Shaper: Charlie Vaughan-Lee

Show aired on 24th October 2015

Transcript

Elliot Moss
A really uplifting version of Happy Talk there from Cannonball Adderley and Nancy Wilson. Good morning this is Jazz Shapers, I am Elliot Moss, thank you so much for joining me. It’s your weekly spot of business mixed with music. It’s the place where you can hear the very best of the people shaping the world of jazz, blues and soul, alongside their equivalents in the world of business, a Business Shaper. My Business Shaper today I am very pleased to say is Charlie Vaughan Lee; he’s the founder of the property investment business called Student Cribs. It does what it says on the tin, they have created an amazing high end level of property for students and there are lots more of them, which is of course good for his business. Lots coming up from Charlie very shortly. In addition to hearing from him you will be hearing from our programme partners at Mischon de Reya, some words of advice for your business. And on top of all of that of course, some great music including Zara McFarlane, new music from Ibrahim Maalouf and this from Mike Stern and Eric Johnson.

Mike Stern and Eric Johnson with Red House, a Jimmy Hendrix classic and now has become a blues standard. Charlie Vaughan Lee is my Business Shaper today as I said earlier, he is the founder of the property business called Student Cribs and they basically have created a lovely portfolio, I think that’s the language that you use in the property world? A lovely portfolio of really nice houses for students to live in. Charlie thank you so much for joining me.

Charlie Vaughan Lee
Pleasure, thank you for having me Elliot.

Elliott Moss
In a nutshell, I’ve sort of done your, your, the elevator pitch but how would you describe what Student Cribs is now and very briefly, how long have you been running for?

Charlie Vaughan Lee
Well I set the business up in 2003 when I was an undergrad at Bristol University. I was in halls and was sort of fairly despondent about the fact that in order to secure a nice house for my second year to live in with my mates, I would have to lie to a letting agent and pretend I was a young professional. So in the first year we got some investors together and bought three houses, did them up and let them out and it went well. I then did some other things sort of after University in a packaging business which I will probably tell you about in a bit and we really have been growing Student Cribs aggressively since 2010, so…

Elliot Moss
And now you… how many properties around the country?

Charlie Vaughan Lee
So we have got about a hundred and fifty houses around the country or units. Some flats as well in blocks and we have got eight hundred and twenty three tenants in our student properties. We have also got a new brand called Professional Cribs where we are creating cool houses in London for young professionals, so when students graduate and come to get their first job, often they will move to London and there is quite a, quite a shortage of good quality affordable housing in London that are done, you know, properties built well for young people who want to live in small groups, work hard and also have a bit of fun at home.

Elliot Moss
Now its great timing, I mean in the last ten years we have seen an explosion, not just of the population in London but of course of the student population, so fantastically good and we will talk about how you cleverly saw that coming obviously.

Charlie Vaughan Lee
Of course.

Elliot Moss
That is exactly why you designed your business around it.

Charlie Vaughan Lee
Yeah.

Elliot Moss
But it is very rare that I meet someone here where this is their first business. I imagine you were busy at school making a buck, am I right?

Charlie Vaughan Lee
Yeah I was, I was a bit more focussed on making a buck than I was on my lessons. Most of my school reports would detail that but yeah, no I set up a tuck shop in my second year at school which I made about £20 or £30 a week from which kept me in good money. I used to sell wine and cheese to parents when they came to school plays, organised an open-air rock concert to fund out school rugby tour which is still going at my school, fifteen years later which is quite cool.

Elliot Moss
What was the buzz? I mean that’s a lot of things and of course then you have done other things as well but at that point you are a young – how old were you when that tuck shop opened?

Charlie Vaughan Lee
I was fourteen.

Elliot Moss
And what did it feel like when you were selling stuff and making a bit of profit?

