Trade union leader profits from real estate

Copyright: David Lawson- Unions Today 2000

Tony Cooper is in the wrong job. Why spend your time running a trade union when you obviously have a knack  for making a fortune as a property developer?

 Probably the same reason as the rest of us: accumulating wealth is not necessarily a primary drive. And if you do aspire to champagne socialism, property development is not exactly a favourite activity among the brothers.

 But perhaps it should be. Cooper's 'fortune' has helped the Electrical Managers' Association replenish coffers drained by falling membership. It also stems from an astute manipulation of the union's own modest offices rather than exploiting others. The lessons are obvious for other unions, many of which probably have little idea what they own, let alone a cogent plan for making their bricks and mortar sweat.

  Cooper would be the first to admit that good fortune started the ball rolling. When he joined as general secretary nine years ago, the first thing he needed to handle was a compulsory purchase order from the council for the EMA's headquarters next to the rail station in Chertsey, Surrey, just outside the borders of Greater London. It just happened that the country was sagging under the biggest property slump of the century, so he was able to snap up an alternative modern HQ just down the road for less than half the asking price.

  Within a short time, however, the building began to look like a luxury even at that figure. A huge drop in membership as the electricity industry was privatised plus a move towards new technology led to a 75% cut in HQ staff. But this was to prove a blessing in disguise

 The membership drop left not just empty HQ desks but a growing hole in the union coffers. Cooper desperately needed to replace declining m membership fees with other income to help pay for an ambitious program of support and training for remaining members.

  The national executive was the first to learn about the move into property development, although not, perhaps, as they might have expected. After one meeting they were told to memorise their surroundings, as they would not see the room again. It had been let to a local  firm. Today,  dentists from all over the country are attracted in to test the  gleaming equipment which usurped the boardroom table.

 'It was plainly a waste of resources to reserve a room used only seven times a year,' says Cooper, exhibiting his typically  blunt logic

 The committee could not complain, however. On the ground floor, a new meeting place had been created out of what was once undercroft parking. And it hummed with state-of-the-art electronics installed for continuous translation and video-conferencing.

 While the chance for video links to regional offices were welcome, translation might have appeared a little extreme. But these were clues to the fact that Cooper still aimed to get more than seven days a year out of the room. It has become another rich source of income when rented out for training courses and conferences to firms in office buildings springing up around the once-quiet  town.

  This transition from occupier to landlord produced another bonus. Unions are well aware that they cannot reclaim VAT. Trading companies can, however, and letting is a trading activity. There is also a grey area of partly reclaimable tax which has been opened up. 'It is hard to pin this down but in simple terms we can claw back a lot of money,' says Cooper.

  Those simple terms translate into an income of close to ś50,000 a year in rents, almost ś45,000 in service charges and ś20,000 in reclaimed VAT. All that for a one-off cost of ś300,000 to enclose and refit the undercroft and buy alternative car spaces next door.

 The conference room and two smaller areas for translators have been isolated from the rest of the building through a series of gates and other security measures. This means they  can be rented out as complete suite over weekends when EMA staff is not in the building. That brings in another ś10,000 a year.

  All this has added value to the premises, which are now worth around ś2.5m compared with the ś1.7m bargain price, and still rising. Chertsey is a now  a boom town and rents  have risen substantially. That means the union's income will also increase when its tenant's rents are reviewed in a couple of years.

 'We currently raise about 15% of our income from these non-subscription sources,' says Cooper. 'Within three years that is planned to reach 25%.'

  Meanwhile, the former HQ has come back into the reckoning to produce another bonus. Development plans collapsed in the recession, so the union was never forced to sell. But nor could it find a tenant, so the old place was demolished to save paying rates. Now the market has recovered  and the whole town centre is being reshaped with pedestrian streets and plush new buildings for blue-chip companies.

  A year ago Cooper arranged a partnership with a local developer to create new offices on the site and has already banked more than ś1m before a brick is laid. That compares with an offer of ś700,000 before the demolition.

 There will be more to come, as the scheme has been pre-funded by an institution, giving EMA a share of any rents that will be collected when a tenant is found. Alternatively, the union could sell its interests for as much as ś500,000.

  The same principles have been exported into the regions. Rationalisation of the industry has meant a 50% reduction in the 10  regional offices to match the fall-off in membership. One is within the HQ while the other four have been put into new buildings, bought for around ś250,000 each.

 'We calculated the space we needed for each one and roughly doubled it,' says Cooper. Each is a miniature version of head office, collecting income by renting out space. At one time, each office cost ś15,000 a year in rent. Now they produce ś7,000 each - as well as all the VAT benefits.

  If a smallish union can exploit its property this way, some of the bigger ones could have a field day. 'I guarantee that there are lots of assets out there that are not being utilised fully,' says Cooper.

 Many unions are historically based in central London because of the need to be close to each other and Westminster. 'I can see why this is considered necessary for political reasons but that does not mean back-office operations need to there,' says Cooper.

  He finds little difficulty travelling in from Chertsey for TUC and other meetings. In fact, it is getting home to Hampshire which can be more of a slog, so he bought a small cottage in the town  a few years back for the couple of nights a week he might be stuck.

 True to form, he has made a nice paper profit as the value soared. Few EMA members should begrudge him, however, when property skills have done so much to plug what could have become a gaping hole in their books.

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