16 November 2001

OLD BARNS, NEW

INCOMES?S

Keeping a close eye on your

builder and your costs is

vital if youre embarking on a

redundant barn conversion.

But its not always that

easy, as Sarah Allen-Stevens

explained to David Cousins

CONVERTING a redundant barn into something that might make a bit of profit sounds fairly straightforward. Just hire an architect, get in some builders, put a sign outside the farm gate and – hey presto – you have a money-making diversification that cant fail.

But is it really that easy? Who better to ask than someone who has lived and breathed farm building conversions for the last few months and who has learnt some important lessons in that time?

Sarah Allen-Stevens is probably just such a person. Her family have farmed at Wicklesham Lodge Farm near Faringdon in Oxford-shire since the 1920s, initially with a dairy herd and then wholly in arable crops. They decided some while ago that there were better uses for their five attractive-but-agriculturally-useless stone barns than becoming a store for discarded implements. In fact the first of them was converted into offices in 1994.

Since then Sarah has set up Wicklesham Commercial Propert-ies and has taken over responsibility for converting and marketing the remaining unused stone barns. She has also just finished the conversion of a set of barns into attractive offices.

&#42 History

Sarahs grandfather Captain Tom Allen-Stevens bought the 206ha (510-acre) farm near Faringdon in 1921 and ran successful dairy and Shorthorn cattle breeding enterprises. His son John took over the farm in 1953, expanded the dairy side and reared Ayrshire x Friesian cows.

But the crunch came in 1984 with the arrival of milk quotas. The farm didnt have enough quota to make the dairy side viable and the herd was sold. The whole of the 180ha (445 acres) of suitable land was turned over to arable, growing wheat, barley and oilseed rape.

By late 1996 farming fortunes had begun to turn down again after a period of relatively good prices. Johns son Tom (Sarahs brother), who was now running the farm, decided the crop yields on this gravelly, drought-prone land would never be good enough to justify him sitting on a tractor. So he got a local contractor to do the fieldwork, leaving him to take the decisions on input and variety choice. Meanwhile he became the arable editor on FWi, farmers weeklys on-line service.

Sarah, on the other hand, had decided to give up a good job in the telecoms industry and was keen to return to the family farm in some form or other. With one barn already converted in the mid-1990s and several more standing idle, there was obviously scope for someone to oversee their conversion into offices as part of a sustainable long-term diversification project.

&#42 Cost

How much can you afford to spend on converting redundant barns and still hope to make some profit? Its an important question that has never been far from Sarahs mind.

"Those in the business say anything more than £10/sq m – not including architects fees or decoration – will take a long time to pay back," she says. "In fact at that figure, everything you earn in rent will go straight back to the bank to service the loan. We actually spent £5-6/sq m in Ram Court (the big barn), but £12/sq m on the smaller buildings."

Managing costs is critical, she adds. In the case of Wicklesham Lodge Farm, the architect did much of the cost management, but when costs got way out of line she called in a quantity surveyor. For example, when some unforeseen underpinning was needed in one of the barns, a big bill from the builder was cut sharply by the quantity surveyor doing his own calculation of what the job should cost.

She also worked with a 30% contingency fund, consisting of 10% cost overrun and £20% profit – that is, the increase in value you would reap if you simply sold the barn when it was converted.

&#42 Choice of builder

The builder is a key player in any barn conversion project, so choosing the right firm for the job is vital. Sarah got four local builders to quote for the job, but found the most expensive was £100,000 more than the cheapest. And, somewhat depressingly, even the cheapest would have meant a conversion cost above the critical £10/sq m figure.

So she decided to push the tender out wider to try to draw in a bigger range of costings. The Federation of Master Builders came up with a list of members and Sarah simply phoned them up to ask whether they could handle a £500,000 project.

Four more tenders were found from further afield and one came in at £70,000 less than the cheapest of the previous figures. Slightly covert checks were made to check whether the builders previous work was up to scratch. It was and the firm was taken on.

Why do costs vary so much? "I think its to do with the builders own costs for subcontracted woodwork, plumbing and electrical work," she says. "Some firms are charged high rates by subcontractors and they obviously pass that on to the client. The cheapest way is obviously to employ electricians and so on direct but its a full time job doing that."

&#42 Marketing

When youre bogged down with the complexities of the build itself, there can be a danger of forgetting that you need to produce something that will be attractive to tenants, says Sarah. There is also sometimes a conflict between agents and architects here too, she adds. Architects tend to favour lovely designs that are not very marketable; agents often prefer boring but easy-to-lease designs

Sarah used two agents to market the newly converted barns, one covering one part of the potential catchment area, the other covering the other part. Each agent is paid 7.5% of the first years rental as a one-off payment, so at an annual rental of £12,000, she paid each agent £900. If you have a high turnover of tenants, such costs can mount up, she points out.

&#42 Finance/grants

Like many in farming, Sarah found getting a grant was harder than it seemed. She applied for a grant of £35,000 of the £100,000 conversion costs of Ram Court from South East England Development Agency (SEEDA) but was turned down. Shes not quite sure why; grant agencies are reluctant to give applicants details of why they failed to get the grant for fear that they will simply adapt the scheme slightly each time and keep reapplying.

Another hurdle proved to be getting a bank loan. "My existing bank said it had a policy of only lending money for conversions to offices if the tenants were tied to leases of 10-15 years duration," she says. "Since no tenant would even commit them selves to such a long tenancy – most are for three to five years – we had to change banks to find one that was happy to lend on a more realistic tenancy period."

All the converted barns at Wicklesham Lodge Farm have tenants apart from Ram Court. Firms used to town or city-centre offices can sometime find it something of a culture shock to move to the country, but once theyve made the move they never go back, says Sarah.

&#42 The future?

Farming may operate in its own little economic world, but once you start a non-farming business you are subject to the ups and downs of the general economic cycle. So does Sarah worry about the recession that economists predict is just round the corner?

"Theres no problem with demand for offices in rural locations like this," she says, "though I cant account for the lack of takers for Ram Court. However, the long-term picture is good and 10 years from now converted barns like this should definitely be an asset. It does have to be self-financing; you have to know that if it all goes wrong and you have to sell the barn, you will still cover all your costs."

Above: Three 18th century unlisted open barns, were converted into smaller offices (below) earlier this year. Cladding was added, as well as windows and doors, and the courtyard landscaped. The planners were not enthusiastic because of the barns relatively poor state of repair and felt they they should be pulled down and the area turned into a car park. However, Sarah stuck out for permission on the buildings, feeling that the courtyard layout would give a sense of community that would otherwise be missing. She had the roofs repaired and then re-applied for planning permission. This time she got it.

Sarah Allen-Stevens says you need to keep a tight rein on builders bills.

The 3360sq ft (312sq m) Old Barn was converted into offices in 1994. Parts of the building date back to the 12th century and it was used up until the late 1980s for grain storage and drying and storage of fencing. It was listed in 1987, so conversion had to be done carefully to meet planning laws. Front Velux windows were allowed under planning laws in place at the time; Sarah says they probably wouldnt be allowed if the conversion was happening now. The building is occupied by a media firm.

No 1 Ram Court (named after a water-pumping hydraulic ram rather than the sheep variety) was built in the 16th century and used for stock-rearing, fertiliser storage and machinery repair and maintenance. It was converted last year into a 2700sq ft (251sq m) two-storey office building, with new rafters and several new purlins.

Keeping the existing roof trusses as they were – ie running right across – would have made the second storey impossible, so they were cut off and supported by vertical beams with cross girders to support the floor.