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G C P R I V E

REPORT

P R I VAT E O F F I C E

ULTRA-PRIME THE LONDON

G C P R I V E 3

ABOUTUS

As an independent private office, we facilitate deals backed by a strong culture of execution and rigorous analysis. We take extraordinary care to provide a personalised level of service— hence our clients commemorate us on our integrity, trust and complete discretion in dealing with their affairs. Our team and associated firms deliver project management expertise on challenging issues faced by the world's most discerning individuals and families.

Discreetly located in London’s Knightsbridge, GC Privé serves the world’s business leaders, family offices, royalty and high-profile individuals

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CONTENTS

LONDON HOTSPOT

UHNWIs and BIs gravitate to global cities for business opportunities and high living standards

ÉLITE BUYERS

Preferences of élite buyers determine whether a property stock is ultra-prime

HEDONICS

Élite buyers look for five hedonic attributes when choosing their preferred property in London

LUP MARKET

Our hedonic analysis ascertains the residential developments that form part of the LUP market

VALUATION TRENDS

The current “softness” in the LUP market presents an opportunity to negotiate exclusive deals

LOOKING AHEAD

An increase in London's ultra-prime developments will potentially enhance its “hotspot” status

METHODOLOGY

Our research is the first of its kind to use sophisticated econometric techniques in the ultra-prime sector

WEALTH STRATEGY

Manage the complexity of your family’s wealth, succession legacy and values

ASSET INVESTMENT

Access unique opportunities to grow the value and prestige of your investment portfolio

LIFESTYLE PLANNING

Realise your deepest desires and experience the most authentic moments in life

WELCOME...

Disclaimer & Important Notice: This report (“Information”) is published by GC PRIVE LLP for general information only and cannot be relied upon in any way. The Information is not definitive and is not intended to give advice about properties, markets, policies, taxes, currencies or any other matters. This report should not be regarded as constituting an opinion as to the fairness or otherwise of the terms of any actual or proposed transaction involving any properties nor relied on as a basis to proceed, or not to proceed, with any transaction involving any properties. For the avoidance of doubt, any references to properties, developments or projects in this document are purely for research purposes only.

The Information may not be accurate and all of the subject matter may change without notice. So far as applicable laws allow, neither we nor any of our members, advisors, “partners” or associates will have any responsibility or liability in connection with or arising out of the accuracy or completeness or otherwise of the Information or the reasonableness of any assumption we have made or any information included in the document or for any loss or damage resulting from any use of or reference to the Information. As a general review prepared using information from various sources which may not have been verified, this document does not necessarily represent the views of GC PRIVE LLP in any respect.

GC PRIVE LLP is a limited liability partnership registered in England with registered number OC381232. Our registered office is 64 Knightsbridge, London SW1X 7JF, where you may look at a list of members’ names. © GC PRIVE LLP 2015

To our inaugural issue of the London

Ultra-Prime (LUP) Report, an

exploration of London’s most

exceptional and priceless residential

developments. The LUP Report examines

the attributes of residential developments

based on the desires of ultra-high net worth

individuals (UHNWIs) and billionaire individuals

(BIs). These properties carry significant

premium over prime properties located in the

same areas. Our research is an extensive study

of the LUP market, pinpointing highly-sought

after residential developments (completed

and expected) within London’s most exclusive

areas: Knightsbridge, Belgravia, Mayfair and St

James’s.

Louis LoizouPartner, GC PRIVE LLP

08

16

17

18Louis loizou

THE LUP REPORT2

[email protected]

+44 207 590 3022

64 Knightsbridge

London, SW1X 7JF

England

G C P R I V E 54 THE LUP REPORT

LONDONHOTSPOT

The number of UHNWIs living in London has risen to around 6,815; only falling short of New York. London is also home

to circa 150 BIs with a primary or secondary residence, a figure higher than any other city globally according to research conducted by Wealth-X.

A number of special factors relate to the city's

ÉLITE BUYERS

Over the last few years, there has been a noticeable amount of research based on sales and marketing inclinations of the

prime and ultra-prime residential areas of London. Traditionally, the ultra-prime (or super-prime) residential sector refers to properties valued over £10 million – or in some other definitions properties with valuation in excess of £2,000 psf (£21,528 psm) across London.

In our view, the LUP market resides in its own class as it elicits additional characteristics which cannot be solely attributed on price. For example, traditional price-only definitions would not include a one bedroom apartment in the ultra-exclusive One Hyde Park development, as its current valuation is well below the £10 million threshold.

