Tony Pidgley: the Master Builder leaves the stage

I always enjoyed company visits as a fund manager. They were a valuable reminder that I was investing in businesses rather than bits of paper and an opportunity to gain insights. Occasionally they were a priceless crash-course in getting to know a company, an industry and how a business should be run. One of those was a trip to Epsom in the early 1990s to see Berkeley Homes, the housebuilder co-founded by Tony Pidgley, who sadly died recently.

Berkeley was then a small company specialising in upmarket houses. Pidgley, a Barnardo’s boy who left school at 15, had started his housing career at Crest Nicholson. He told us that in the 1970s housing slump he had been sent to Kent as their star salesman to shift a new development of 12 houses, only one of which had been sold. In a fortnight, he had sold them all. But over the next few weeks, all but one of the sales fell through. The lesson, he said, was that in one of the sector’s periodic slumps, there is nothing you can do.

He applied that lesson several times at Berkeley, cashing up the company and battening down the hatches when the market was riding high. He was happy to acquire construction plots under option, foregoing the planning gain for the reduced risk and capital commitment.

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A new approach

At the time, standard housebuilders’ practice was to buy a plot of land, usually greenfield, flatten it, build near-identical houses on it then offer them for sale. Buyers would have to wait at least ten years for the saplings and landscaping to mature and new-build housing had a poor reputation among the well-to-do.

Pidgley’s formula was radically different. Berkeley built on small sites, typically buying an old, dysfunctional house with too much land, knocking it down and building three to five houses on the site. This spared the Green Belt and meant that road and utility infrastructure was already on the site.

Rather than flatten the site, Berkeley left mature trees and landscape features alone, to the inconvenience of the contractors. The houses were sold off-plan, reducing the financial risk but enabling the buyers to decide the model of the house and specify features. Double-glazing was standard and the customer chose the decoration and fittings.

Everything from extra electrical sockets to conservatories and swimming pools could be added at a fraction of the cost of doing it yourself. All the houses were different and our personal prejudices against new-build properties were swept aside.

On the Epsom trip, Pidgley offered to show us a house that was completed and sold, inviting us to pick one at random on a development. We trooped up to the door, Pidgley pressed the bell and we all expected to be sent packing.

When a lady opened the door, Pidgley introduced himself and pointed to some paving which he said was uneven. “I’ll send the boys round tomorrow to sort it out,” he said. Within a few minutes, the lady was giving us a tour of the house and then offered us tea and biscuits while answering questions from half a dozen complete strangers in her sitting room.

Gazumped by dad

Tony Pidgley junior had recently joined the business, but he wasn’t going to be given an easy time (he had just written off an expensive new car). He went on to found his own company and be successful in his own right, sometimes despite his father. A popular story has his father asking him at a family Sunday lunch how business was. His son then told him about a fantastic development opportunity he had found.

A month later, his father asked him how he was getting on with that deal. His son, crestfallen, said he had been gazumped by an unknown rival, to which his father said “Son, the first rule of business is that you don’t brag about the deal until the papers are signed”. Berkeley was the gazumper.

Berkeley, through its St George and St James subsidiaries, later moved heavily into urban regeneration. Anyone who remembers the sites at Woodberry Down, Woolwich Arsenal and Kidbrooke (arguably London’s worst sink-estate) before development can only be staggered at the transformation. Friends who have been involved in such projects with Berkeley say that they never offered the best deal financially, but more than made up for it in reliability and quality.

In his book Home Truths Liam Halligan is scathing about housebuilders generally, but has nothing but praise for Pidgley. He tells the story about how Pidgley bought a site near Effingham Junction “for a song – about £3m” because planning permission was thought to be impossible.

Pidgley realised that a nearby school needed redevelopment and offered £25m towards it, plus 20% affordable housing. The offer was increased to £32m and approved by the secretary of state. Berkeley built 295 new houses and still made a profit margin of 20%.

Pidgley was a genius who transformed the housebuilding industry, revived run-down urban areas and made great returns for his investors. His focus was always on building, not on trading land, and on deals that shared the benefit between his customers, the public and his investors. His legacy is immortal.