It has easily been one of the most hush-hush transactions of the past 12 months. For the past nine, the West End property fraternity has watched with a mixture of suspicion, contempt and envy as a little-known company called Triangle aggressively knocked out the competition for the Holborn Links Estate, WC1, with a hefty deposit and a £200m-plus bid.
Here, for the first time, the men behind Triangle reveal how the £212.5m acquisition came about and what they plan to do with their new holdings.
The back story
Up until this transaction, asset management and investment group Triangle had kept relatively under the radar. But it clearly has some serious clout, and funding, behind it. The company, which has offices in London and Guernsey, acts for a number of high-net-worth individuals from across the globe. So well resourced is its client base that in November 2013 it was confident enough to put down a £4.5m deposit for Englander Group’s prestigious Holborn Links portfolio (see box).
But this wasn’t the company’s first foray into Midtown – the central London district made up of Holborn, St Giles and Bloomsbury. In April 2012 it bought 2-6 Southampton Row, which is adjacent to the Holborn Links Estate, where it is creating the lifestyle hotel L’Oscar, due to open by the end of 2015.
Could this be the key to last week’s deal? Perhaps. While Triangle partner and chief financial officer Tunc Guven declines to comment on the nationalities or individuals in the Holborn Links consortium (named Perez International), he does let slip that some parties are also in the consortium behind the hotel.
Whatever the reason for such an aggressive play for Holborn Links, which includes the stylish Sicilian Avenue, it has sent ripples through the industry. Just how did a relative newcomer snatch one of London’s most exciting deals from under the nose of some of the sector’s biggest players?
The swoop
The £4.5m deposit certainly helped. Guven, who engineered the deal, reveals he heard about secretive Englander Group wanting to sell the estate in an off-market deal towards the end of the third quarter last year, and quickly pounced with a big figure.
He talks through the deal timeline: “We exchanged at the beginning of December 2013 and completed last week. That [timing] was at our request, because there were 42 buildings and more than 130 tenants – and securing the financing took some time.”
Was it difficult to get financing? “No,” Guven says, “because of the potential and because of the income profile and the covenant of the leases.”
The purchase equates to a capital value of £534 per sq ft. Guven refuses to divulge which lender backed the sale. However, Deutsche Bank is understood to have financed the purchase, with a loan of 50-60% of the total value, equating to between £106.3m and £127.5m.
The fall out
Triangle’s move provoked anger from rivals – with sources claiming that Legal & General had put in an offer of £208m for the 320,000 sq ft asset in Q4 2103. Before that, CarVal Investors had made a play for the estate, but securing funding allegedly proved difficult.
Billionaire business magnate and Arsenal Football Club shareholder Alisher Usmanov and various Ukranian and Azerbaijani businessman have also been linked with the deal.
“It is extremely rare to find a portfolio of this size and quality in the West End,” explains Paul Cockburn, director central London at Savills, which advised Triangle. “It also has the perfect balance of income and risk. Triangle faced tough competition to secure it, given the low capital value per sq ft, the new developments in the area and the arrival of Crossrail at Tottenham Court Road.”
The plans
Now that Triangle is in possession of one of London’s most sought-after portfolios, what does it plan to do with the estate? Guven is convinced there is huge scope for rental increases as Holborn reaps the benefits from booms in neighbouring submarkets such as Tottenham Court Road and New Oxford Street, where office rents are jumping to above £60 per sq ft.
Nick Scott, Triangle’s head of property asset management, adds there is potential for new development and rental increases on existing supply.
He says: “We will continue with the good work that Englander has done in terms of the asset management and we will look at regearing leases and undertaking new lettings. We will waork within the parameters of the existing estate to try to improve the quality of the asset.”
New development could add an extra 50,000 sq ft to the portfolio, subject to planning. Scott says conversions to flats – and more office stock – are definitely on the agenda: “A lot of the estate is listed, so we will undertake whatever requirements are necessary. But we will be looking to spend some capital on various different buildings, which will include change of use.”
Camden council is notorious for trying to clamp down on office-to-residential conversions, but it is an option Triangle will pursue. Also on the agenda is a spruce-up of the shops. Guven explains: “It’s a great piece of land in central London, but on the Southampton Row side it’s a bit quiet. One of our main focuses will be to increase footfall by boosting the retail area in Sicilian Avenue.”
There are no concrete plans yet, but Guven believes the new lifestyle hotel could help to attract more boutique retailers to the estate.
The wider strategy
The latest acquisition brings Triangle’s UK property portfolio to £750m, with some 55 commercial properties and 200 flats.
Guven says: “Our wider strategy is to look at deals in central London with income potential and asset management potential.”
The firm is also looking to buy outside the capital, as West End stock gets more scarce.
While Triangle has operated quietly since it began commercial property investments in 2008, all eyes are likely to be on this now not-so-little-known company to see what it does, where it goes and how much it pays next.
The Holborn Links deal
The Holborn Links Estate comprises 3.3 acres and 320,000 sq ft across 42 buildings. Assets include shops and restaurants along Southampton Row and Sicilian Avenue, as well as offices and flats on Southampton Place.
The approximate property breakdown is:
• 63% offices
• 10% retail
• 22% leisure
• 5% residential