Quantitative examples such as the above are factored in our LUP market analysis. Based on our interactions with a representative sample of private

FINANCIALCENTRE

LONDON MAINTAINS ITS ESTEEMED FINANCIAL STATUS AND CONSTITUTES A SIGNIFICANT BASE FOR UHNWI/BIS TO ADVANCE THEIR BUSINESS INTERESTS

SAFE HEAVEN

INVESTORS VIEW LONDON AS A SAFE HAVEN FOR REAL ESTATE INVESTMENTS WITH PRIME PROPERTY BECOMING A GLOBAL RESERVE CURRENCY

bespoke requirements of UHNWI/BIs, and can therefore be classified as 'ultra-prime'.

The supply-side of the LUP market is both polarised and fiercely competitive and only a small number of niche players stand out as the LUP 'movers & shakers'.

But what differentiates an ultra-prime residence from a prime one?

VERITABLY COSMOPOLITAN

A GREAT CITY TO LIVE AND THRIVE, LONDON OFFERS WORLD CLASS EXPERIENCES, EDUCATIONAL INSTITUTIONS, MEMBERS’ ESTABLISHMENTS AND SOCIAL HAPPENINGS

but many around the world. These individuals are global citizens with property interests in multiple locations like New York, London, Hong Kong, Monaco and Genève. They also show interest in acquiring substantial properties in leisure locations such as Côte d'Azur, French & Swiss Alps, Caribbean and Phuket.

For many élite buyers, their property buying decisions are influenced by factors such as having the opportunity to socialise with like-minded individuals and being in close proximity to private members’ establishments.

Additionally, they strive to accommodate their global lifestyle preferences such as traveling in private jets and mega yachts, frequenting exclusive hotels, as well as cultivating their passions which typically include fine art, rare wine and antiques.

The preferences of the élite buyers is the differentiating factor in determining whether a property stock is ultra-prime

clients, the LUP Market could be more accurately described as the stock of property which appeals to élite buyers, i.e. those demanding extraordinary properties in terms of location, quality and finesse. Naturally, élite buyers fall under the UHNWIs and BIs bands with investable assets of at least US$30 million, excluding personal assets and property such as primary residence, collectibles and consumer durables.

It is also evident, that the majority of élite buyers in the LUP market are international buyers - a trend which is only set to increase as corroborated by established selling agents.

According to Wealth-X, 30% of all UHNWIs and BIs own at least one residence outside their primary business nation and predominantly choose Western Europe and North America as their main residential base. Consequently, a large percentage of élite buyers are not contented to a single home,

UHNWIs and BIs gravitate to global cities which are conducive to business whilst offering higher living standards and leisure facilities

global appeal and its status as a “global hotspot” for UHNWIs and BIs: financial centre, veritably cosmopolitan and safe heaven.

London is arguably one of the very few global cities where there is a clear-cut between ultra-prime and prime property markets. It is our belief that only a small fraction of property stock can be characterised as catering to the

1,395

1,525

2,055

3,335

3,345

5,135

5,460

6,815

8,655

32

23

10

82

33

25

20

150

103

- 100 200 300 400 500

- 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

SINGAPORE

GENÈVE

ZURICH

HONG KONG

PARIS

LOS ANGELES

SAN FRANCISCO

LONDON

NEW YORK

UHNWIs BIs

FIGURE 1 - GLOBAL CITIES FOR UHNWI/BIS

*Includes BIs with either a primary or secondary residence in London. Figure represents our round estimate based on relevant commentary in the Wealth-X report.

Source: Wealth-X World Ultra Wealth Report and Wealth-X UBS Billionaire Census.

The Household Cavalry, London

*


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21

HEDONICS

Élite buyers are looking for five hedonic attributes when it comes to choosing their favourite residential development in London

New build or recently renovated

Prime position within the most coveted areas

Inhabited by like-minded individuals

Privacy, dedicated facilities and service

Designed or craftedby a brand

London has been the playground of royalty and aristocracy for centuries. Steeped in tradition the beauty of London is only

matched by its glorious history. As the city really began to grow in the

18th century, beautifully grand residences and commercial buildings started to flourish. Nowhere is there a better example of this transformation other than the exclusive locations of Knightsbridge, Belgravia, Mayfair and St James’s. One of the greatest attractions is this long and illustrious history is still palpable

amongst high-end shopping boutiques, refined members’ establishments and dining venues that these areas offer.

While Knightsbridge, Belgravia, Mayfair and St James’s are indisputably recognised as London’s prime property market, élite buyers further require the most coveted positions of ultra-prime developments in these areas.

