out to travel and ski. Together with group chief executive Ken Tod, who joined the original letting business in 1996 as a property consultant, he founded the current business in 1998.