Refugees And Avoiding Groupthink: How This Former Soldier Rescued A £1B Property Company From Oblivion

When Andrew Coombs took over as chief executive of London-listed property company Sirius Real Estate in 2010, no one thought it would survive. Its shares were trading at just 20p, its loans were coming due, banks wanted their money back, and activist investors were trying to take control of the company or break it up.

“It wasn’t working and a number of activist shareholders were building stakes on the register,” Coombs said. “Everything was set to be given back to the banks. When I came in, I was asked to write two business plans. One for how to shut it down — and the other on how we could make it work.”

Today, as the property market heads into another period of turmoil, Sirius is in a very different position. Its market capitalisation of £1B puts it in the FTSE 250 of leading London-listed companies and its portfolio of German and UK flexible industrial assets and business parks are valued at €2B (£1.75B), with 78 properties in Germany and 72 in the UK totalling nearly 28M SF.

As European property companies begin to face a debt refinancing crunch similar to that experienced by Sirius in 2010, there are lessons to be learned in how the company avoided the fate of many others that headed into bankruptcy. 

But the more interesting lesson is how Coombs helped Sirius to grow. With a background outside of commercial real estate, he eschewed the orthodoxy of the sector, using strategies to plan for unforeseen events learned in the British army. That made the company more flexible, with moves like diversifying from Germany into the UK, partly because of worries about Germany’s reliance on Russia, turning out to be on the mark.

What is more, Coombs has long been an advocate of diversity, making Sirius a multinational company in terms of its staff. The company has even set up a programme to bring refugees who fled conflict into the business to make it more resilient and avoid the dangers of groupthink. 

In 2010, Sirius was still part of a stable of listed vehicles set up by a company called Dawnay Day, which bought assets using high leverage and then floated the companies on the stock market, leaving shareholders to deal with the problem when the market turned. It had snapped up a portfolio of German industrial and business parks, which produced good income, but had too much debt. 

Coombs cut back on staff, but crucially, he said, changed the makeup of the business. Previously, it had 300 members of staff, only 15 of whom were customer-facing and dealing with tenants. That overall number dropped to 200, with 75 becoming customer-facing. Tenants were persuaded to pay rent upfront, which kept the interest on loans paid. 

Sirius had previously been externally managed by a separate asset manager, but Coombs internalised the management function.

"That meant we could sell assets to repay the banks, as you no longer had an asset manager in control who was being paid higher fees for a higher AUM,” he said. 

In 2014, against the advice of the firm’s advisers, he went to South Africa to raise new capital on the Johannesburg Stock Exchange. That allowed the company to start looking forward again, buying new assets and improving the existing portfolio. Few European property companies had raised money from South Africa at that point, but Coombs felt investors there would be keen to diversify away from a politically volatile country following the loosening of restrictions restricting capital leaving its borders.

“People told me it wouldn’t work, but if it didn’t work, the company didn’t have a future anyway," he said.

Coombs did not follow the typical path into real estate. He left school at 17 and became an enlisted soldier with the Grenadier Guards, an infantry unit of the British army. He was posted to Berlin in the 1980s when the German city was still divided by the Berlin Wall.

He left and took positions in consumer businesses like BT, Experian and Yell, before coming to real estate in 2004 via the flexible office sector, taking roles at MWB Business Exchange and Regus (now IWG) before arriving at Sirius in 2010.

Coombs said he left the army because he knew it didn’t offer everything he wanted from life, though it did teach him plenty of lessons he took forward into business: “I was in a particularly disciplined part of the army, with a particular attention to detail, looking at things in a way that might not occur to a non-military person.”

One example was scenario planning — taking an issue and plotting for multiple outcomes to not get caught out by unforeseen outcomes.

“I think a lot of people in the real estate industry lack the appetite to drive returns to the highest levels, and just like to do things the way they’ve always been done,” he said.

Before the pandemic, the company had run a scenario as to how it would operate if its Berlin staff couldn’t access its sites. Although a strict quarantine of the type it had planned for was never fully implemented, the company was up and running with a blueprint on how to deal with Covid-19 regulations before rivals, he said. 

Coombs also traces his commitment to diversity back to his time in the army.

“When you’re in a hole in the ground, it just matters how you solve a problem, not where you’re from,” he said.

The company has staff from 37 different nations; its management team has seven different nationalities.

“If you have a room full of people with the same name, from the same place, you get the same answer,” he said.

Coombs has established a programme whereby Sirius hires refugees who have come to Germany after leaving their own countries because of conflict. Many have worked or fought alongside western forces in countries like Syria or Afghanistan. 

“If someone has come to Germany from Syria and made their way across a continent, they have faced risks and solved problems that many of us have never even thought of in our lives,” he said.

Managing a team that is split between Germany and the UK has its advantages and its challenges, Coombs said, given the different corporate cultures in the two countries.

“The British can sometimes have an attitude of, if it ain’t broke, don’t fix it, which in my experience, is not how the Germans work,” he said. “When you set the German team a problem, the first thing they ask in trying to solve it is, what are we not allowed to do, while the British team are a bit more willing to think outside the box. The British will solve the problems more quickly, but the Germans will engineer a solution that will be a lot more robust and long lasting.”

The team's hefty British contingent is partly the result of Sirius’ 2021 acquisition of Bizspace for £380M. The firm offers similar light industrial and office space to its German parent.

Coombs said he had been looking to diversify outside of Germany since 2019, worried by Germany’s reliance on Russian energy. With Angela Merkel’s time as German chancellor heading to a conclusion — she left office in 2021 — the relationship between Germany and Russia looked less stable.

“Merkel had probably done a lot of deals with Putin, and was one of the few people who could speak to him in his mother tongue,” he said. “Her stepping down fractured that relationship.” 

While Coombs was not certain Russian aggression in Europe would increase, he was worried enough to expand beyond Germany, leading to the Bizspace acquisition. The acquisition gave it 72 properties in the UK totalling 4.2M SF and housing more than 3,000 tenants. 

Today, the UK looks more challenged in the short term because it has a higher inflation risk. Germany has done a remarkable job in reducing its energy consumption, with manufacturers in the country collectively reducing gas consumption by 35% while only reducing output by 2%, he said. 

But the diversification argument holds firm in the long term, he said. The UK will be the next location for new acquisitions, having a better balance between supply and demand for space. While expansion is on pause until interest rates stop rising, there are several owners of portfolios below £400M the firm is targeting when the market settles down. 

“The UK is going to continue to see lack of supply, while demand should be maintained,” he said. “We will increase our exposure, but only at the right time.”