These characteristics include park views, private square gardens, and locations which are moments away from exquisite shopping boutiques.

UHNWIs and BIs form bonds and relationships with individuals who share similar interests. On average, according

to Wealth-X, the immediate social network of an UHNW individual includes seven other UHNW individuals, at least one of whom is a billionaire.

Furthermore, Wealth-X finds that BIs typically have business or personal relationships with another nine UHNW individuals, three of which are billionaires.

UHNW and BIs tendency to gather in the

most prime residential positions is not only a social requirement, but rather a necessity, given the demanding lifestyle of these individuals.

Evidently, we see a positive relation between élite buyers and prime positions of exclusive areas. We concur that residential developments which cultivate a “community” feeling are the most successful ones and remain within the upper tier of the LUP market. After all, being in close proximity to other UHNWI/BIs is a positive factor for socialising with like-minded individuals.

Both new build and restored developments encapsulate the requirement for attaining the highest

finish standards of exterior and interior spaces. The feel-good factor of a luxurious living

experience, can simply be obtained at its best within a new build or a fully restored development.

The option of creating extensive entertainment spaces together with a master suite which comprise a larger proportion of the

total internal floor area is quite important when compared to prime units.

Though the property may not be habited on a frequent basis, élite buyers still consider newly build or restored spaces an important factor; typically providing occasional use for a few days per year.

Élite buyers are not just looking for a pied-à-terre, but rather a splendid home away from home which compliments their global lifestyle.

The quality and authenticity of property space remains of paramount importance. The epicenter of the design should rely

solely on the bespoke requirements of the élite buyer by reflecting cultural heritage and individual idiosyncrasies.

Branded design is much more preferred over non-branded as dictated by the esoteric nature of the ultra-prime market. In turn, the supply-side of the LUP market has given rise to certain developers and designers who established themselves as recognisable brands.

Élite buyers are inclined to pay a premium for branded designs – even transforming multiple residences across the globe under

the supervision of their favourite brand. These brands are indeed the movers & shakers of the LUP market.

Established brands with a high appeal in the LUP market currently include Candy & Candy, Finchanton and Oliver Burns. Other important players on the supply-side of the LUP market are offering mostly specialised architectural expertise such as Eric Parry, Foster + Partners, RSH+P and Squire & Partners.

Élite buyers not only require a branded turnkey solution, but a finely presented space tailored to their individual taste together with the latest technological innovations.

UHNWIs and BIs are usually high-profile individuals who often draw unwanted and unsolicited attention. This can be a

detrimental factor to their demanding lifestyles. Élite buyers, therefore, require a highly

secure and private residential development which enables them to experience intimate personal and family moments uninterrupted. Properties of such calibre utilise experienced security guards and close protection systems to safeguard their residents' privacy.

Élite buyers are also seen to acquire smaller units in the same developments to keep their

own security staff and entourage close to them. Further fundamental aspects of LUP

properties include dedicated services and amenities resembling those of a boutique hotel.

These include, round the clock concierge service, chauffeur-driven vehicles, leisure and wellness spa, as well as, cinema rooms, business centres, staff accommodation, secure parking and wine cellars.

Features such as the above are gradually becoming the defining standard in the LUP market.


LUPMARKET

Based on the hedonic rankings, our analysis qualifies a number of residential developments that form part of the LUP market

We assigned the five hedonic rankings to a comprehensive range of developments within

the four LUP areas of Knightsbridge, Belgravia, Mayfair and St James’s. Based on our hedonic analysis we have qualified 25 developments out of which 11 have been completed since 2002 and 14 are expected to be completed by 2020.

The total number of units in all 25 LUP developments is not yet confirmed, but 445 units have already been completed – the majority being in Knightsbridge.

The era of ultra-prime developments commenced in Knightsbridge more than a decade ago with developers demolishing old

buildings and constructing ambitious projects in their place. Some developments kept their traditional style, like Trevor Square which is the redevelopment project of the former Harrods Depository building, while others opted for a modern outlook – for example The Knightsbridge and One Hyde Park. Developers in Mayfair have been predominantly refurbishing instead of building and restoring. Mayfair, has therefore, only recently embarked in major new developments and we observe a number of commercial buildings currently being transformed into residential.

A recent example of this remarkable transformation is the 42-unit development situated at 30 Old Burlington Street and the future development of the Audley Square House, the latter estimated to be a £2 billion project.

Knightsbridge remains ahead of the game and clearly has first-mover advantage in the LUP market, but Mayfair will eventually catch-up, as a significant number of ultra-prime developments are scheduled for completion in the near future.