Charlie Vaughan Lee
I just loved making profit so I would get the matron, I would pay her a fiver to drive me to Yeovil which was near where the school was, in her Ford Escort I think it was and go to the Cash and Carry and buy one penny sweets and the margin on sweets is not quite as good as popcorn but it is pretty damn good as margin goes and you know, it was fun seeing people want to spent their money at school, sure the money wasn’t very big because we were all young but just to create something, be it a tuck shop that customers wanted to line up outside during break time between lessons and buy some snacks was good. The fact that we occasionally might have sold a stick of chewing gum accompanied with a cigarette under the desk helped as well but that, but now I am far enough away from school to not get in trouble for that.

Elliot Moss
He has just admitted to past misdemeanours. We won’t give away any more. Find out more from my Business Shaper today, Charlie Vaughan Lee and why creating things has been a bit of a passion for him. Time for some more music, this is Madeleine Peyroux with A Little Bit.

Madeleine Peyroux with A Little Bit here on Jazz Shapers. I have been talking to Charlie Vaughan Lee, he is my Business Shaper today; founder of the property company called Student Cribs. We were talking about past misdemeanours but more importantly the desire to create and whether it was the tuck shop or whether it was later on, I think you were saying at University you were a nightclub promotor – is that right?

Charlie Vaughan Lee
Yeah that’s right. I think a lot of people who have entrepreneurship in their blood cut their teeth if they go to University with promoting nightclubs. The usual way is to you know, somebody owns a nightclub, they have promotors and then people in their first year become sub-promotors and get paid a pound or two for every person they get to go through the door. The promotors take the door money. We went a step further actually and we sort of set a night up with, directly with the club owners so that we could take all the door money and it was you know, it was pretty profitable actually in terms of disposable income it was definitely the first time in my life where it made a big difference running a business and it was a cash cow. From my perspective I have never been particularly creative in terms of art or music and the only way I could or I have been able to create something is by bringing people together around an idea or vision, motivating them to pull it off and getting customers excited about buying that product or service and for me that is extremely fulfilling building a team together and employing people. If you had asked me when I was twenty two, twenty three what my goals were from setting up a business I would have probably have said to be the richest man in the world and to build a really big massive company. That’s changed slightly, probably because I haven’t achieved it but I think also because you know, of course financial success is, is the main yard stick that you measure yourself against when you are running a business, profit is key but it’s extremely fulfilling setting something up from nothing, coming up with an idea and having twenty, thirty, forty people working for you, paying them enough so that they can live, they can educate their kids, they can feed themselves, they can pay their mortgage, that’s you know for me, that gives me a lot of pleasure.

Elliot Moss
And Student Cribs, you employ how many people right now?

Charlie Vaughan Lee
We are twenty people full time and about ten people part time. It is growing at the moment. The London Bio Packaging business inbetween we got up to about forty five people.

Elliot Moss
And why do they follow you Charlie because I think you very eloquently explained what’s in it for you and that sense of bringing people together, that sense of them creating their own lives and living their own lives and enjoying their own lives and so on but why do they follow Charlie Vaughan Lee?

Charlie Vaughan Lee
I think probably because they can’t find anyone better to follow. No I’m joking. I think you know, they, they are excited about what we are doing. They can see the sense in the vision at Student Cribs, what we are achieving, the product is very good, it’s a very simple idea. Our customers love it, our tenants love it and we have a second customer base which are our investors, obviously buying property is quite capital intensive so we are continually raising money.

Elliot Moss
How many investors do you have roughly?

Charlie Vaughan Lee
Well so far we have raised money really from high net worth individuals, so we have about thirty five guys who are all successful, well not just guys, people who have been very successful and our investors tend to invest between half a million and two million pounds each into our property investment funds so we have got about sixty million of gross assets now across our portfolios and so we have two clients. We have our investors on one side and then we have our tenants who are living in the properties on the other side. And you know I think to get back to your question, why do people like what we do and follow – we create a great work environment, we have got a nice relaxed work environment but you know, we don’t sort of rule people particularly by times, clocking in, clocking out, holiday times are fairly flexible. It is just about pulling together and achieving something together. We give everybody a share in a long-term incentive scheme so part of our deal with our investors is that if the properties go up in value we have a carried interest over a hurdle rate return and we share that with the whole team and so people are, all our team are genuinely aligned with us and our investors in growing something.

