KUALA LUMPUR: AlloyMtd Group, which recently obtained approval for the redevelopment of One Crown Place in London, England, is targeting local buyers as part of its “short-term yield, long-term capital appreciation” strategy, said its CEO Datuk Dr Azmil Khalid.
The mixed-use project with a gross development value (GDV) of £451 million (RM2.67 billion) comprises 247 units of apartments with net internal area (NIA) of about 200,000 sq ft housed in two residential towers, offices with142,000 sq ft NIA, a 32-room boutique hotel with 15,000 sq ft NIA and 10,000 sq ft to 12,000 sq ft of retail space.
“There are currently no residential components near this project. Within a radius of half a mile to a mile, this is going to be it. So these 247 units of residential are going to be very sought-after, Our target is to turn it into a vibrant area; we don’t want this to be an investment-driven sale,” Azmil told SunBiz in an interview.
Unlike the Battersea Power Station project in London, which is being developed by a consortium comprising SP Setia Bhd, Sime Darby Bhd and the Employees Provident Fund and has been attracting international investors, AlloyMtd plans to sell most of the residential units to local buyers and retain as much of the office space as possible for recurring income.
“Our approach is, we want to sell to the locals, That’s why in our market survey, a lot of focus was done in seeing whether the local market can take this up. If you sell majority, 80% let’s say, to the investment market, we are not achieving our goal of making sure it’s vibrant because after 5pm or at night, the lights are all off because it would be investment-driven, nobody would be staying there. That’s not our aim,” said Azmil.
He said the aim is to build a vibrant area with amenities that will cater to various activities for the locals including after-work hours and weekends.
“Of course we can’t help it if someone buys in the secondary market and sells it to an investor but our drive is to sell it to the locals. That’s the way we approach it.That’s what was very important when we sold the idea to the London Borough of Hackney,” he added.
Prices for the residential units begin at £700,000 for a small studio. The average selling price of the entire residential portion is £1,500 per sq ft.
AlloyMtd’s subsidiary AlloyMtd (Jersey) Ltd, first acquired the 0.93-acre freehold site from Sun Street Properties Ltd, aunt of UBS, in June 2013. The site is close to Broadgate Estate and Liverpool Street Station.
According to Azmil, UBS had initially planned to build a 24-storey office building with 400,000 sq ft on the site to house its UK headquarters but decided to dispose of it via tender as it needed a bigger office.
In February 2013, companies were invited to submit their bids and AlloyMtd became the only Asian company to participate in the tender. It subsequently won the bid, beating other players including UK’s Berkeley Group and British Land.
Azmil said it took two years to analyse the market, carry out surveys, fine-tune its plans and convince the authorities to approve its mixed-use plan, which is a new concept in London as residential and commercial developments have traditionally been segregated.
“If they (London Borough of Hackney) have a commercial facility, they get more taxes. When you have mixed-use, it is a one-off thing, stamp duty and others, but you don’t have recurring annual income and they wanted to preserve this area as purely commercial,” he said.
However, it managed to convince the authorities with support from London Mayor Boris Johnson who saw the project as a solution to some of the housing problems in London. The authorities were also pleased with the company’s plans to maintain the Georgian terraces, which will house the boutique hotel as well as the facade of the Victorian warehouse.
The project is expected to kick off this year, with demolition works starting in November. Construction is expected to begin in August 2016 with completion of the entire project expected at the end of 2019. The residential portion will be open for sale once construction begins.
In terms of funding, Azmil said there will be a debt equity component.
“We are going to the banks. Thank God till today, many banks have expressed their interest, So we will decide when the time comes who gives us the best rates. It’s going to be a mix of internal funds and some equity. There will be some equity demanded by the banks; probably 70:30 debt equity or 80:20, we don’t know. Well see.
“The thing about the UK, just like the more developed markets like Australia, you can’t go on progressive billings. If it was progressive billings I think we can cut down on our debt part quite a bit. But in this case we have to fund, put in our equity quite a bit before the bank comes in. So that’s something we have to manage internally,” he said.
Azmil said the company has been on the lookout for real estate opportunities in the UK since its subsidiary Metacorp Bhd, disposed off its one-third stake in the Spitalfields development in 2000. One Crown Place marks its re-entry into the London real estate market.
“We didn’t have any projects (prior to One Crown Place) but we owned Spitalfields. Metacorp was an owner of that but we decided to sell before development started. So this is really our first one under the AlloyMtd Group.