1

7

21

9

2

12

MAYFAIR KNIGHTSBRIDGE BELGRAVIA ST JAMES'S

COMPLETED

EXPECTED

DEVELOPMENT AREA UNITS COMPLETION

TREVOR SQUARE KNIGHTSBRIDGE 40 2002

21 DAVIES STREET MAYFAIR 22 2004

THE KNIGHTSBRIDGE KNIGHTSBRIDGE 201 2005

21 CHESHAM PLACE BELGRAVIA 6 2008

10 LANCELOT PLACE KNIGHTSBRIDGE 50 2008

MONTPELIER HALL KNIGHTSBRIDGE 6 2009

BULGARI RESIDENCES KNIGHTSBRIDGE 8 2011

ONE HYDE PARK KNIGHTSBRIDGE 86 2011

3-10 GROSVENOR CRESCENT BELGRAVIA 15 2012

THE LANSBURY KNIGHTSBRIDGE 6 2012

WALPOLE ST JAMES'S 5 2012

FIGURE 2 - NUMBER OF LUP DEVELOPMENTS BY AREA

TABLE 2 - EXPECTED LUP DEVELOPMENTS

TABLE 1 - COMPLETED LUP DEVELOPMENTS

THE LUP MARKETIN NUMBERS

Source: GC Privé

COMPLETED 445

EXPECTED 249*

TOTAL 694

DEVELOPMENTS

UNITS

COMPLETED 11

EXPECTED 14

TOTAL 25

DEVELOPMENT AREA UNITS COMPLETION

55 HANS PLACE KNIGHTSBRIDGE 10 2015-2016

77 MAYFAIR MAYFAIR 7 2015-2016

30 OLD BURLINGTON MAYFAIR 42 2015-2016

RYGER HOUSE ST JAMES'S 5 2015-2016

ST JAMES'S HOUSE ST JAMES'S 8 2015-2016

CLARGES MAYFAIR MAYFAIR 34 2017-2018

56 CURZON STREET MAYFAIR 31 2017-2018

11-15 GROSVENOR CRESCENT BELGRAVIA 11 2017-2018

20 GROSVENOR SQUARE MAYFAIR 36 2017-2018

AUDLEY SQUARE HOUSE MAYFAIR 24 >2018

1 GROSVENOR SQUARE MAYFAIR 41 >2018

24 GROSVENOR SQUARE MAYFAIR N.A >2018

HYDE PARK BARRACKS KNIGHTSBRIDGE N.A >2018

THE PICC ADILLY ESTATE MAYFAIR N.A >2018

Source: GC Privé – based on publicly available information; excludes townhouses

Sorted based on completion/expected completion dateN.A. denotes “Not Available”

109

3 3

Our findings suggest that the ultra-prime developments stock in Knightsbridge has passed its inflection point, whilst Mayfair’s ultra-prime stock of new developments is still at its infancy stage.

As Knightsbridge (190 acres) is significantly smaller than Mayfair (285 acres), it will remain more scarce and valuable, given that completed ultra-prime developments in Mayfair will eventually surpass those in Knightsbridge.

Based on our analysis, Mayfair will have a total of 10 LUP developments in the coming years, whereas Knightsbridge will have a total of 9.

The expected pipeline of LUP developments will be 2 in Knightsbridge and 9 in Mayfair over the foreseeable future as shown in Figure 2.

On the other hand, both Belgravia and St James’s are strict conservation areas, which makes it harder for new residential developments to emerge at the same rate as Mayfair and Knightsbridge. Notable examples include the 21 Chesham Place development in Belgravia, as well as, the ongoing St James’s House project in St James’s.

*Based on available public information.


30 OLD BURLINGTON

WALPOLE

RYGER HOUSE

21 DAVIES STREET

RYGER HOUSE

ST JAMES'S HOUSE

CLARGES MAYFAIR

THE PICCADILLY ESTATE

AUDLEY SQUARE HOUSE77 MAYFAIR

24 GROSVENORSQUARE

20 GROSVENORSQUARE

1 GROSVENORSQUARE

11-15 GROSVENORCRESCENT

3-10 GROSVENOR

CRESCENT

21 CHESHAM PLACE

55 HANS PLACE

THE LANSBURY

10 LANCELOT PLACE

TREVOR SQUARE

ONE HYDE PARKHYDE PARK BARRACKS

THE KNIGHTSBRIDGE BULGARI RESIDENCES

LEGEND

COMPLETED

EXPECTED

KNIGHTSBRIDGE

BELGRAVIA

ST JAMES'S

MAYFAIR

MONTPELIER HALL

56 CURZON STREET


£4,729 PSF

KNIGHTSBRIDGE

Knightsbridge’s ultra-prime developments are centred around Harrods as well as being in close proximity to Hyde Park.

