Empires are won an lost in the blink of an eye when it comes to the property market in my experience. So what does it take to establish yourself as a magnate in the field. We talk to Naomi Heaton, CEO and founder of London Central Portfolio (LCP) at her London home to try and understand what it took to build such a formidable reputation.
When did you purchase your first property, how did you raise the capital and where was it?
I bought my first flat when I was about 26, I very much wanted to get on the property ladder. I literally beg, stole and borrowed in order to get enough money and I managed to acquire a garden flat in Camden Town.
What was the trigger that made you realise there was a significant gap in the private rental market?
I graduated and went into advertising and I became a Director of Saatchi & Saatchi and Young and Rubicam advising blue chip clients like Heinz and Kelloggs. I had always had this
interest in property alongside and what I found was that I was able to maximise the profit returns on those properties through buying well and doing up well and that really set my interest in setting up a new business I suppose to match my entrepreneurial streak and use all my strategic disciplines I had learnt through advertising. What I realised that there was a gap in the market for any investor, particularly an international investor getting into the market which was complex and difficult. There was gazumping and they needed assistance to find that property, to get it renovated and ultimately to get it let and managed. So it was an obvious one stop solution to help the buyer and that was just a concept that didn’t exist at all.
We understand that LCP focuses on the PCL area, was this the focus from the outset or did this strategy develop over time?
Prime central London is a unique market in terms of its global desirability, the fact that it really is a destination to come to in terms of finance, culture, education and tourism and also that it has this fantastic central core of heritage property which is here for the long term but cannot be replaced or added to. So its very much a unique centre with unique growth characteristics that we like to exploit.
What do you look for when considering a new development acquisition?
LCP’s already been in a very fine spot as far as the residential market goes we’ve concentrated on small units which are highly demanded which show very consistent price growth. If anything, when the market becomes difficult as it did in 2001 and again in 2008-9, people tend to rent smaller units and they want better product quality because the environment becomes more competitive. LCP specialise in small units and excellent product quality and will win out when the market becomes more intense.
Why do you feel that property funds are revolutionising the sector and becoming more attractive compared to direct ownership.
Property funds offer people a very attractive way into the market, buying power, expertise, diversification and our funds provide excellent returns. In addition to that now, direct investors have been very hard hit by a lot of new taxes, Non Resident CGT, the forthcoming Non-dom IHT for example. These funds enable people to invest in this asset class, get their returns but without the taxes that are applied to direct investors which make them exceedingly attractive.
Why did you choose to launch a residential fund in the UK?
When I started LCP it was very much for the High Net Worth private investor and giving them a one stop service but it became very clear to me as we saw a lot of opportunities in the market place that we weren’t acquiring. Also I wanted to open up the market like another listed stock to a much wider range of investors to come into this very prime and uncorrelated asset class.
In terms of investment advice, there appear to be a number of different voices offering suggestions, do you feel we are at a state in the UK where legislation is at the right level?
People buying their own homes is probably their biggest single and most important purchase of their life time. I think that there should be more regulation in that activity. Clearly an estate agent is representing the vendor and the buyer needs representation as well. I think that is something that will come. With regard to property funds of course, that is a highly regulated FCA activity.
Can you describe your archetypal client make up and their financial profile?
Our clients are generally high net worth or ultra high net worth, they might be individuals or family offices. They are sophisticated or professional investors who understand the role of prime central London as an alternative asset class, as an uncorrelated investment to equities and want to broaden and diversify their portfolios. They are smart investors who like to delegate.
What is your view on where Central London prices will go in the next 1-5 years?
As arguably the best capital in the world, alongside the Trump-effect, European vulnerability and instability in the Middle East, London will remain a big draw as investors seek safe havens. Low interest rates, weak sterling and an attractively priced market is encouraging buyers back in. Despite Brexit uncertainty and uncomfortable tax changes, the entry level sector which rental investors prefer has continued to see moderate price growth, which we expect to increase significantly in the medium term. The luxury sector may take longer to recover given the greater buy-in costs and the new non-dom IHT. The new build sector is the most vulnerable. The tax changes have pulled the rug from under this market and a glut of over-priced and over-supplied “comodity style” property has led to falling prices. As always, the sector with the more consistent long-term potential is the unique heritage stock in Prime Central London, which is also the rental heartland.