Prudence Rules over Pride and Prejudice: Canada’s Historic London Address Sold to Indian Developer
MACDONALD HOUSE SOLD TO LODHA GROUP FOR $530 MILLION
By S.B. Veda
“We are a long way from Grosvenor Square, are we not Mr Darcy.” – Jane Austen, Pride and Prejudice
For over half a billion dollars, (306 million pounds sterling) Canada has sold the historic building bearing the coveted address 1 Grosvenor Square, which has housed Canada’s High Commissioner in London since 1960 – and the asset has been picked-up by the Mumbai based Billionaire Lodha Group. The Real Estate giant plans to turn the iconic MacDonald house into super luxury flats for the Uber-wealthy.
The Palatial seven storey Neo-Georgian building, located a stone’s throw away from Buckingham palace in the posh area of Mayfair, has been the residence of such top diplomats such as Charles Ritchie, Fredrick S. Eaton, Paul Martin Senior, and Donald MacDonald.
The Conservative government announced early this year it was putting a ‘For Sale’ sign on Macdonald House as it executes a plan to concentrate its diplomatic presence at Canada House in Trafalgar Square in downtown London, and achieve efficiencies.
“There was exceptional interest from international parties for the property on Grosvenor Square. We are looking forward to the move to Canada House on Trafalgar Square, Canada’s traditional home in the United Kingdom, in the next year,” High Commissioner Gordon Campbell said in a statement. “We thank Lodha Group for their keen interest and welcome this new phase in the project.”
The government hired real estate company Savills to sell the 150,000-square-foot mansion, which had been expected to fetch more than $500 million because of its valuable location. It has been one of a number of lucrative assets the federal government has been looking at selling off as it promises to balance the books by 2015-16.
The Lodha Group, one of twenty bidders, was the only Indian party to make an offer.
Global Gamble by the Ambitious Lodha Group
The Lodha Group, established in 1980 and best known for its World One Tower project, the tallest residential high rise planned in India, situated in central Mumbai’s Lower Parel, expects £750 million in receivables from the sale of these flats to burnish its cash resources as it bounds on to the global real estate stage.
The developer has until the end of March, 2014 to pay the entire consideration for MacDonald House, but the group is determined to pay the Canadian Government in full by February 1st – and this without taking on any additional debt to finance the deal, betting its own stores of cash and receivables that the deal will be well worth the risk.
It seems a reasonable one: Over the past nine months, a total of 20 Embassies and diplomatic assets have been sold or considered for sale according to Wetherell Estates and Diplomat magazine, with one agent describing the diplomatic market as a ‘bloody goldmine’.
Abhishek Lodha, managing director of Lodha Group was bullish on the investment: “The acquisition of this marquee asset overlooking London’s most renowned garden square, in the heart of Mayfair and in close proximity to Bond Street and Mount Street is a great opportunity for our company.”
‘One Grosvenor Square is the best address in the world and we will create a world class development which befits the status of this address.’
The Lodha Group, which is setting up its own British operation to oversee the super-luxury project and pursue its other plans in the UK, has already hired Tyler Goodwin, the former managing director of JPMorgan, as the new chief executive officer of its UK business. Tyler is expected to join the company early in the new-year, according to a Lodha spokesman “Lodha’s entry into a mature and high-value property market like London will push its brand visibility to a new level.”
Indeed, with around 150 000 sq. ft. of space expected to fetch £5000/sq. ft, the math seems to support expectations, especially with the Canadian Government footing the bill for renovations. If done right, the Lodha group could manage to preserve the historic nature and architectural integrity of the building while investing modestly in its development, potentially realizing double its pay-out to the Government of Canada.
“This is an indication of just how much flex in the muscles of emerging markets.” said one analyst from the trade consultancy, Global Trade Associates Canada (gbltrade.ca).
When asked to comment on The Lodha Group’s potential windfall, Mr. Campbell responded that the government of Canada was in the business of providing service to Canadians – not making money from real estate transactions. While anyone dealing with The Canada Revenue Agency (CRA) might debate the former, the latter is, indeed, far from being in doubt.
Mrs. Bingley, the snobbish character from Jane Austen’s Pride and Prejudice whose quotation immortalizes the famous address in English Literature, and begins this article, was intended by the author to convey the pompous attitude of the character – the lady, turning her nose up at a English country-side dance as she utters the words. One wonders what Austen might have had her say about the purchase, today. — You are a long way from N.M. Joshi Marg, Mr. Lodha. — I am dear lady, and loving it!