16th July 2010
It is the same game of luxury residential development in prime central London, but for John Hunter and his latest venture, everything else is different.MORE
Northacre co-founder has created development company with a very different approach
It is the same game of luxury residential development in prime central London, but for John Hunter and his latest venture, everything else is different. Hunter is back in the market six months after his sudden departure as chief executive of Northacre, the AIM-listed company he co-founded 22 years ago and which made his name as one of London's leading developers. For the past two weeks Hunter and financial adviser Nash Fitzwilliams have been in talks with prospective partners, including institutional investors, sovereign funds and wealthy families, to raise as much as £400m for a new company called Tenhurst. Tenhurst will not be Northacre mark two, says Hunter. It will be "lean and mean" with a team of just eight developers, unlike Northacre and its "overhead" of architectural and interior design subsidiaries. Nor will Tenhurst go down the joint venture route for individual projects, which has been Northacre's custom. The idea is to find one or a select few partners for the new company - effectively backing Hunter, a development portfolio and a six-year business plan. Hunter says he has already identified five sites in Kensington, Chelsea and Westminster for acquisition - all with planning permission, but with "room for added value". They are all "readily available" and range in value from £25m to £95m. The £400m that Hunter needs would be split between equity investment and bridging finance. The package would be restructured once the banks start lending again, which Hunter believes will be after 2011. "The business plan does not work without debt. Without gearing, unleveraged returns are not terribly exciting - they're in the teens rather than in the 30s," he says. "We're looking for institutions who are confident that, one day, the banks will have a good enough balance sheet to start lending again." There's been about £1bn of prime residential completed under my stewardship, or that I've masterminded and procure. The payback to the investor would be a stake in a business that Hunter says has "a very strong asset base" and the prospect that it could be sold or floated on the stock market. Tenhurst is a big play on a resurgent prime London market, but it is also an investment in Hunter, who left Northacre following speculation about disagreements with his chairman and co-founder Klas Nilsson and with Minerva, the company's partner on its main project, the Lancasters, a luxury apartment scheme overlooking Hyde Park. However, Hunter says the pitch to investors plays heavily on his track record at Northacre, where returns averaged 32% on projects such as the Bromptons, a listed complex in Chelsea. "Over two decades there's been about £1bn of prime residential completed under my stewardship or that I've masterminded and procured," he says. "Those developments go back a long way, and really set the tone and flavour of prime residential development in central London." One lesson learnt from that track record, Hunter says, is to "steer away from joint venture partners at all costs. They're only interested in what they can squeeze out of their investment in the one development." Last month, Northacre and partner Minerva announced that presales had topped £250m - more than half the flats at the Lancasters, equating to £3,000/sq ft. Hunter masterminded the scheme from the outset. "My ex-co-founder partner stands to do very well out of it," he says. In his statement, Nilsson, now Northacre's chief executive, highlighted the "chronic shortage" of high-end residential schemes. Hunter uses the same language in an attempt to bring investors on board at Tenhurst. If the supply-and-demand argument proves compelling, it just leaves Hunter to deliver the schemes. One property adviser, who has worked with Hunter over the years, is doubtful about the availability of the sites identified for the new venture. They are thought to include stalled projects such as Alpha Place and the Glebe, which are both in Chelsea. "Everyone is all over these sites like a rash, but none of them is straightforward. They're massively complicated and the owners don't know whether to sell them or not," the adviser says. "Why is John Hunter going to succeed when no one else can? And would the City take a huge punt again on prime residential values continuing to go through the roof? They may do but with talk of a 'double dip' [recession] they may not." Hunter is nonetheless confident that Tenhurst will be up and running this year, on the back of "a huge appetite" from investors for prime London. "We're not pushing water uphill, put it that way," he concludes.
