When property developer Lodha Group decided to finally expand beyond its home turf in India, where it is one of the largest residential builders, it certainly made a splash.
Last week Lodha snapped up one of the most high-profile properties on the London market: the Canadian High Commission at One Grosvenor Square in Mayfair. The Mumbai-based company is paying $530-million for the building, topping more than 20 bids from Russia, Asia and some of Britain’s leading developers. And that’s just the start.
The company is opening an office in London, has hired a chief executive for the British division from Vancouver and plans more purchases in London and, perhaps, beyond. These are all aggressive moves for a 33-year-old family-owned business that until now had never bought or built anything outside Mumbai.
“We’ve been looking at global markets for the last year or so and we found London to be the most suitable and attractive market to be in because it is truly a global city, the world’s first global city,” said Abhinandan Lodha, the company’s deputy managing director and one of the sons of founder Mangal Prabhat Lodha, who is chairman.
“And in London we found [the High Commission] to be the best location to enter with because it has all the right elements in place.”
Mr. Lodha said the company has yet to figure out exactly what to do with the 135,000-square-foot building, although most observers expect it to be turned into luxury condominiums. “Whatever we will do, it will be extremely high end,” he said in an interview from Mumbai.
Lodha Group has already built an impressive portfolio of high-end condos in Mumbai, where it is developing 35 million square feet of property and has annual sales of about $2-billion. Its flagship projects include World One, a 117-storey tower considered the tallest residential building in the world, and the 77-storey Trump Tower Mumbai.
Heading to London won’t be easy. House prices, particularly at the top end, have been rising sharply lately and there are fears a bubble is forming. Last week, the Bank of England scaled back a special program created in 2012 to encourage banks to increase mortgage lending, citing house price inflation.
Mr. Lodha said the company isn’t worried that the London market may be overheating. “Our belief is it’s a long-term good buy,” he said. “If there are blips along the way, when you are there for a long period of time you tend to take them in their stride. But our thoughts about London are that this is one of the very, very few markets in the world which will continuously do well.”
He added that the company has looked at investing in other countries, including Canada, “but we haven’t really been able to make much traction there.” That could change, however, given that the CEO hired to run the London operation, former JPMorgan real assets manager Tyler Goodwin, is from Canada. “Maybe, maybe,” Mr. Lodha said about a possible expansion overseas.
For now the focus is on redeveloping Macdonald House, the seven-storey structure that has served as the Canadian High Commission office and residence since 1962. Lodha is technically buying a 999-year lease on the building, which is owned by the Duke of Westminster. And there are some restrictions on what can be done to it, although dozens of buildings in Mayfair have recently been converted from commercial to residential use.
“We will look at trying to build out a business in London,” said Mr. Lodha. “This is the first acquisition we’ve done there and we really believe the City of London is the right place to be. There is lots to learn from the city.”