Elliot Moss
So there is essentially two revenue streams; there is the rental and then there is obviously the upside in terms of the value of the property itself?

Charlie Vaughan Lee
Yeah. For our investors they get a total return which is a combination of net yield from the rental income we generate and then also capital growth.

Elliot Moss
Very clever. Stay with me for much more from my Business Shaper, Charlie Vaughan Lee today. Latest travel coming up in a couple of minutes and before that, some words of wisdom for your business from our programme partners at Mishcon De Reya.

This is Jazz Shapers and you can hear me, Elliot Moss interviewing someone who is shaping the world of business every Saturday morning from 9.00 o’clock sharp. Today my brilliant interviewee is Charlie Vaughan Lee, he is my Business Shaper and he is the founder of Student Cribs. They offer rather nice swanky places for students to live and they can rent those places. Now when I was a student a hundred million years ago in the Jurassic age, our places were not particularly nice, I mean they were pretty horrible actually and it was cheapish but it was not good value for money. When you began your business in 2002 it came from that insight didn’t it that you, you saw it yourself and you were like you know, ‘I can’t get a good place unless’. What enabled you to go from ‘I’ve got the idea’ to ‘I am going to make this happen’?

Charlie Vaughan Lee
I think a couple of things, one I wanted to live in a nicer place, I wanted to do my second year to live… not talking like a palace but just a nice reasonable place that was warm and comfortable and would be, you know, excited to bring some friends home to or something like that for a party, drinks, whatever and it was very difficult to find places like that. I think the other thing is when you are a student you have a shed load of time. I did a relatively challenging degree course, chemistry, which you know, the sciences, I think in my second year when we did live in the first student crib with five other people, I have more hours of lectures a week than my five other house mates put together who were doing art subjects but even doing a science course you still have so much time at University and I wanted to use that time – I still had lots of fun – but I wanted to use that time to try and get something off the ground and this just seemed like an obvious gap, you know, all of us were in halls, suddenly there was a huge rush after about four or six weeks of just meeting each other in halls to go and find houses and they were all pretty rubbish and you know, whilst we were students, I didn’t see why we shouldn’t be given the opportunity to pay a little bit more and I am talking £10 a week more per bedroom in rent to live in something that we could enjoy and be proud of and what we found is you know, most student landlords didn’t give students the you know, the respect, they thought that if they gave them a nice house they would trash it. What we found was that then when we created some nice houses and people wanted to pay a bit more for them, they were proud of their house and they looked after it. I am not suggesting we haven’t had the occasional mishap over the years; one guy built a skateboard ramp inside his bedroom and we came to find there was no plaster on the walls so it’s not, it’s not always perfect but actually you know, we’ve let a lot of student bedrooms now over the years and, and people seem to respect them if you give them a nice property.

Elliot Moss
Now in this thirteen year period since then, 2002 to 2015 as you mentioned earlier, you were involved in another business. That business you had fifteen percent share in that other business; that business sold. How were you managing the two businesses? Was it the kind of a focus for a period and then you’ve come back to this one?

