Despite a background in insurance, Martin Belcher, Chairman of the Polygon Group, has embraced technology and property to transform his business. He explains all to Nick Kirby
Martin Belcher has reinvented himself in the last decade. Having worked exclusively in insurance from 1970 to 2005, the last 10 years have seen him transform a former insurance firm into an investment group that has fingers in a load of pies, including a considerable interest in property.
Having arrived in Guernsey in 1983, Martin joined Transglobe as Deputy Underwriter for Polygon. Two years later, Transglobe’s parent in the UK went into receivership and Polygon became an independent entity, with Martin assuming the role of Managing Director.
Polygon initially diversified, but a management buyout of certain fee-based companies in 2001 formed the basis for Heritage Group, a new company owned by the management and the Hiscox Group. Polygon Insurance Company continued trading and remained a client of Heritage.
In 2005 things started to move away from insurance. That year, Martin led the buyout of the Hiscox shareholding of Heritage and was instrumental in the Heritage Group’s rapid expansion in both Guernsey and Jersey. In 2008, he moved from being CEO to Non-executive Chairman of Heritage Group and its subsidiaries. Since 2009, he’s been Chairman and sole owner of Polygon Group.
Polygon now styles itself as an investment company and has either advised or has holdings in a diverse range of companies. It also comprises Polygon Properties, which owns Forum 3, home to Digital Jersey, and the One St Julian’s Avenue development in Guernsey.
Martin spoke to businesslife.co about how he got here and where Polygon goes next.
Polygon has undergone changes and diversification since you joined, and now seems like a completely different beast. How did you get to where you are now?
Through most of the changes, Polygon was owned by a series of European airlines and was writing just aviation insurance business. The formation of Heritage was aimed at balancing the income flows and mapping out a career base for the individuals involved, because we could see that Polygon was really just a one-trick pony. Once we’d branched out into captive management and insurance broking, it became obvious we could strengthen the financial base of Heritage by moving into more traditional offshore business – namely trusts and fund administration.
We’d thought for a while that Polygon itself was going nowhere, so we formed Heritage to spread the portfolio that was then owned by Polygon. In the end the management said to Polygon shareholders that the way forward is for you to go whichever way you want. In our opinion their business plan was unsustainable, so we purchased Heritage from them.
When I was CEO of Heritage, I had a considerable shareholding in my own right. Then Polygon invested in Heritage, so I doubled up. Then I did a share swap that meant I bought out Polygon completely and paid for it in Heritage shares. So I owned Polygon completely and Polygon was a shareholder in Heritage – and in 2014, Polygon sold its shareholding in Heritage completely. So I’m no longer involved in Heritage – just the sole owner of Polygon. See? It’s not remotely confusing!
OK, I think I follow! Of course, the big picture is that Polygon has gone from being an airline reinsurer to an investment company. Why the change?
I decided I’d stop being CEO of Heritage aged 55, and that I’d change from an exec role to a non-exec role. This was in 2008. At that stage, Polygon was an insurance company in ‘run off’ – it had stopped writing business in 2000. In insurance company terms, you have a series of liabilities and a pot of money, and hopefully the money will last as long as the liabilities. The reality is that almost all companies in run off eventually run out of money because they don’t get enough return on the money they’ve got to cover their costs and pay claims. So there I was with a very small team, with a shareholding in Heritage that will yield dividends, and, as time passes, will be potentially saleable. But alongside that, the plan was to take Polygon off and go forth and map out the future – so the rebirth of Polygon was a career change for me.
The investments you have are quite diverse – would you consider yourself an angel investor?
Your vision changes as life goes on. We didn’t start that way – there’s been a general drift to widening the portfolio. I see Polygon as now trying to be, in offshore terms, a mini family office. What that means is that we’ve got a diverse portfolio. In rough terms, we’ve got 60 per cent of our assets in property, 20 per cent of what we do I’d class as service companies operating in the Channel Islands – generally under the name of Vantage which is the old Heritage Jersey. Included in that we have a 10 per cent share in a legal firm called MJ Hudson, which has offices in Jersey and Guernsey. Then we also have another 20 per cent that I’d class as angel investments.
So how are you identifying these opportunities? Are people coming to you, or are you seeking them out?
We are actively sourcing because we’re involved in two or three angel investor networks. The principle one is Envestors. We go regularly to Envestors presentations in Jersey and we’ve invested in probably six or seven opportunities through them. We’re trying to look at high-tech, low-footprint businesses wherever they may be.
Of the ones you’ve invested in, which have been most successful or satisfying?
The one that’s outstripped the others by a huge amount is Your Workspaces, which started as one thing and morphed into something else. The guys behind it were all ex-Regus and they had a plan that in the recession they could become another Regus by going to hotels, who were under desperate pressure at the time and would let you have meeting rooms for free. What they were hoping to do was to offer meeting space and potentially office space, renting them out from hotels at very discounted rates. It didn’t really work out that way, but what they did have was very good software that they were able to sell to hotels to manage their small meeting rooms. Right now, they’re growing hugely as a software provider for hotel chains.
You’ve said that property accounts for 60 per cent of your portfolio – a significant portion in something very different to your background. So why the move into property?