Veritably cosmopolitan, Knightsbridge caters to international discerning individuals and families.

The Knightsbridge average ultra-prime property valuation of £4,729 psf (£50,902 psm) is the highest within the LUP market – with the most recently recorded LUP transactions in the public domain reaching £5,506 psf (£59,264 psm) at One Hyde Park and £4,473psf (£48,151 psm) at Trevor Square.

Harrods is the catalyst factor in boosting Knightsbridge’s valuations, and its utmost importance in cultivating a luxurious lifestyle in Knightsbridge cannot be underestimated. Boasting stunning architecture and 330

departments within a magnificent 5-acres space, Harrods offers world-class service and access to a multi-faceted range of high end brands. One only needs to take a quick stroll outside Harrods to witness the extravagant mixture of exotic and classic automobiles.

In our view, this part of Knightsbridge is one of the most direct comparables to the legendary Place du Casino in Monte-Carlo.

Furthermore, we ascertain that if the potential development of the 6-acre Hyde Park Barracks satisfies the hedonics of élite buyers, then this advancement will be the last missing piece of the puzzle in sealing Knightsbridge’s status as undoubtedly the world’s most sought-after neighbourhood.

BELGRAVIA

Knightsbridge boasts a secluded and multicultural lifestyle, which resonates in the area between Harrods and Hyde Park

DEVELOPMENT COMPLETION

TREVOR SQUARE 2002

THE KNIGHTSBRIDGE 2005

10 LANCELOT PLACE 2008

MONTPELIER HALL 2009

BULGARI RESIDENCES 2011

ONE HYDE PARK 2011

THE LANSBURY 2012

55 HANS PLACE 2015-2016

HYDE PARK BARRACKS >2018

KNIGHTSBRIDGE LUP DEVELOPMENTS

LUP VALUATION (2014 AVERAGE)

LUP MARKET POSITION

7COMPLETED

2EXPECTED

1

One Hyde Park, Knightsbridge

£50,902 PSM

£4,541 PSF

Belgravia is a discreet location having the most prominent and aristocratic neighbourhoods since the beginning of

the nineteenth century. Populated by white stucco-fronted houses;

better known as the “City of Palaces”, Belgravia is considered nowadays as hosting some of the most high-profile individuals and families residing in London.

One of the area’s most remarkable features is the high security on offer with police patrols around the clock– especially on Belgrave Square and Eaton Square which host a large number of Embassies and grand residences.

Belgravia differentiates itself from the legacy “touristic” and business-men's pathways, allowing its local residents to enjoy its beauty and benefit from a discreet lifestyle, while being moments away from cosmopolitan Knightsbridge.

Iconic spots, Elizabeth Street and Motcomb Street, offer a selective choice of designer

boutiques and restaurants, including Christian Louboutin and private dining club Mosimann's.

The core areas for ultra-prime developments are Chesham Place and Grosvenor Crescent, while properties (notably townhouses) situated around Belgrave, Eaton and Chester squares are all considered to be uber-exclusive.

Belgravia’s ultra-prime development stock averages at £4,541 psf (£48,879 psm), having seen a significant restoration of historical estates to their glorious past. Belgravia’s last recorded LUP transaction in the public domain was at 21 Chesham Place for £5,612 psf (£60,407 psm).

The fact that Belgravia is a strict conservation area may affect its potential when it comes to showcasing new ultra-prime developments, however we still expect further restorations of listed buildings to be in line with the LUP market standards.

Belgravia has been renowned as one of London’s most prestigious neighbourhoods, offering a discreet and highly secured “village-type" lifestyle


21 CHESHAM PLACE 2008

3-10 GROSV. CRESCENT 2012

11-15 GROSV. CRESCENT 2017-2018

BELGRAVIA LUP DEVELOPMENTS


LUP MARKET POSITION

2

Belgravia

£48,879 PSM

2COMPLETED

1EXPECTED


MAYFAIR ST JAMES'S

£4,214 PSF

Mayfair is London’s focal point of opulent establishments, ranging from Michelin-starred dining venues to

award winning cocktail lounges and world-class members’ establishments – including 5 Hertford Street, Mark’s Club, Annabel’s and Les Ambassadeurs Club.

