Abu Dhabi investors have agreed a Dh1.8 billion financing deal to develop apartments next to London’s Buckingham Palace.
The upmarket property developer Northacre, which last year was acquired by Abu Dhabi Capital Management, plans to convert the Grade II-listed Number One Palace Street complex opposite Buckingham Gate into 72 apartments, a restaurant and health centre.
Abu Dhabi Capital Management is a unit of Abu Dhabi Financial Group (ADFG), which yesterday struck the financing deal with National Bank of Abu Dhabi for the project – one of the largest prime developments in central London.
The complex of five neoclassical buildings, which overlook the Buckingham Palace gardens, was originally built as a hotel during the reign of Queen Victoria. They were later converted into offices and were most recently used by the government.
Northacre won planning consent to redevelop the nearly 275,000 square foot complex from Westminster council two weeks ago, with plans including a restaurant and health centre. The project is expected to be completed in late 2017.
But becoming a royal neighbour comes with a hefty price tag. Abu Dhabi Capital Management estimates that apartments in the block could cost between £5 million (Dh28.8m) and £60m.
Gulf investors have poured billion of dollars into luxury London property. Qatar bankrolled the development of One Hyde Park, which was launched in 2011 with the cheapest flat said to have cost £6.7m. The majority ranged between £27m and £33m.
“The transaction will allow One Palace Street to become one of the most desirable addresses in the world and will set a new standard for ultra-prime residential developments in London,” said Jassim Alseddiqi, the chief executive of ADFG.
But the news comes just as experts are warning that after five years of soaring prices, the steam is coming out of the prime London property market as uncertainty around next year’s general election and the threat of a mansion tax push down prices.
Savills predicts that even without the introduction of a mansion tax, average prime house prices will fall 0.5 per cent next year. If a full mansion tax is introduced, the agent estimates that average prime prices will drop by 5 per cent, with homes worth more than £10m falling 10 per cent.
“The growth for the last five years has been phenomenal, but in the end you just can’t expect the market to keep on climbing like that,” said Yolande Barnes, the director of world research at Savills. “The reason we think the crunch will come next year is because of all the uncertainties surrounding the election, which is being used as a good excuse to pare down buying activity.”
lbarnard@thenational.ae
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