Northacre shifts investment focus from London to UAE and wider GCC

Dubai-backed luxury property developer Northacre is shifting focus from prime central London to the UAE and wider GCC, despite bumper sales at its two key developments in the British capital.

The UK-based company, a subsidiary of Dubai investment banking firm Shuaa Capital, has been solely focused on developing high-end residential projects in London for the past 30 years, with £2 billion worth of projects in London completing in the next six months.

Among them is The Broadway, a new-build development of 258 apartments located on the site of the former New Scotland Yard Metropolitan Police Headquarters, which has secured £40 million in sales since the start of November last year.

Moving forward, however, Niccolò Barattieri di San Pietro, chief executive of Northacre, said London is not the company's first choice for expansion because of a shortage of land and suitable sites for the type of luxury development the company specialises in.

“If we only focus in London, we're not going to be doing very much," Mr Barattieri di San Pietro told The National.

"Cycles evolve, times change and you have to go with where the opportunities are. London is not off the table - we do a lot of appraisals all the time to see sites - but as of today, I don't have anything that really tickles us,” he said.

UAE and wider GCC offer lucrative opportunities

Instead, the UAE and wider GCC is considered a more lucrative option for the company, according to Mr Barattieri di San Pietro, namely because it is “the region of our shareholders” and offers the company an existing network of business “relationships”.

“Thanks to our shareholders, we can penetrate the GCC market better than most. And then hopefully, we can impress people with our know-how and product. And if we do, then we've got a winning formula," the Northacre chief said.

“We don't necessarily have to acquire land, you could have an asset owner that owns the land and might want to do a joint venture. So, there are many different formulas of putting these things together.”

While the company is actively shopping around for fresh ventures in the UAE and wider GCC, Mr Barattieri di San Pietro said nothing is set in stone yet.

“I don't have a specific city to tell you. However it has to have certain buyers ... and it needs to be a place where you can be aspirational with pricing. In general, the Middle East does lend itself to that.”

London faces luxury home supply squeeze

Northacre is certainly not the first developer to be discouraged from expansion in London, as the UK capital faces a supply squeeze on new-build luxury homes amid rising taxes, complex planning regulations and a shortage of land.

“London is a bit of an odd place at the moment. The Broadway is a 1.7 acre site and there aren't many of that size floating around and for us, size does matter because it is it is the opportunity to create a destination and change the perception of an area as well," Mr Barattieri di San Pietro said.

"We're struggling to find places with size and more than that, places with size that are in locations that we really want. Even if we do [find them] the prices are shocking. Even though prices have come down for end products in central London, you're not seeing an equivalent adjustment in land prices that you would have expected in normal market economics.”

Mr Barattieri di San Pietro insists he is not closing the door on London altogether, “you never know, right” he said. "If I found here at the development here, would I do it? Absolutely," he said, adding that in the current climate, finding the right kind of project will take some time.

This is why he wants the company to redirect its expertise into new markets.

“We've got an incredible know-how, acquired through 30 years of doing exactly the same thing, which is only high-end residential," Mr Barattieri di San Pietro said.

"We like to think that we got quite good at it and the idea is to go to places to export our know-how, with asset owners that have land that want something special."

For now, however, the focus is still very much on London as the company looks to shift another 30 per cent of the apartments at The Broadway this year, “Covid or no Covid”.

“We’ve still got to sell half a billion pounds worth of apartments in The Broadway in the next couple of years, which is a tall order and will keep us busy for a while longer," Mr Barattieri di San Pietro said.

Views across London from The Broadway

Located in south west London, nestled between the Houses of Parliament and St. James Park, prices at The Broadway start from £1.75 million, with the three-bedroom show home on the 13th floor available for just under £8.5m.

Northacre acquired the former Metropolitan Police Headquarters in 2014 for £370 million, with the original building later demolished with 90 per cent of the construction materials recycled.

Now, instead of an unremarkable 19-storey office building, the mixed-used development comprises six glistening towers featuring 258 luxury apartments, including a collection of penthouses, as well as office space at ground level and units for retail and restaurants.

Residents purchasing a home will secure all the modern amenities expected of a luxury London development: 24-hour security and concierge, private meeting rooms, a cinema and games room and a 25-metre heated indoor pool, gym and spa, as well as views of London heritage site and landmarks ranging from Buckingham Palace, Big Ben, Westminster Abbey, Parliament and the Shard.

While demand for the project has been robust, most of the properties sold so far have been to domestic buyers – a pandemic trend seen across the capital - with the pre-pandemic Asian buyers replaced by London dwellers that “live in the area of varying nationalities”.

Northace hit by slowdown in international buyers

Like many developers, Northacre has been affected by the loss of the international buyer as travel restrictions prevented them from flying in to view properties.

"Sales velocity has suffered for us and for every other developer in central London," Mr Barattieri di San Pietro said,

"If we want to look on the bright side, you are going to now have more owner occupiers.”

The Broadway has not received “a huge amount” of interest from Middle East buyers, something the developer chief, “attributes to a general shift" in Middle Eastern buying habits. While No.1 Palace Street, which is now 40 per cent sold, has attracted more Middle East interest, most of those deals were secured in 2015 to 2016, he adds.

At No. 1 Palace Street, set to complete in May, sales have been paused for a couple of weeks while finishing touches are applied to the lobby and portes-cochères to provide a more enticing entrance for prospective buyers.

Located in Victoria, opposite Buckingham Palace, the building sits on an island site and offers 72 luxury homes with the distinctive appeal of overlooking the Queen's garden.

Development on No.1 Palace Street started earlier than The Broadway, but it is a more complex engineering project as it is a restoration project.

“It’s one of the most complicated residential buildings in central London, if not the most complicated,” Mr Barattieri di San Pietro said.

With completion on both projects just months many, the real estate executive expects sales to pick up as post-pandemic energy returns to the market.

However, that won't necessarily be coming from international buyers, who Mr Barattieri di San Pietro says are still a rare sight.

“If people are travelling, they're travelling for pleasure. But at least the UK is moving towards the endemic part of the disease, so, I think that we will be going back slightly more to normality, whatever normality is, and we will see international buyers come in."

Pandemic-induced appetite to spend on luxury

Prices will be supported by the wider inflationary pressures, as investors turn away from equities to real assets, despite demand only at half the level it was at the 2014 peak for the luxury market.

This is a reflection of how London''s prime real estate market has “changed dramatically” from the 2014 peak when luxury homes were literally flying off the shelves.

“When it was peaking, 86 per cent of sales were off plan and 14 per cent on plan, because there was a frenzy," Mr Barattieri di San Pietro said.

“Since then that number has gradually shifted to exactly the opposite number. So it's 14 per cent bought off plan and 86 per cent on plan.”

However, there is a pandemic-induced appetite to spend, he notes, something also reflected in heightened demand for luxury goods.

“”Rolls-Royce sold out of all the cars they're building, Lamborghini said, 'don't come and see us, we don't have any other cars left' and look at the boat business - you can't buy a new boat for love or money. So sales will do well for us and other developers with the right product in 2022."

Northacre recently sold two penthouses at The Broadway for "just shy of £4,000 a square foot", and, despite the pandemic and poor weather conditions halting construction work at times, the project is being delivered just six months later than planned.

So, with so much experience in London, how does Mr Barattieri di San Pietro, who has headed up the company since 2013, feel about the new Middle East focus?

"I'm opportunistic," he said. "If we didn't have shareholders from the GCC, I would still think of going to the GCC. A lot of [people in the GCC] have properties in London. They understand what quality should be. I don't think they're getting exceptional quality at the moment and they know that they could be getting better and they are willing to pay for it."