Home to some of the world's most privileged social happenings, Mayfair welcomes a crowd of celebrities. Traditionally an area hosting modern townhouses, Mayfair’s majority of LUP developments are still in the pipeline.

We observe significant activity in the regions of Grosvenor Square, South Audley Street and core areas towards the lower end of the border with St James’s.

Mayfair’s ultra-prime developments market averages at £4,214 psf (£45,361 psm). Its most prominent residential location is Grosvenor square, where it is expected to host a number of significant ultra-prime developments within the next 2-4 years; these are mostly commercial

buildings which are going to be transformed into residential complexes.

Both Mount Street and Carlos Place surroundings remain prime property positions and host a number of local amenities. Berkeley Square and Bond Street host a number of prestigious businesses (e.g. Jack Barclay and Sotheby’s), as well as, a coveted range of top retail brands.

Berkeley Square also remains the most preferred location for investment companies including hedge funds and private equity.

We note that the majority of Mayfair's ultra-prime stock is scheduled for completion between 2015-2018 and this may well change Mayfair’s market position as well as narrow the valuation gap with Knightsbridge.

The latest recorded valuation in the public domain is derived from a press release issued by the developers of Clarges Mayfair stating that off-plan sales in the development averaged at £4,750 psf (£51,129 psm).

Mayfair's fusion of business and lifestyle makes it a vibrant LUP area, nevertheless, it boasts astonishingly calm neighbourhoods


21 DAVIES STREET 2004

77 MAYFAIR 2015-2016

30 OLD BURLINGTON 2015-2016

CLARGES MAYFAIR 2017-2018

56 CURZON STREET 2017-2018

20 GROSVENOR SQUARE 2017-2018

AUDLEY SQUARE HOUSE >2018

1 GROSVENOR SQUARE >2018

24 GROSVENOR SQUARE >2018

THE PICCADILLY ESTATE >2018

MAYFAIR LUP DEVELOPMENTS


LUP MARKET POSITION

3

Mayfair

£45,361 PSM

£3,875 PSF

St James’s captures English eclecticism with its exclusive gentlemen's clubs, bespoke outfitters and shoe makers; rare wine

and fine tobacco merchants. Particularly, the area hosts the renowned

Fortnum & Mason department store, the exclusive White’s and Royal Automobile Club, as well as, a significant number of Royal Warrant Holders: the wine and spirits merchant Berry Bros. & Rudd and made-to-measure footwear John Lobb.

Gentlemen's clubs are clustered in the exclusive preserve known as “clubland,” located predominately on St James's Street and Pall Mall, a suburban promenade that began to assume a street shape at the end of the 17th century.

Its appeal to British royalty and aristocracy throughout the centuries makes St James’s genuinely exceptional and offers discerning individuals and families an elite residential

address in the current times. Ultra-prime developments in St James’s clearly

benefit from its deep history with an average valuation of £3,875 psf (£41,709 psm). The latest recorded LUP transaction in St James’s reached a valuation of £3,808 psf (£40,988 psm) at Walpole.

Positive valuation factors include the Crown Estate's ongoing investment of £500 million, aimed at doubling the amount of St James's residential properties by 2020, while Fortnum & Mason department store fosters St James’s residential character.

Our optimistic stance towards St James’s is reinforced by the fact that Mayfair valuations remain high close to the “St James’s border” and are not deteriorating as it happens with property valuations in Mayfair close to the “Oxford Street border”.

St James’s returns to its former grandeur and is gradually re-establishing itself as one of the most premier LUP areas


WALPOLE 2012

RYGER HOUSE 2015-2016

ST JAMES'S HOUSE 2015-2016

ST JAMES'S LUP DEVELOPMENTS


LUP MARKET POSITION

4

Lake in St James's Park

£41,709 PSM

1COMPLETED

9EXPECTED

1COMPLETED

2EXPECTED


VALUATIONTRENDS

LOOKINGAHEAD

The current “softness” in the LUP market presents an excellent investment opportunity to negotiate deals on newly available units

Rigid price differentials suggest that all four areas remain at the pinnacle of London’s most sought-after residential

locations. Knightsbridge, however, remains the most

prominent LUP area given that it exhibited the highest volume of precedent transactions in the LUP market.

During the course of 2014, the LUP market averaged at £4,437 psf (£47,756 psm). The market exhibited an all-time high at 2014 Q3, primarily due to significant transactions in Knightsbridge and Belgravia; two transactions at One Hyde Park and one transaction at 21 Chesham Place– as recorded by Lonres.