Charlie Vaughan Lee
Yeah it was an interesting time that and it was exciting so I left Bristol and I was desperate to set up a business. Before Bristol University I didn’t even want to go to University, I just wanted to set up a business and my dad was very keen for me to get some qualifications and some experience and so after Bristol I went and worked for Anglo American in their packaging division on a grab programme, a big cardboard business called Mondi. So I worked in cardboard factories in Scunthorpe, March in the Fens and Maldon, Northern Wales for two years and I actually learnt a lot. My dad was right, I learnt a lot about how a business operates and runs and the skills and the understanding I developed about business I think definitely helped me to grow businesses faster and more efficiently as a result of that. That got me into to meet a guy called Marcus Hill who had set up London Bio Packaging. We are still trading from his house, from his kitchen table and I joined in, he gave me a share of the business to join and we grew that business pretty quickly from 2006 to 2011. We supplied biodegradable food packaging to the food industry, things like coffee cups and juice containers and I guess the peak of that business was winning the contract to supply the Olympic Games and it was probably off the back of that contract actually that we got enough scale to sell the business as well. And in terms of handling that over the Student Cribs, Marcus was great, he understood that whilst we were going to be growing London Bio Packaging together, he sort of, I think he wanted me because he knew I was entrepreneurial and would get stuff done and get through hurdles and do all the things that you need to have when you are entrepreneurial but along comes with that you know, the fact that you are creative in a business sense and I had this other business which was just getting going and we had a couple of people working in Student Cribs at the time, partner Charlie Philip who joined very early on and a guy called Tom Ferber who was one of our first tenants and we just had two offices next to each other. So we had London Bio Packaging in one office and literally two doors down in a little mews, we had Student Cribs and I would work in London Bio Packaging from 9.00 to 6.00 – I’d pop across at lunch time to Student Cribs, have a little meeting and then I would work in Student Cribs from 6.00 until 8.00 in the evening and it was quite hard work but I was twenty five, twenty six, twenty seven – it was fine.

Elliot Moss
And that is how you do it. You work hard and you become incredibly flexible. Lots more coming up from my fantastic Business Shaper today, Charlie. Time for some music, this is some stonking new music, I really like this, it’s called Esensial, it’s from a Lebanese artist called Ibrahim Maalouf.

That was Esensial from Ibrahim Maalouf and I hope you liked that as much as I do. Charlie we were talking about how you managed the two businesses and I have just got this image of you literally running like a crazy waiter from one room to the next – ‘Okay which am I going to first, the Bio Package and then I am going to move over to the…’ but that’s amazing, I mean that really shows energy and that shows passion and you said you were in your twenties. At what point did you stop, was there an event in the other business and is that when you then started focussing purely on Cribs?

Charlie Vaughan Lee
Yeah there was an event in two businesses and there was an event in my mind as well. In 2010 we met our chairman who is now a chairman of Student Cribs, a guy called Brian Linden who has become my mentor as well – he is a fantastic guy. He was one of the founding partners of a very large private equity firm called Cinven, one of the largest European private equity buy-out firms and he was sort of retiring in 2010 from Cinven or stepping back and he wanted to do two things – he wanted to build a charity and he has built an amazing charity which maybe we will touch on in a moment and also have a business interest and probably help an entrepreneur and I was lucky enough to meet with Brian and he invested with some of his other founding partners and friends, five and a half million pounds into our first investment fund and they also bought half of the management company of us, so they gave us three hundred and forty thousand pounds for fifty percent of our business. Now at the time we had seventeen houses, my partner Charlie Philip was involved and Tom but it was a fledgling operation and we were just about breaking even.

Elliot Moss
And why did he buy in to you do you think, in a nutshell?

Charlie Vaughan Lee
I think…

Elliot Moss
I don’t mean financially, I mean as a person, as a human being, why did Brian say ‘you know what I am going to mentor this guy’?

Charlie Vaughan Lee
I think we got on well, I think he liked the fact that I had already built a business, I think having done London Bio Packaging at that stage we were probably turning over five or six million pounds and making a profit from selling paper cups so I think he you know, I had a bit of credibility…

Elliot Moss
And what about the other way Charlie? What did you buy in to with Brian? You said he was your mentor now and he was a great guy, what are the two or three characteristics of Brian that make him very important to you as a person and in your business?

