The investment firm set up by former Heron International man Peter Ferrari is hunting for further central London deals, after buying 200 Aldersgate in the City for its Saudi client, writes Jane Roberts
Peter Ferrari’s new investor client has one of the hottest new lending tickets in pre-eminently bankable London, in the shape of 200 Aldersgate, EC1. Buying the 434,000 sq ft, 95%-leased building for £225m was the debut deal for Ashby Capital, which Ferrari quit Heron International to set up in May with £750m of equity capital to invest from an unnamed Saudi Arabian family investor.
The EC1 building has a chequered past (see below) and its purchase now illustrates Ferrari’s all-round good timing, not least the ability to add cheap debt to his purchases. “We are talking to banks about modest leverage, 55-60% maximum, five-to-seven- year money and there is a huge appetite,” he says. The financing’s lending margin is expected to be as low or lower than the recent 160bps for Ares’s 10 Fleet Place, EC2 deal.
So far Ashby is Ferrari and two colleagues, soon to be joined by a finance director. In the initial investment stage the company will only target London assets, but that could extend from well-leased, income-producing offices to joint-venture development funding, residential and retail – all areas Ferrari worked in during his 18 years at Heron. The firm’s hunting ground extends from Hammersmith to Tower Bridge and from St John’s Wood to Southwark.
“Aldersgate is at the income-producing end but isn’t completely dry,” says Ferrari. “There is no leasing risk or capital expenditure needed, but it has 25 tenants, so we can work it over a period as there will be churn. At £40-55/sq ft it is under-rented.”
He argues that its location, once seen as the unloved north-west City fringe, will see growth on the back of the opening of the Farringdon Crossrail station by 2019, and nearby developments like Helical Bar’s at Bart’s Hospital. “Our business plan is to benefit from that growth,” he says.
“We won’t buy single-tenant, bond-style buildings, as we want some prospect of outperformance. Other than that, we are opportunistic. You have to be alert and flexible. I think London offers a great opportunity. Office rents are at an affordable £60-65/sq ft and there is undersupply of new stock. Occupiers are more mobile and that’s to do with the amenities and connectivity for staff wanting to work in a vibrant place.”
Ashby’s model is ultra-wealthy individuals investing via dedicated property vehicles like his, Crosstree’s or Almacantar’s, rather than remotely from overseas. The higher costs to their clients should be offset by better returns from buildings like Aldersgate which, Ferrari says, “needs a set-up over here”.
Next he is looking at some central London residential development. He doesn’t see the team growing fast, but is seeing plenty of potential deals. “We are offering on things all the time,” he concludes.
Little Britain caused big letting problem for former owners
Wimpey Properties developed 200 Aldersgate (pictured), originally called Little Britain, in the late 1980s. It was sold to Prudential and Nippon Life and let to Clifford Chance as its HQ.
It was largely empty from late 2000, when the law firm moved to Canary Wharf, but The Canary Wharf Group paid the £16.7m annual rent as the price of moving Clifford Chance to its Docklands complex, until 2005.
Resolution Property paid £190m for Little Britain in 2004 and flipped it for £209m in early 2005 to Canary Wharf, which sold the building six months later to RREEF’s second global opportunity fund for £100m. RREEF also failed to let it, despite a £60m-£70m refit by Allied London during the 2008 recession. RREEF’s lender, Deutsche Pfandbriefbank, took over the building in 2009.
Another refit, leasing and the sale to Ashby was managed by Helical Bar, which repositioned and let the building within two years, “creating a community of tenants and offering flexible lease terms”, director Gerald Kaye says. Helical’s management and success fee is thought to have been £20m-£30m.