It is also worth noting that in September 2014 the developers of Clarges Mayfair issued a press release stating that off-plan sales in the development averaged at £4,750 psf (£51,129

psm). Since 2014 Q4 we have observed signs of a price correction in the LUP market.

Based on publicly available data, the LUP market has fallen by 15.5% when comparing the 2015 Q1 average price level to the peak valuation of 2014 Q3. Furthermore, the number of transactions has fallen dramatically in 2014 when compared to 2013– with total transactions in 2014 dropping at the activity levels of 2009.

It is worth noting however, that these figures do not include unrecorded private transactions which potentially could have an impact on our overall picture. Furthermore, it is widely perceived that the 2015 Q1 market drop is attributed to the interplay of domestic politics. In detail, recent stamp duty reforms especially with regards to company ownership of residential properties, the possibility of a

mansion tax connected to the forthcoming General Election and the ongoing proposed reforms of non-domicile tax rules are all important factors to consider.

However, we are optimistic that these are short-term challenges in the LUP market. As we depict in figure 3, the LUP market has shown a long-term upward trend since 2005 Q1 with corresponding ups and downs in certain quarters. As of 2015 Q1 the market exhibited an average capital appreciation multiple of 3.1x when compared to 2005 Q1.

Over the long-run, it is our belief that the LUP market will continue its upward trend. The current “market-softness”, therefore, presents an investment opportunity to negotiate deals on exceptional lateral units which have only been recently made available.

Additional ultra-prime developments will enhance London’s “hotspot” status and further engage the world’s UHNWIs and BIs

A number of factors have a profound impact on the future state of the LUP market. The below mentioned attributes will shape the market valuation in the years to come and determine the equilibrium level of demand and supply.

1 2 3 4 5 6 7 8 9 10

0

5

10

15

20

25

30

100

150

200

250

300

350

400

Mar

-05

Sep-

05

Mar

-06

Sep-

06

Mar

-07

Sep-

07

Mar

-08

Sep-

08

Mar

-09

Sep-

09

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-10

Sep-

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Mar

-11

Sep-

11

Mar

-12

Sep-

12

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-13

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-14

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-15

LUP Price Growth (Rebased 2005 Q1) LUP Total Number of Transactions per Year

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

FIGURE 3 - LUP MARKET TRENDS FIGURE 4 - LUP VALUATION BY AREA(2014 Average)

£3,875

£4,214

£4,541

£4,729

ST JAMES'S

MAYFAIR

BELGRAVIA

KNIGHTSBRIDGE

£PSF

£50,902

£PSM

£48,879

£45,361

£41,709

Market Dynamics

Evidently, UHNWIs and BIs continue to value the city for its “hotspot” status and, therefore, LUP residential developments remain high in demand. Given the current economic climate, it is only a matter of time before more UHNWIs/BIs are drawn into the city. However, we note that any new introductions of LUP developments, must match the ever-changing preferences of élite buyers and equally important avoid oversupply in a market which could easily become overblown.

GLOBALPOLITICS

House prices in London have a direct correlation with political turmoil in particular parts of the world as investors look for safe havens for their cash, according to research conducted by Professor Tarun Ramadorai and Dr Cristian Badarinza from the Saïd Business School of the University of Oxford. Therefore, London and the LUP market will remain “relevant” for UHNWIs and BIs, irrespective of whether the global climate is deteriorating or improving– especially for individuals originating from locations such as Russia, Southern Europe, China, the Middle East and South Asia.

DomesticPolitics

Over the past few years, there has been continuous political scrutiny on wealthy individuals and following the 2015 General Election, there could even be more restrictive fiscal policies and property taxes (especially on foreign buyers). In particular, recent stamp duty reforms with regards to SPV ownership structures, a potential mansion tax, as well as ongoing suggested modifications of non-domicile tax rules, may have negative implications to the future of the LUP market.

FOREIGNEXCHANGE

Further strengthening of the pound could weaken the attraction of the LUP market to foreign investors. This is particularly detrimental for buyers whose wealth is held in Euro and Rubble– currencies which have already been experiencing a strong devaluation against main currencies. Furthermore, an increase in UK interest rates may lead to further sterling appreciation, however, the first rate hike is not expected before 2016 Q1. On the other hand, the pound/ dollar rate has remained relatively constant over the recent years, a fact which could potentially mitigate a pound appreciation.

Source: GC Privé

(LHS) (RHS)


METHODOLOGY

Our private office team has developed a proprietary microeconometric framework for analysing the LUP

market. The hedonic variables used in our model

have been quantified based on a representative sample of our client interactions and their preferences towards acquiring lateral units in residential (multiple-unit) developments– excluding single-unit apartments and townhouses.

