When Dubai investment group Onex Holding was looking for a real estate investment opportunity in London, one development stood out thanks to its location and extensive history: the Old War Office.
Now rebranded as The OWO, the turreted former War Office on Whitehall in the centre of the capital was once the workplace of Winston Churchill when he was Secretary of State for War, and has since doubled as the MI6 headquarters in five James Bond films.
The four British-Indian brothers behind the multinational Hinduja Group – Srichand, Gopichand, Prakash and Ashok – bought the grade II-listed building in 2014 for a reported £350 million ($472.4m) from the UK government, with Onex Holding purchasing a 49 per cent stake in November last year.
The investment firm chose The OWO because the project is among the highest-profile new openings in London this year, fitting with the company’s strategy “to invest in high-quality assets and forge strategic partnerships with leading global organisations”, said Ramez Attieh, senior adviser of Onex Holding.
While entering into a joint venture with the Hinduja empire, which has diverse interests from van manufacturing to banking, health care and hotels, is certainly an important partnership, another is the tie-up with the global hospitality player Raffles, which will run the 85 residences and 120-room hotel at the site.
Growth in demand for branded residences
With headquarters in Dubai, the Onex Holding team has already seen the growth of branded residences in the UAE, as well as the range of domestic and international buyers the schemes attract.
It’s certainly a smart move considering even the premier international brand, the Waldorf Astoria New York hotel, is cashing in on the trend, splitting its famous building in two with the bottom half dedicated to 375 hotel rooms and the top converted into 375 branded residences.
With London ranking sixth in Savills’ top cities for branded residence projects, attracting a premium of around 29 per cent compared to non-branded enterprises, Onex considered The OWO “a safe investment”.
That investment quickly paid off, after a mystery buyer paid “significantly over £40m” for a four-bedroom, duplex apartment on the fifth and sixth floors, which included its own private, three-storey turret and terrace, Jenny Naylor, global head of marketing for The OWO, told The National.
The sale was a record for London – surpassing the £11,000 per square foot price barrier for an apartment for the first time.
How to lure a billionaire buyer
While the pad was reportedly snapped by a billionaire in his 30s, Charlie Walsh, head of residential sales at The OWO, who secured the sale is naturally tight-lipped about the buyer's identity.
So how did Mr Walsh secure such a hefty price tag?
“It was a pretty straightforward conversation. We said ‘this is where we believe the pricing should be',” Mr Walsh told The National.
“I had a good understanding of where the market was for very top-end products in central London and what price had been achieved beforehand. And when you have that level of belief in the product, we had that wonderful luxury of being able to sit and wait for the right buyer to come along."
While some media reports claimed the buyer was related to the owners of the building, possibly even as a ploy to push up the price, Ms Naylor insists that was not the case.
“I can guarantee they are not a relative of the Hinduja family,” she said.
Mr Walsh started talking to the buyer in the spring of last year, shortly after the development was first listed on the market.
“It took four or five months to talk through it, get him comfortable with it and then he quickly realised it was a bit of a one-off,” Mr Walsh said.
“He's a collector of fine things. He appreciates fine, one-off collectibles and this is something he saw as just magic. He is also very into the history of the building; he loves the heritage – for him this was an opportunity too good to pass up.”
A building steeped in history
The legacy of the building is certainly an easy selling point for Mr Walsh. While the building stands on the site of the original Palace of Whitehall, home to kings and queens between 1330 to 1698, the current structure was built in 1906 at a cost of £1.2m, becoming the Old War Office with military leaders Winston Churchill, David Lloyd George and Lord Kitchener all holding office at the site.
The imposing building is opposite Horse Guards Parade, meaning buyers will be a short stroll from Buckingham Palace, The National Gallery and St James’s Park, with a slightly longer walk talking them to shopping destinations such as Regent Street, Bond Street and Oxford Street.
Shopping was probably not on the mind of Ian Fleming, the author of the Bond series, who dreamt up the famous 007 novels after working in the building for Britain’s Naval Intelligence Division.
It’s no surprise, then, that the building has been used as a shooting location for five Bond films including Octopussy, Licence to Kill and Skyfall – an association which sealed the deal for one buyer.
“He’s obsessed with James Bond and Ian Fleming and loved the connection,” Mr Walsh said.
For those buying a slice of this historical treasure, the restoration project is being carried out sensitively with features such as the intricate mosaic flooring across the building cleaned and restored to its original place piece-by-piece.
Other London developments lack the history and heritage that The OWO offers, Mr Walsh said, pointing to one of project's competitors, The Peninsula London on Hyde Park Corner, in the heart of Belgravia, which will also offer residences and a hotel.
