Abu Dhabi Capital Management shows faith in central London properties

ADCM looks to release prime real estate worth £800m in London in the next four years.

The No 1 Palace Street building that Abu Dhabi Capital Management owns is near the Buckingham Palace. Justin Tallis / AFP

The Abu Dhabi investor that owns No 1 Palace Street expects penthouses at the central London building to fetch as much as £60 million (Dh372m).

Abu Dhabi Capital Management (ADCM), which manages Dh6 billion, is redeveloping the listed building, which is located close to Buckingham Palace.

Northacre, which the Abu Dhabi group bought last year, is converting the office building into 76 apartments. Once complete, units there could cost anywhere between £5 million and £60m, ADCM estimates.

It is part of an £800m central London portfolio which the company expects to release for sale over the next four years.

The rapid escalation of property prices in central London has triggered fears of a housing market bubble. Lloyds Banking Group, Britain’s biggest mortgage lender, this week capped applications for mortgages of more than £500,000 at no more than four times a borrower’s salary. It followed a warning from the governor of the Bank of England that lending of up to five times income “could store up bigger problems for the future”.

Still, such fears have not dented ADCM’s confidence in the long- term prospects of the central London property market.

“It’s hard to time a bubble,” said Jassim Alseddiqi, ADCM’s chief executive. “But we are a long-term investor; we want to continue that. Moreover, central London projects take anywhere between five and six years to complete.”

The number of units sold in central London rose by 63 per cent last year to 12,000, according to the real estate consultancy JLL. Construction starts doubled to 13,500 last year.

“We see stable price growth in London residential market for the next five years,” said Will McKintosh, the head of London residential for JLL Mena. “But we don’t see a bubble.”

The Arab Spring has been identified as one of the drivers of the central London property market as people from the Middle East and North Africa have sought safe haven investments.

Last year, almost one fifth of buyers were from the Middle East and North Africa. About 18 per cent came from the UK, while the rest included buyers from Hong Kong, Singapore and China.

While the three-year-old ADCM is heavily invested in central London property, it also has interests in Eastern Europe. It has a land bank of some 600,000 square metres in Serbia, Bulgaria and Montenegro.

“There are many opportunities there and not many specialised players,” Mr Alseddiqi said.

This month, ADCM said it would build a business hotel in Montenegro as part of the mixed-use Atlas Capital Center in the capital city Podgorica. The six-storey hotel is expected to be ready next year. ADCM also wants develop residential projects along the Montenegro coast acquire food and beverage franchises.

It expects to deliver projects worth US$500m in the next five years in Eastern Europe.

In the UAE, ADCM has interests in real estate, asset management and financial services such as brokerage.

“There is not much supply [of real estate] in Abu Dhabi, whereas in Dubai there is a huge variety and supply, which means the Abu Dhabi market will be in an upswing for another three or four years,” Mr Alseddiqi said. “We prefer the Abu Dhabi market [to Dubai] even though it is less liquid.”

The company is also active in private equity.

“Family businesses should start to sell to private equity businesses, we haven’t seen much of that,” said Mr Alseddiqi. “There will be more IPOs in the next three years and that will also help the private equity market [here].”

Most of the group’s backers are individuals and financial institutions from Abu Dhabi, but it also has investors from Europe and Singapore.

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