Blog | Commercial Central London Investment

Trophy assets: the allure of the London garden square

The Ferrari 250 GTO is the most expensive car ever to sell at auction, achieving $48.5M in 2018. Produced from 1962 to 1964, only 36 were made, and buyers had to be personally approved by Enzo Ferrari before parting with $18,500, the original retail price.

The rarity and desirability of certain assets has turned them into objects of status for hundreds of Ultra High Net Worth Individuals (UHNWI).

With the continuing growth of the global class of super wealthy, many luxury items have progressively become more expensive, resulting in a highly competitive market. According to Forbes, in 2010 there were 1,001 billionaires with a total net worth of $3.6 trillion; 40% of them were in the USA, and 6% in China. By 2020, the number of billionaires had more than doubled to 2,095 with a net worth over $8 trillion. China’s share has risen to nearly 20% during this period, and Asia’s combined total to over 30%.

There are now over half a million people in the world with net assets in excess of $30M.

With interest rates at near historic lows across the UK, the US and the Far East, trophy real estate assets that are able to offer a solid income return are increasingly in demand, particularly in tier 1 global cities such as London. Combine this with the international prestige of London, its super prime assets are well-placed to outperform the market over the long term. It does not get more super-prime in the West End than a Bond Street shop or an office fronting a garden square.

If you add up all the buildings in the three principal Garden Squares: Grosvenor Square, Berkeley Square and St. James’s Square, then take out the residential properties, clubs, institutional buildings and all the buildings held by the landed estates (Crown Estate, Abu Dhabi Royal Family and Grosvenor Estate) you are left with just 16 freehold office properties. Just 16. Half as many as there are Ferrari 250 GTO’s.

This is evidenced by pricing; only two £100M+ London office buildings have ever traded for in excess of £3,000 per sq ft, both of these are located in St. James’s Square.

In 2020 Allsop represented Columbia Theadneedle Investments on the sale of one of these assets, 21 St. James’s Square. Our client had undertaken a comprehensive office development behind the listed façade to the highest standard. The building is fully let to two tenants at an average rent of close to £120 per sq ft with over 10 years of secure income.

The marketing offered us huge visibility into the market for super prime assets and highlighted the considerable depth of demand from UHNW investors, whose confidence was not impacted by travel restrictions and the grip of the global pandemic. Following two rounds of competitive bidding the building was sold to Zara founder Amancio Ortega’s property company PonteGadea for £187.5M representing a net initial yield of 3.65% and £3,065 per sq ft. We calculated the combined wealth of the parties that submitted offers for the property to be in excess of £100Bn.

Also last year, Allsop together with its Asia alliance with Millennium Group, advised Hong Kong investor Lifestyle International Holdings on the £250M purchase of BP’s headquarters at 1 St. James’s Square. Our client plans to extend the building and create a truly exceptional business space that befits the address when BP vacate in a couple of years’ time.

There is only one London. Regardless of Brexit, the global pandemic and other turbulences, it remains a magnet for the global super-rich, who are increasing in number. They value the political stability, education and environment for doing business and entertainment that this city has to offer. Unique trophy property assets are finite in number, its garden squares can command a premium and the most prestigious of these, St. James’s Square, is to offices what the Ferrari 250 GTO is to the car world.

Nick Pemberton

Partner Commercial Investment - West End Asia Property Investment

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