Charlie Vaughan Lee
Well the characteristics that make him important now, well first of all he is very bright and is, you know, comes in and gives us advice that you only can get from one, someone who has had a lot of experience in running other businesses or being involved in investing and developing other businesses even though his were much bigger. He would buy businesses for a billion Euros but he can come in and give us that sort of helicopter view on situations but more than that I just liked him and we got on well and I think that was by far the most important thing and he seemed to like me, he’s probably regretting that now but…

Elliot Moss
He did mention that… he didn’t really.

Charlie Vaughan Lee
He normally does and he also was keen to you know, I think he also liked the fact that we were in property. He wanted, he had been in a high risk environment in private equity and so you know the investments they make make twenty percent annual returns, twenty percent IRR kind of investments whereas in the space we are in in property, we are looking at more sort of eight to twelve percent returns but they are more solid, well not necessarily more solid than Cinven investments but they are, you know, you are buying in to bricks and mortar. It’s not going anywhere so I think both the asset that we were dealing with and also the fact that we got on was important to him and to me.

Elliot Moss
Stay with me for my final chat with Charlie plus hear from Jazz FM award winner, Zara McFarlane, that’s after the latest traffic and travel here on Jazz FM.

Night and Day from Zara McFarlane, Jazz FM award winner this year. Charlie Vaughan Lee is with me just for a few more minutes and we have been talking about the role of mentors and about what who bought into what and so on. You’ve now got a pretty decent sized business Charlie, you said almost eight hundred and twenty three people sleeping in your accommodation. You own those properties, the various people own them. What’s next? Where is this business going to go? Have you got a number in your head? Is it two thousand, is it X hundred, three hundred properties or doesn’t it work like that for you?

Charlie Vaughan Lee
No it does a bit. It’s good I think to have an idea as to where you want to get to. We would like to be the largest provider of second and third year student accommodation by bed spaces. The student accommodation market tends to be that in the first year people go and live in halls of residence and that is where a lot of institutional money has been pointed because it is quite easy to build a five hundred bedroom block and you can get scale quickly. The market that we are in which is second and third year students when tenants want to leave halls and go and rent a house with their mates, that’s a much more fragmented market. It is not consolidated, it’s owned by a lot of individual landlords across the country and we are the first people that is taking a professionalised approach to that so there is a big opportunity for us there. And then beyond that I want to build a big property business. We have a great set of skills in our company, we have great development managers who develop our projects, we have refurbished thirty five houses over the last twelve weeks from top to bottom across the country. We have a great acquisitions team who are looking for great properties to buy across the country. We have a great lettings and management and marketing team so we brand all our properties and let them and market them well. We manage them through Facebook. So we use Facebook groups to interact with our tenants because it is easier to manage a property with a group of people from a Facebook group that is via email, especially if they are young people and we want to use that for other areas in property. We are becoming experts in, in old property so Victorian terraced houses, Edwardian terraced houses which is a sector of the market lots of people aren’t looking at and we are doing it in London now and we could offer those property services to other groups of investors so that’s what we are looking at doing, growing Student Cribs but some other brands alongside it like Professional Cribs, City Cribs and we have got quite a few other ideas in the pipeline.

Elliot Moss
You look like you are really happy, you look like you are involved and you are enjoying it. Is it more fun than the tuck shop or is it about the same? But seriously, you know that sense when you are young…

Charlie Vaughan Lee
You know what it is the same thrill and I think one of the things Brian, our chairman has been great at is teaching me that it is not just all about you know, doing business and making money, it’s about doing it in a good way. He set up a great charity called Second Chance which takes… so young not in education or employment or training to the age of sixteen and twenty four in Elephant and Castle and takes them for a six month training programme, gives them GCSE Maths, English and IT skills and after six months they come out of the programme into a job. We are now looking at setting up a thing called Street Coffee which will sit on top of that. We have just started that which is using a bit of my experience from London Bio-Packaging and that will be a social enterprise, it will be a not for profit business. We will have hopefully coffee carts and kiosks outside Tube Stations and Train Stations and the young people coming out of Second Chance will work in these as Baristas. We are going to send them on Barista courses and so these guys will get their first jobs in life. We are going to pay them the London living wage and then all the profits will go back to Second Chance and hope to fund more programmes and more schools. There is a million young people without employment so… and I wouldn’t have done that or thought about doing that I think if it wasn’t for Brian. I’d have just focussed on trying to line my own pockets but its… and don’t get me wrong, I want to get rich still and be successful but it’s, it’s great to you know, use some entrepreneurial skills in another way as well.

