Mayor Boris, Kuwait and a luxury flat windfall from Mount P

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Special report: Mayor Boris, Kuwait and a luxury flat windfall from Mount Pleasant ‘double rip-off’

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LONDON Mayor Boris Johnson said he would “iron out” any difficulties one of the priority shareholders in Royal Mail might have in investing in the UK.

Royal Mail is seeking permission to build about 500 luxury homes, plus thousands of square feet of office and retail space, on the site of its Mount Pleasant sorting office in Clerkenwell, part of which has been declared surplus to requirements.

The scheme could net investors more than half a billion pounds. Mr Johnson has taken over the planning process from Islington and Camden councils – at the request of Royal Mail – and will decide next month if the development can go ahead.

The local authorities oppose the plans, arguing that the project has inadequate affordable housing. Residents argue that it is poorly designed.

Islington housing chief Councillor James Murray said this week that, if approved, the plans would amount to a double “rip off” – first, the Royal Mail privatisation, and now the Mount Pleasant housing development.

One of the 16 preferred investors in Royal Mail, revealed this week, was the Kuwait Investment Office.

According to the Bureau of Investigative Journalism, “the Kuwaiti government wealth fund had an allocation of 16m shares worth just under £53m. Another Kuwaiti government fund then bought around 300,000 shares on the open market.

"The register from February this year shows that it has retained its holding.”

The KIO would therefore be a beneficiary of any profits from the Mount Pleasant site.

In November last year, on a visit to Kuwait, Mr Johnson, according to the Kuwaiti News Agency (Kuna), said “it was his duty as mayor to encourage Kuwaiti investments in London”. Kuna also reported him as saying he would “iron out any difficulties”.

He added: “I want London to continue to be the number one city of choice for investors from Kuwait and the Gulf region. There are already strong historic ties between our capital and Kuwait and I aim to build on these by promoting the huge opportunities for inward investment into London, championing the potential for future trade and by seeking to share expertise in areas of mutual interest.”

Another of the 16 favoured Royal Mail investors was the Abu Dhabi Investment Authority – a fund for investing on behalf of the Abu Dhabi government, and owned by the Emirate of Abu Dhabi.

During a visit to the United Arab Emirates last April, Mr Johnson was reported by the Financial Times as saying that the United Arab Emirates was “very interested” in investing in London’s housing and transport infrastructure.

He added: “We are having discussions about housing development opportunities.”

It is not known if the investment authority kept its holding. This week, the government came under fire for the botched Royal Mail sell-off when it was revealed that many of the priority investors sold their shares within weeks at great profit. They had, the government said, made an agreement to remain as long-standing investors.

There is no suggestion Mr Johnson has done anything against the rules in promoting foreign investment. He said he called in the planning decision to “speed up the decision-making process” and that he will make a decision on the merits of the scheme.

But his trips to the Middle East are in stark contrast to his treatment of Islington South Labour MP Emily Thornberry. He has refused to meet her about the scheme and has failed to answer her letters.

This week, she said the mayor should “hang his head in shame”.

“Now we learn that, far from protecting us from the worst excesses of international capital, the Mayor has been ‘doing his duty’ and encouraging it. I don’t call building massive blocks of flats at prices no one from Islington can afford, blocks that stand empty and mock our housing crisis, ‘investment’, I call it asset-stripping. I call it ripping Islington’s heart out. Boris Johnson should hang his head in shame,” she said.

Research by the Tribune estimates that developers could make as much as £550m from the sale of the housing alone on the Mount Pleasant site – not taking into account receipts from the offices and shops.

It also shows that Royal Mail’s surplus London land was seriously undervalued on its privatisation in January – yet was a key part of the privatisation plans.

The Royal Mail prospectus valued the three surplus London sites – eight acres at Mount Pleasant, 14 acres at Battersea’s Nine Elms and an acre at Paddington Station – together at just £200m. It has already been estimated that Nine Elms will yield another £500m for investors when its almost 1,900 homes are completed.

Royal Mail shares were valued at £1.7bn in January, but instantly leapt in value and are now worth £2.7bn. The National Audit Office has said the taxpayer lost out to the tune of £750m from the sale.

The NAO’s report into the sale of Royal Mail, published on April 1, said that the government had been advised to hold on to the surplus London lands, or at least try to claw back some of the profits from their sale on the grounds that “it is unlikely the selling department will recover full value for the surplus property”.

It added: “An alternative is to include arrangements to claw back a share of sale proceeds.”

However, the government decided against this.

The Royal Mail’s prospectus told potential investors that it would “capture upside” of the value of the land by seeking planning permission for developments before selling.

This is what it is attempting to do with the Mount Pleasant site, with plans for a total of 681 one-, two- and three-bedroom flats, of which just 20 per cent will be affordable, along with 4,260 square metres of office space, and 1,428 square metres of retail space.

The prospectus said: “A key objective of the Group in relation to the London Development Portfolio has been to generate value in the relevant sites by undertaking pre-development work, including obtaining planning consents… with the aim of positioning the portfolio for alternative use (which has tended to be residential use) and thereby allow the group to capture upside on the disposal of the relevant property.”

Residents argue that they are not against the site being developed, but that there should be more affordable homes, and a more sympathetic design.

They fear the Mayor’s decision is a foregone conclusion. Last month, he approved a 42-storey tower block nearby which had already been rejected by Islington. The Mayor has denied waving it through.

It is expected that much of the new housing will be sold abroad. Almost two-thirds of new London property is being sold to investors in the Far East, including Hong Kong and Singapore, according to some estimates. Research by Islington Council has shown that many of the homes built here are being left empty.

Flats in the nearby Canaletto and Lexicon buildings – not yet completed – are already on the market for as much as £850,000 for a one-bedroom property and more than £1m for a two-bedroom flat.

Based on these figures, the Tribune estimates that the Mount Pleasant development, could fetch around £550m at these prices. Cllr Murray said this: “Royal Mail’s plans for Mount Pleasant put their investors’ profits ahead of affordable homes for local people.

It’s becoming more and more clear how we got ripped off by the government’s Royal Mail privatisation – and now, local people in Islington stand to be ripped off again if the Mayor waves through this housing development with hardly any affordable housing.”
‘Less-well-off losing out under flats plan’

Labour deputy leader Councillor Janet Burgess hit out this week at another proposed property development for Archway which will contain no desperately needed social or affordable housing, writes Peter Gruner.

The plan is to build 141 luxury bedsits at 14-storey Hill House, a building between the Archway Tower and the proposed Premier Inn hotel at Hamlyn House.

However, under government permitted development rules – and despite a High Court challenge by Islington Council – the developer does not have to include socially rented or affordable flats.

There are more then 18,000 people on Islington’s housing waiting list. A similar number of bedsit properties at Archway Tower are being planned, again with no affordable units included.

Cllr Burgess said: “I’m extremely annoyed that there will be no socially rented or affordable flats within the scheme, but there appears nothing we can do. I’ve met with the developer and asked them to think again. But I don’t think it is going to happen.

“These schemes are a cheap way for the government to say they are creating a lot of housing. But it is at the expense of the less-well-off in society.”

Kate Calvert, chairwoman of the Better Archway Forum, said residents would like to see the area beneath the building opened up and made safe for shoppers.

“Currently it’s a windswept space with empty shops and a bit of a no-go area,” she said. “As for the building itself I hope they provide a decent form of cladding.”

Developer Bode, which has bought Hill House, is undertaking a consultation with the community, starting with a workshop between 5pm and 8pm on the 10th floor of Hill House on Thursday.