The quantification of the hedonic variables also depends on the track record of the developers and designers responsible for crafting these ultra-prime developments. As a result, our hedonic analysis provides a ground-breaking definition of the LUP market based on non-price characteristics.

Indeed, our LUP market definition contains

CONTRIBUTORS

Louis is a co-founding partner of GC Privé and trusted advisor to some of the world’s most affluent individuals and single family offices. He has extensive experience in investment banking and wealth management, having worked for Citigroup, Barclays Capital and Kleinwort Benson advising multinational corporations, financial institutions, ultra-high net worth individuals and charitable organisations. Louis has also worked as an economist at the Her Majesty’s Treasury under the leadership of the ex-UK Prime Minister and Chancellor of the Exchequer Gordon Brown. He holds an MSc in Mathematical Finance with Distinction from Christ Church College, University of Oxford, and a BSc in Econometrics and Mathematical Economics from the London School of Economics. He lectured at the Russian Presidential Academy of National Economy and Public Administration. Louis also holds the Investment Management Certificate.

Louis Loizou Partner

Andreas is a co-founding partner of GC Privé. He qualified as an ACA Chartered Accountant and has worked for KPMG UK in the industry sectors of information, communication and entertainment. Andreas has been instrumental in developing the company’s strategic positioning and market direction, with the aim of providing a truly integrated and holistic approach to the challenging needs of UHNWIs. He also has extensive experience in financial modelling development and has founded an information technology boutique consultancy. He obtained a BSc in Mathematics, Operational Research, Statistics and Economics from Warwick University.

Miria is the founder of KPS London Ltd., a property consulting firm she started 10 years ago. KPS advises private clients with regard to acquisitions and dispositions of real estate assets in Central London. Miria currently serves as real estate consultant to GC Privé. She is very familiar with London hotspots and the LUP developments in particular, having successfully transacted a number of acquisitions within various high-profile ultra-prime developments on behalf of her clients. She was also instrumental in closing other significant transactions, including acquisitions of boutique hotels in London. Miria holds an MBA degree from Henley Business School.

Hyde Park, London

only 37% of transactions above £10m, which has so far been one of the traditional ways in referring to London’s ultra-prime market. In doing so, we have qualified 25 developments which form part of the LUP market, and have assumed that the expected developments will be satisfying the hedonic attributes and choices of the élite buyers upon completion.

Based on the 25 developments which exhibited precedent transactions (secondary, primary and off-plan), we estimated the LUP market valuation per quarter over the 10-year period between 2005 Q1 to 2015 Q1. In the absence of recent or “visible” precedents, we have deployed a market comparable analysis in deriving our average valuation estimates per area of interest.

Furthermore, we have primarily used data from Lonres which is London's most

comprehensive database of historical property transactions, while we have also included data from publicly available sources (e.g. developers’ press releases).

It is also important to note that a number of off-plan and primary transactions in new residential developments have not been recorded on Lonres as yet, while prior to the stamp duty changes any transactions under SPVs were not recorded on Land Registry.

Additionally, Lonres has no record of any off-market transactions or private deals, therefore, these transactions have not been taken into consideration due to the lack of visibility.

Our team will be delighted to perform bespoke analysis to enhance your negotiating position with selling agents for the purposes of acquiring lateral units in London's ultra-prime developments.

Sarra provides project management expertise with regards to investor visas and citizenship programmes, including UK, Spain, Cyprus and St Kitts. Over the last seven years, she has worked in Paris in the banking, insurance, energy and retail sectors. Sarra is fluent in Arabic, French and English. She obtained an MBA degree from the University of Southampton.

Andreas Ashiotis Partner

Miria KyprianouAdvisor

Sarra OthmaniAssociate

Our research is the first of its kind to utilise sophisticated econometric techniques with the aim of analysing the LUP market

Olivia is a communications and marketing advisor, harnessing opportunities and developing partnerships across multiple channels, countries and cultures. Her meticulous attention to detail, editorial skills and thorough knowledge of public relations disciplines has been instrumental to the communication function of GC Privé. Olivia has previously worked for the award winning property supplement of The Times. She holds a Journalism and Communications degree from Cardiff University.

Olivia AzadeganAdvisor

G C P R I V E

London is one of the very few global cities, where there is a clear-cut between ultra-prime and prime properties— and is not merely on price

Louis Loizou Partner, GC Privé

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