Savoy to PCP Bet London’s Strand Revamp Will Boost Values
The Savoy, the London five-star hotel once frequented by Winston Churchill, Claude Monet and Marilyn Monroe, charges at least 350 pounds ($550) a night for a basic room. In the morning, guests step over homeless people sleeping in alleys and doorways off the Strand.
The closely held Savoy is joining with businesses from British American Tobacco Plc to PricewaterhouseCoopers LLP and Royal Bank of Scotland Group Plc’s Coutts & Co. to attract luxury retailers by sprucing up the street featured in T.S. Eliot’s 1922 poem “The Waste Land.”
“You walk out onto a street like the Strand and it lets us down terribly,” Kiaran MacDonald, the Savoy’s managing director, said in a phone interview. “If we were reliant purely on location, I think we would struggle in terms of achieving the level of rates, and indeed occupancy, that fortunately we are getting.”
While the group of companies plans to spend about 8 million pounds through 2017 refreshing the public space from Trafalgar Square to Aldwych, homebuilder Berkeley Group Holdings Plc (BKG) and property investors including Amanda Staveley’s PCP Capital Partners are making their own bets that the street in the heart of London’s theater district is on the rise.
Property broker Knight Frank LLP will market 206 luxury apartments in a 200 million-pound project by Berkeley and Prudential Plc (PRU) at 190 Strand next year. PCP bought Arundel Great Court on the street for 234 million pounds last year and received planning approval for 147 apartments, a 154-room hotel and 398,000 square feet (37,000 square meters) of offices. Closely held Galliard Homes sold 86 apartments on the Strand from 2010 to 2012, according to spokeswoman Madeleine Flower.
“From a residential point of view, it was very much a no-man’s land,” said Dominic Grace, head of London residential development at property broker Savills Plc. (SVS) “No one ever rang us up and said: ’I’m looking for a flat just off the Strand.’”
The street has the advantage of being in a central location north of the River Thames, where property prices have consistently outperformed values south of the river, according to Knight Frank.
On the office side, investors are seeking to attract businesses to join consulting company Bain & Co. and Coutts & Co., which have their London headquarters on the Strand.
Wainbridge Capital Ltd., a closely held real estate asset manager, is carrying out a 15 million-pound refurbishment of 1 Trafalgar Square at the western end of the Strand, where Reed Elsevier Plc (REL) and National Grid Plc (NG/) are based.
On Aldwych, an arched street that joins the Strand in two places toward the eastern end, Jones Lang LaSalle Inc. is managing the renovation of Bush House, the former BBC World Service headquarters, on behalf of Japan’s Kato Kagaku Co. ISG Plc (ISG), which is carrying out the revamp, estimates the contract is worth 52 million pounds.
Northbank BID, the group that includes the Savoy, plans to use a 1 percent business levy to clean public spaces, tackle homelessness and reduce congestion. The project will promote the area’s history and attractions including West End theaters and Somerset House, an arts center and concert venue.
“Without a doubt it’s going to enhance our revenues,” MacDonald said. “There’s going to be tremendous upside opportunity for something like the Savoy.”
The Savoy underwent its own overhaul, reopening in October 2010 after a 220 million-pound renovation that took almost three years. Melia Hotels International SA (MEL) opened the five-star ME London hotel on the Strand in March.
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