“It’s a fantastic scheme but that is a new-build scheme – there is no history of heritage to it,” he said.
When EPR Architects took on The OWO redesign, they had 1,100 rooms spread over 53,883 sq metres and 4 kilometres of corridors to contend with.
That space will be transformed into 85 residences, from studios to five-bedrooms with two penthouses at the back of the building, while the front will house Raffles London at The OWO, the first Raffles hotel with 11 restaurants and bars.
Middle East appetite for London still high
With more than half of sales made up of domestic buyers, with so much heritage and such a sizeable Dubai stake in the project, it is no surprise the development is attracting a high level of interest from Middle East investors.
Despite Brexit and the challenges thrown up by the pandemic, London continues to dominate as a vital investment hub for Middle East residents and businesses, something Onex Holding noted when it committed to the British capital long term.
Sixteen per cent of all London sales to overseas buyers in the first three months of 2021 went to Middle Eastern buyers, said Knight Frank, up from fewer than 10 per cent in the second and third quarters of 2020.
Buyers from GCC are ranked third in prominence in the UK after Asia and Europe, with interest further boosted by the closer bilateral relations between the UK and the GCC over the past year.
Discussions are now under way to secure the UK-GCC free trade agreement, a further boost to the £30bn in bilateral trade between the two regions in 2020.
Two key Sovereign Investment Partnerships have been signed with the UAE and Oman in the past 12 months, with the UAE deal securing £10bn of investment for the UK’s energy transition and its technology and infrastructure sectors.
Henry Faun, a partner of the Private Office at Knight Frank Middle East, said the first half of 2021 featured some of the highest activity levels from the Middle East in London’s property market for years, with prices expected to grow 25 per cent by 2025.
While this “cooled slightly in the second half of 2021” as travel restrictions lowered the volume of in-person viewings, “a robust level of interest remains” for second homes in London, Mr Faun said, particularly from locals and expatriates in the UAE and wider GCC.
“Throughout the pandemic the super-prime market has outperformed, underpinned by the quality of product on offer and the lack of new homes at the top end," he said.
More than half of The OWO residences sold over Zoom 'sight unseen'
This is something Mr Walsh hopes to tap into over the course of 2022. He says there was a surge in interest from the Middle East in the run-up to Christmas, when large families flew to the UK capital to go shopping and see the festive lights, with two buyers from the GCC already locked in.
While more than half of the deals so far have been secured on Zoom “sight unseen”, Mr Walsh said people prefer to visit London "to touch, feel and smell” the development when it comes to viewing the larger homes more popular with Middle East buyers.
"The sheer grandeur of the development is hard to translate over a Zoom call," he said.
With every apartment individual because of the nature of the restoration, it means buyers have 85 different floor plans to choose from, and apartments with ceiling heights of up to 4.4 metres and sash windows up to 3.5 metres high.
This is why The OWO Residences by Raffles stands out as it “sets itself above the market”, Mr Faun said, with anyone buying set “to own a piece of British history that simply cannot be recreated elsewhere” – a big attraction for Middle East buyers that “tend to prefer properties with outstanding facilities and in exceptional location”.
Amenities is certainly one feature upon which The OWO prides itself. While the building is only 14 storeys high, seven of those are below ground level, with the 30,000 sq ft located underground including a 16-seat private cinema, seven lounges, a gym, games room, treatment suites and bicycle storage.
There is also a clear distinction between the homes and the hotel with the amenities for the residents separate.
“The design is really clever with the two parts of the building quite separate – something buyers in the Middle East really appreciate," Mr Walsh said.
"They want the hotel experience on the doorstep – the servicing and the five-star turnkey service – but they also want to know that when they open the front door of the apartment, they're not going to walk into a hotel guest.”
While residents can walk out through the main hotel lobby or through a grand private entrance, there is also a discreet entrance once used by spies to exit the building.
What's next for the Hindujas?
With the project now well under way, the question is whether the Hinduja brothers are looking for more London projects to take on, considering how the shortage of land and more stringent planning rules is already encouraging developers to look outside the UK.
For now, Mr Walsh said the company’s “IP and skill set is in London ... but I don’t think they will limit themselves to London – it will opportunity led".
"We are looking at other projects in central London and we are also looking at some in the home counties," he said.
Options could include a new country club project to take advantage of demand from London dwellers with second homes outside the capital.
For now, however, the focus is still very much in Whitehall, where most of the family also live.
“The Hinduja family have really immersed themselves in this project. This is a real passion project for them," said Mr Walsh.
"They want to leave a legacy for London and the idea of taking a building, which has been off limits for the public for 130-plus years and then turning it around into something which is a celebration of life ... is a lovely legacy to leave."