High-end resi take-off will see some fall to earth
By Peter Bill
One of the most astute developers of high end residential schemes in London has returned to the market says the FT today. Former Northacre chief, John Hunter, is trying to raise £400m to buy into stalled developments using his new vehicle, Tenhurst. With his good connections, Hunter will probably do well. But those thinking of jumping on this rapidly growing bandwagon of those seeking to cash in on the rising values of high-end resi should have a care. In last week's Standard column Alasdair Nicholls of Native Land was kind enough to spell out the profits he and Grosvenor are set to make on a 50; 50 JV building 197 flats on Bankside. The 1.75-acre development of four towers is costing £275m. The income from selling 300 000 sq ft of flats at £1250 sq ft and a few shops is £400m. But that £125m profit is only being make because the deal was done in 2006, when the expected selling price was £725 sq ft. The expected selling price today for top end resi starts at £1250 today and rises well past £2000 sq ft and into the stratosphere of £4000 ft for flats at the top of the Shard and of course, into the outer space of £6000 for those at One Hyde Park. At about £1000 sq ft it starts to become profitable to sell flats rather than rent offices. So many developers are looking to ratchet up the proportion of resi and ratchet down the amount of offices on various schemes. This supply will add to the 20 or so stalled schemes Hunter says are ready to go. So, give it 12-24 months and there will be plenty of posh flats in central London? Maybe, who knows: just as nobody knows if the current level of foreign demand will continue, or indeed, what effect immigration caps will have on the market. But those buying into posh resi development at current values would be careless to factor in the size of the rise enjoyed by Alasdair Nicholls. Because even before take-off this already feels like a market where some will crash.
Developer seeks £400m for London property schemes
By Daniel Thomas, Property Correspondent
One of the pioneers behind the prime London residential boom of the past 20 years is planning a return to the sector with a £400m development company.
John Hunter, a London developer behind such 1990s schemes as the Bromptons, the listed Chelsea complex, is in talks with institutional investors to provide £400m in debt and equity for a new company, called Tenhurst, to build previously postponed luxury residential schemes in central London. Mr Hunter left Northacre, the listed developer, in February.
Funding is still difficult to secure for larger high-end residential developments given the lingering effects of the credit crisis, which has seen building work across London stall in spite of unexpected boom in luxury property prices over the past 18 months.
Mr Hunter told the Financial Times: "I have counted 20 different opportunities in prime London that are ready to go but have stalled because owners cannot find the finance. They can be acquired for less than half what they were at the peak."
Mr Hunter, who declined to confirm the amount targeted, is seeking an institutional investor to back a series of five schemes to create a large portfolio of properties that could then be sold or floated. Nash Fitzwilliams is advising.
"We are trying to do a simultaneous debt and equity raise, with a view that it will be able to be refinanced in the next three to five years. The banks will come back to the market, but we need the firepower now. We are in a market of chronic shortage of prime stock."
Prices of prime London homes have risen more than 12 per cent in the past year, according to Savills, the estate agent, helped by an influx of overseas buyers encouraged by the weakness of the pound.
Ed Mead, a director of Douglas & Gordon, the estate agent, said lack of stock was seeing property sold for record prices. He added: "The issue with high-end development is that prices are high, the market uncertain, and development finance actually getting worse. Until banks open up, high-end development looks dead in the water."
While the latest figures suggest that price growth of prime London property has slowed over the past three months, developers are still reporting record sales of newly built properties.
The Lancasters, one of the projects that Mr Hunter started while at Northacre , a joint venture with Minerva, was yesterday reported to have hit a record price with sales at more than £3,000 a sq ft. In a statement, Minerva said it had agreed to sell 11 apartments for £107.5m, taking pre-sales to £230m.
Hunter Tracking Development Site in Mayfair
by Samantha McClary
Luxury residential developer John Hunter is leading the bidding race for a Nama-controlled development site in Mayfair.
The former Northacre chief executive is believed to be bidding £163m for the South Audley Street car park site, W1, previously owned by Derek Quinlan.
News of the potential sale — after years of uncertainty — came as another long-overdue bank-led sale was ﬁnalised.
Also bidding for the South Audley Street car park site are Grosvenor, the Candy brothers and Jayne McGivern’s Red Grouse, which is backed by Malaysian property giant IGB Corp. Their bids range from around £140m to £160m.
Quinlan had planned to build 160 large serviced ﬂats on the site, but put it on the market in 2009 for £200m as he came under increasing pressure from his banks.
“John Hunter is a very serious player, one of the best in the market” said one West End source.
The former Savills agent co-founded Northacre more than 20 years ago, but left last year. He then set up Tcnhurst and was reported to be raising £400m from institutional investors.