How A Private Investor Is Using Asset Management To Drive Value In £150M London Deal

The purchase last month of the Notting Hill Gate Estate by Mago Capital and Prideview for £150M was one of the biggest deals in London so far this year. The buyer is forecasting it can likewise make a big impact.

“We buy with a private investor mentality and get our hands dirty,” Prideview Director Jesal Patel told Bisnow.

Prideview is a family-run broker, investor and asset manager based in north-west London with a history going back 40 years. It has a long track record of advising smaller individual investors on property deals and investing its own money, often through the auctions market. 

But it has expanded recently and is taking on bigger mandates. Last year, it began advising Mago Capital, a company run by a group of wealthy families with about £500M of assets, undertaking £60M of smaller deals. 

So successful was the tie-up that Prideview has taken a seat on Mago’s board and is now a co-investor alongside it in deals. 

At the start of the year Mago and Prideview bought the 36K SF Portland & Riding Estate in Fitzrovia, near Great Portland Street, from M&G for about £28M. The half-acre mixed-use site comprises shops, offices and six flats. 

Mago and Prideview have broken the asset down into smaller chunks, selling individual shops and offices to different investors while retaining the flats. Ultimately the estate could be sold for as much as £40M, an uplift of more than 40%, not from waiting for the market to improve, but from asset management. 

Asset management is key to the plan for the Notting Hill Gate Estate as well. The estate was sold by a fund managed by Morgan Stanley and Frogmore for £150M, with debt funding provided by Todd Boehly's Eldridge Real Estate Capital.

The estate comprises two buildings with retail on the ground floor and offices above, located above the tube station in Notting Hill in west London.

“The beauty of that deal is, when we looked at it, there was a lot of asset management opportunity, because there was outstanding rent reviews,” Patel said.

“We think we bought it really well from a yield basis, given all the potential increases that we can have there.”

The larger north building has a passing rent of £6.5M and a weighted average unexpired lease term of nearly 8.7 years to break. The rent is split about 60-40 between retail and office.

The office part of the building is fully leased to Fora, Blackstone and Brockton’s flex office company, on a 14-year lease at £63.50 per SF, a prospectus for the sale of the building said. There is an outstanding 2024 rent review, with the rents at a 54% discount to those in the West End.

That is an opportunity to instantly increase the income. 

The south building produces passing rent of £2.5M a year, with 34% coming from retail and 66% from office. The weighted average lease term to break is 4.1 years. The office element is fully leased to Ovo Energy on a lease with four years left to run and another outstanding rent review. 

Increasing rents at the scheme is the first priority for Mago and Prideview.

“Some of the leases were fairly short, so there was potential there where we know certain tenants were happy to take longer leases,” Patel said. 

Once the increased rents are in place, there is then the opportunity to break up the estate and sell parts for more than the value of the sum over a period of around five years. 

It could sell the two blocks separately if there was appetite for larger lot sizes, Patel said. Alternatively, individual retail units and the office elements could be sold to private investors. 

Many of the retail units are leased to large, globally known brands like Tesco and M&S. The lots on the retail would sell for anywhere from £2M to £20M. 

Office space leased to companies like Ovo and Fora on long leases would appeal to institutional investors, Patel added. 

The price paid for the estate represented a yield of 7.2%. Extending leases and breaking up the estate could result in an exit at a yield “in the fives” Patel said.

“And you never know, a location like that might push a little bit better,” Patel said. “But realistically in the fives.”

Mago has ambitions to grow its central London portfolio to £1B, and it has other deals with similar strategies in the works, Patel said. 

Work on larger deals, especially Notting Hill, has been a step change for the company, bringing it a new prominence in the real estate world, he said. It has always undertaken profitable deals, but size brings transparency and recognition. 

“This grabbed a lot of attention,” he said. “When we walk around places, it's very different — people take you a bit more seriously in this institutional level than they did when we were trying to buy from them before.

“But listen, you've got to run with it while you can. And it's a nice market to be able to do this.”

CORRECTION: NOV. 24, 9:00 A.M. ET: A previous version of this story erroneously calculated the uplift in value on assets that have been sold or may be sold. These calculations have now been corrected.