Super prime residential developer Lodha is banking on continued buyer interest in the capital with a £100m fundraise for new luxury schemes this year.
The developer will provide 25-50% of the investment alongside finance from high-net-worth individuals and family offices, targeting returns of 10-15%.
Lodha Group is the largest developer in India. The fund will be the first for the group in the UK, but will follow its approach in its domestic market. It expects to raise the capital over the next six to 18 months and is already in discussions on a number of potential projects to deploy funds.
Ab Shome, finance director at Lodha UK, told EG: “There is still very much the belief that regardless of Brexit and the pandemic, the view seems to be that London will recover and therefore living in central London gives all the benefits of the cultural side of the city and it’s still an attractive place to be.”
Gabriel York, co-chief executive at Lodha UK, said the developer has been approached over the past 18 months by “a number” of customers seeking to co-invest on future projects.
“The type of people we are selling to tend to be entrepreneurial high net worths, people who have set up businesses who are leaders in a particular sphere,” added Shome. “Rather than doing joint ventures on individual schemes, [the fund seeks to] harness the multitudes of these types of people who would invest through family offices and their businesses.”
Ultra-high-net-worth Lodha property purchasers include a C-level bank executive, a premier league football manager, private equity executives and technology entrepreneurs.
“We are seeing a type of buyer emerge that may not have been there pre-Covid,” said York. “These people that may live outside of London, but now seek to have somewhere to stay mid-week.” This includes senior professionals swapping the city commute for a walk to work, but also other luxury buyers seeking a permanent home in London in place of hotel stays.
“The conditions are right for asset price inflation. Government is producing money and wealth concentration among the world’s wealthiest results in money flowing into hard assets.”
In this way, the London-focused developer anticipates ongoing strength in the super prime market. However, new planning policy in central boroughs may see it deliver a slightly different product.
Last year, Lodha scooped the most expensive penthouse sale last year with a £140m deal at the former Canadian Embassy at 1 Grosvenor Square, W1. However future schemes will see maximum unit sizes limited in Westminster and Kensington and Chelsea.
York said the change could shape the nature of future development. “We need to see how that settles,” he said. “It doesn’t change our appetite for the risk of buying unconsented.”
The group’s portfolio comprises two delivered projects in prime central London – Lincoln Square, WC2, and 1 Grosvenor Square – with a combined value of £1.4bn and a £400m project at Holland Park Gate, W8, where it is development manager, which it will launch to the market later this year.
A Lodha-affiliated company acquired the Kensington Odeon site for Holland Park Gate in 2018. The scheme was the first for Lodha after acquisitions in 2013 and 2014, but it has been quiet since then.
Although York stressed the developer is committed to London, he said it will also “start to do a few different things as well”. “The right balance for us is to have two or three sizeable projects like [the Kensington Odeon], supported by a number of smaller projects,” he said.
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