It’s all about the bread and butter. In Guernsey we own two offices – Hadsley House and Heritage Hall. In Jersey, we have one office and are in negotiations to buy a second. The offices are generating quite a respectable yield – it’s bread and butter stuff, and not very exciting. Our internal target for return is 20 per cent a year on capital – the last four years we’ve exceeded that. You don’t exceed 20 per cent with just property, it’s by doing other things. But what property gives us is that steady regular flow of cash that enables us to effectively invest in a diverse mixture of sometimes high-risk businesses.
Two high-profile properties are Forum 3 in Jersey (home to Digital Jersey) and One St Julian’s Avenue in Guernsey. The latter is residential, which was another shift for you.
Well, not really – you could argue that it shouldn’t actually be in the property portfolio at all. All the offices are long-term keeps, whereas St Julian’s was very much a development project. It’s now fully developed, we’ll sell the remaining flats and move on.
Is that something you envisage doing again in the future?
We would happily do it again, but the opportunity has to pop up. I’m no spring chicken! I dream of being able to make a lot of money by doing the same thing over and over again, but it’s never happened because either the opportunity hasn’t been there or market circumstances change. I’d regard us as a ‘bottom feeder’ – if there’s a business opportunity, and we can get our minds around the business, and the finances make sense, we’ll give it a go.
Is your move into property a vote of confidence in the local commercial property scene, or was this purely business?
I think it’s a bit of both. I suppose it would have been sensible to buy another office in Guernsey, but there wasn’t one that was suitable when we were looking. I didn’t think it was wise to be involved in flat development in Jersey simply because at the time there was so much around, so it wasn’t something I was interested in. When we started looking at office property in Jersey it was a very depressed market and there was loads available. We thought we were on to a bit of a winner because effectively we could half-fill a building with our own companies – it’s not much of a gamble when you’re hedged in that way.
With Forum 3, we originally spoke to the States about Digital Jersey and a certain well-known UK supermarket that’s moved into St Helier recently. To me it was a far better bet to go the Digital Jersey route, with the aim of having one floor as Digital Jersey and one floor divided up into small offices, which is exactly what’s happened. The demand was much higher than we dreamt. So now we’re developing a second multi-tenanted floor, and potentially, if we buy another building, we’ll dedicate the whole of Forum 3 to tech businesses.
Is property a very clear focus for you? Is it going to comprise more of your portfolio going forward?
It’s a balancing act. I think 60 per cent is a comfortable figure – I wouldn’t want it higher. But unless we are totally wrong, some of the tech businesses we’ve invested in will come home to roost. So we’ll need to buy more property to balance the portfolio on the other side.
Is property stock an issue? Is enough being done to keep the commercial property market buoyant?
I think the two islands are very different. Guernsey’s relatively full – most office space is taken, and there’s very little new construction and very few transactions. In Jersey you’ve got a lot of available second- or third-tier office space. If I was in charge of St Helier, I’d be very worried if they build too much on the Waterfront. What’s it going to do to the second- or third-tier office space? I’m sure someone somewhere knows what the plan is, but the quality of the bottom tier is dreadful and a serious amount of money needs to be spent to make it usable, or some of the older offices need to be converted into flats.
Where is Guernsey compared to Jersey on the tech front?
Jersey’s a long way ahead. In terms of setting up the Digital Jersey Hub, they were easy to deal with because they had a very clear idea of what they wanted. There’s also Locate Jersey, which has been hugely helpful in providing a constant supply of high-net-worth individuals who’ve been involved with tech businesses in the UK and are retiring to Jersey, but who definitely aren’t giving up work.
The problem Guernsey has is that while there’s a number of initiatives, there’s no clear focus. There are lots of things coming out – the Digital Greenhouse, the Financial Innovation Lab and Start-up Guernsey. Guernsey’s problem is that there are four or five very good people working in silos away from each other, more or less creating the same thing with a slightly different name with very little support from the States – and even if this arrives, I still think Guernsey would be four or five years behind what Jersey has managed to achieve.
What’s your view on the Channel Islands right now?
Undoubtedly fund business is very good – the question is: how long will it last? There are a lot of clever people doing very clever things and making a lot of money – and hopefully paying a reasonable amount of tax. But when it comes to jobs, it doesn’t provide much, so I think one of the worries is about the middle management jobs that banks and trust companies have provided over the years. Neither of those is particularly strong at the moment, so just where are those jobs going to come from?
There’s also undoubtedly a skills shortage. Jersey has grasped the nettle better than Guernsey in allowing new people to come in and developing courses to train local people and give them the skills the tech industry needs. It’s easy to say you can bring in your high-net-worth person or your super-entrepreneur, but if they don’t have a license for two or three key people around them and can’t find suitably trained locals, these things won’t work.
Finally, what’s next for you and for Polygon?
We’ve got an imminent investment in another office in St Helier. In the longer term, we have far more investment opportunities than we have money, so we’re potentially going to raise funds. One area we are looking at is old people’s care, as there are needs in both islands. I’d love to go off island, as there are obviously huge opportunities, but we are more than occupied here right now.
After this interview took place, Polygon announced that it had acquired Forum 4 on Grenville Street, St Helier.