Elliot Moss
Brilliant. Listen well he’s a great influence obviously on you and you have mentioned him a fair bit and I think he is doing a fantastic job, as are you. Just before I let you go, what is your song choice and why have you chosen it?

Charlie Vaughan Lee
It’s Nina Simone and Feeling Good. I’ve chosen it because you guys wouldn’t let me chose a Queen song which is my passion.

Elliot Moss
He’s so honest this bloke.

Charlie Vaughan Lee
But I love Nina Simone and actually I did have a cheesy record player at the top of Waverley Road, the first Student Crib we bought and I occasionally tried to woo people playing some Nina Simone and Ella Fitzgerald which completely failed. My wife will be pleased to hear. But I love Nina Simone, she’s got an amazing voice, great story and I love this song.

Elliot Moss
Great choice, you made a great guest, thank you so much.

That was Feeling Good from Nina Simone, the song choice of my Business Shaper, Charlie Vaughan Lee. Entrepreneur through and through, right from the age of about fourteen he’s been creating stuff and enjoying doing so. Super ambitious, absolutely unashamedly saying ‘at some point I want to be rich’ and ‘I am already successful but I want to make it happen’ but measured with the belief in doing the right thing in core values all around actually giving something back and applying his skills in more of a social enterprise way. Fantastic stuff. Do join me again, same time, same place, 9.00am next Saturday, here on Jazz FM. Meantime stay with us, you know the drill, coming up next it’s Nigel Williams.

Charlie Vaughan-Lee is CEO of property investment company Student Cribs, founded in 2002 whilst he was studying Chemistry at Bristol. Charlie has worked alongside Charlie Philip in developing the business over the past five years, including the successful launch of the first Student Crib Fund. Student Cribs was launched back when Charlie was part of his own target market, as a reaction to a situation he experienced first-hand when being deemed an ‘unattractive candidate’ by agents of landlords.

Fuelled by frustration and convinced the provision of luxury touches and investment in interior design would encourage better treatment of the spaces, Vaughan-Lee developed the concept of Student Cribs. Between 2003 and 2006 Charlie bought and successfully renovated houses in Bristol and Leeds on behalf of investors. By 2010 the group raised £11m in its first investment fund enabling the company to buy 29 houses in eight cities across the UK before raising £34m in their second fund in 2012.

As one of property’s fast-growing disruptors, Vaughan-Lee has ambitious plans. Now looking to raise fund three and continuing to expand the business, he is set to make Student Cribs the biggest provider of second and third year bed spaces in the student accommodation market by 2017.

Follow Charlie on Twitter @chazvl

Listen live at 9am Saturday.

“I was fairly despondent about the fact that, in order to secure a nice house for my second year, I would have to lie to a letting agent and pretend I was a young professional”

“If you had asked me when I was 22 what my goals were from setting up a business, I would probably have said ‘to be the richest man in the world'”

“I set up a tuck shop in my second year at school which made about £20 or £30 a week”

“It is not just about doing business and making money, it’s about doing it in a good way.”

“We would like to be the largest provider of second and third year student accommodation by bed spaces.”

“It is about pulling together and achieving something together.”

“I am not suggesting we haven’t had the occasional mishap over the years; one guy built a skateboard ramp inside his bedroom…”

“At that stage we were probably turning over five or six million pounds and making a profit from selling paper cups.”

“We have refurbished thirty five houses over the last twelve weeks, from top to bottom, across the country.”

“Don’t get me wrong, I want to get rich still and be successful, but it’s great to use some entrepreneurial skills in another way as well.”