New year, new start for the Portman Estate as it prepares for an entirely new era. With a new chief executive waiting in the wings, a commitment to more direct development and plans to take back control of its retail, the scale of ambition is at fever pitch.
“Over the next 10 years we are going to invest more than £320m in the estate in various developments,” says Bill Moore, the Portman Estate’s current chief executive.
He is preparing to hand over the reins to Oliver Fenn-Smith – the man responsible for most of the estate’s strategic property deals over the last 12 years – in May. That figure is well ahead of the historic average. Development of no fewer than 10 sites will complete over that period and Portman is eyeing opportunities further ahead too, as more long leases fall in.
Fenn-Smith adds: “Since 2000, a core part of our strategy has been to take more and more control of our assets. There’s still a lot to do, which is what makes this a particularly exciting time to be working here. A lot of those opportunities are coming along.”
On a walking tour of the group’s 110-acre estate in Marylebone, W1, Moore, Fenn-Smith and strategic projects director Simon Loomes open up about the scale of their aspirations.
Seymour Street scheme marks new direction
First and foremost, Portman’s new era will be characterised by the most intense period of direct development the estate has seen since it was forced to rebuild after bomb damage in the Second World War.
This marks an important departure from its usual approach of partnering with experienced developers on all major projects – sharing the risk and the rent. Increasing Portman’s development exposure would not be possible without Fenn-Smith’s property experience, honed at the Grosvenor Estate before he joined Portman in 2005.
Portman’s most significant direct development to date is already underway, replacing the 1970s former Marylebone police station at 1-9 Seymour Street, W1. Portman’s Eric Parry-designed scheme will complete in June next year.
Fenn-Smith says the business is just beginning to talk to potential occupiers for the 32,000 sq ft of office space and hopes to achieve rents in the mid-to-high £80s per sq ft. “We’re really pleased with the level of interest. There is not necessarily great depth of demand in the West End, but the indications on this one are that there is no noticeable Brexit effect,” he says.
The scheme’s 24 apartments – branded One Seymour Street – launched in March and were all presold by summer on a leasehold basis, at prices starting just shy of £1m for a one-bedroom flat.
“We have always undertaken direct development and have now extended this to our larger and more strategic projects,” Fenn-Smith says.
The quest for flagship retail
Portman’s next direct development will be 1-4 Marble Arch, W1, where it will go it alone to create 55,000 sq ft of grade-A offices and a 22,000 sq ft store behind a retained facade.
The scheme, which sits next door to its joint venture with Almacantar on Marble Arch Place, W1, will start on site in January 2019, with completion scheduled for May 2021. By then, plans to pedestrianise Oxford Street will just have been rolled out as far as Marble Arch, aiding Portman’s strategy to revitalise the western end of London’s main shopping street. The new store will boast three floors fronting Marble Arch and is aimed at securing a single retailer.
“We want a flagship retail store. We’re talking to retailers to see what they would need,” says Fenn-Smith.
Both projects are being financed largely from the £200m of finance Portman raised through the US debt private placement market. Restructuring headleases has also contributed funding to the estate’s development programme.
Edgware Road investment district
Barely pausing for breath, Fenn-Smith is already eyeing what he hopes will be Portman’s next big direct development project after Marble Arch. With key areas of the estate such as Baker Street and the shopping and eating districts of Portman Marylebone clearly thriving, Portman is increasingly focusing on the future of Edgware Road.
Here, the redevelopment of Garfield House, a tired-looking retail and office block just around the corner at 86-88 Edgware Road, W2, is in Fenn-Smith’s sights. Currently operated by etc.venues as a meeting, training and event venue, Portman will have full control of the building in 2023.
This will form part of a drive to raise the quality of Edgware Road over the next 10-15 years, with Loomes also playing a leading role through the Business Improvement District for Marble Arch and Edgware Road.
With Westminster currently reviewing its planning policy and set to bring out a new local plan in May, timing is key. “We will make the case for Edgware Road to become a new investment district,” says Loomes.
Already under way is a new mixed-use scheme on the site of Regent House, a former 1960s office building at 112-130 Edgware Road, W1. Here, Portman acquired the headlease in 2013 and secured planning consent for 43,000 sq ft of grade-A offices, 24 apartments and four ground-floor shops. It marketed the £100m scheme to developers on a new long lease basis and sold it to Native Land in 2017.
Why not carry out this development itself? “The reason we didn’t do this one was because we were doing the police station and we have 1-4 Marble Arch coming up,” says Fenn-Smith. “We could have waited to do Regent House ourselves, but we wanted to kick start the regeneration of Edgware Road.”
Portman will take back control of the retail, however. The four stores will be leased back and directly controlled by Portman as part of its retail strategy to reinvigorate Edgware Road and continue its investment in the thriving Marylebone area.
An ambitious strategy
Shaping the retail frontage around the estate is another key element of its development strategy, seen also at Marble Arch Place. Similarly, at the Cumberland Hotel on the adjacent block, Portman is imposing its own requirements in the lease terms for several new units.
These are being added as part of a refurbishment by London & Regional and Starwood Capital to turn the 1,000-bedroom hotel into the UK’s first Hard Rock Hotel, set to open this summer. At ground-floor level there will be three new A1 units in Old Quebec Street, which Portman hopes will enliven its planned traffic-free “oasis”. This is intended to create an improved gateway drawing visitors through into the estate from next spring.
The hotel refurbishment has also seen the back of the former KFC restaurant fronting Oxford Street and replaced it with a new flagship store, where Portman has imposed lease restrictions including a ban on fast food takeaways. “We’re trying to improve the retailers on Oxford Street, either by letting space directly or imposing requirements,” says Fenn-Smith.
It is an ambitious strategy. Especially with a new chief executive set to take over this year. But, so far, Portman is making it work.
“In the 15 years I have dealt with the Portman Estate, I have witnessed a slightly dysfunctional collection of trusts unite into a sophisticated property company,” says Mike Hussey, chief executive of Almacantar.
“The estate has honed its resources and assets to great effect, taking greater measured risk across the component parts of the portfolio to drive change and improved returns.
“Today’s Portman Estate embraces progressive portfolio management but keeps a cast-iron grip on its income growth as it transforms its estate to a vibrant growth area for the West End.
“The distinctive Portman Marylebone and Baker Street areas are flourishing and the team has demonstrated a growing focus on Edgware Road, the area, in my opinion, with the greatest potential across the wider West End.”
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