October 18 2010
Lucia van der Post
Way back in the summer of 2005, when the world looked a very different place, I got wind of what seemed like a fantastic opportunity, what my children call a “no-brainer” – a chance to buy an apartment off-plan in one of London’s most splendid buildings, St Pancras Chambers, Gilbert Scott’s magnificent 19th-century gothic revival masterpiece. I’d always loved the building for its grandeur, its Englishness, that wonderful combination of the grimy and the glorious.
It had begun life as The Midland Grand Hotel in 1873 but after the closure of the hotel in 1935, and despite its listing by English Heritage in 1967, it had fallen into a sad, dilapidated state. Harry Handelsman, founder and chief executive of the Manhattan Loft Corporation, had the grand notion of rescuing it from oblivion and creating 67 apartments and a 244-room five-star hotel out of its vast gothic shell. It had period details of the sort that make the heart soar. Outside there were the ornate windows, turrets and a clock tower, wonderful pinky-red brick, and dragons and angels carved out of stone. Inside there was a vast marble staircase, huge vaulted ceilings, beautiful cornices, majestic corridors, space on an almost absurdly generous scale.
English Heritage I knew would be on the case, eagle eyes making sure that none of the splendour was lost. On top of that, just behind it, St Pancras station itself was being beautifully restored and the rather dodgy King’s Cross area was being brought to civilised life. King’s Place in nearby York Way was to be a new cultural centre, Larry Gagosian’s gallery was just round the corner. Eurostar was to move there, so there’d be easy access to Europe, and the financial hub of the City was a mere eye-blink away. Who could resist?
The notion I had was two-fold. Firstly, there was the romance of buying into an amazing British landmark building, being part of an incredibly worthwhile restoration project, but also there was, I do confess, the hope – what seemed like a certainty – that it would be a fantastic investment. House prices were whizzing upwards and some time before I had to pay the full whack, four years or so down the line, I imagined I would be able to sell it at a nice little profit.
So, in that heady summer of 2005, I put down 10 per cent on a two-bedroom, third-floor apartment. I had hoped to invest in one of the smaller – and cheaper – ones on the fifth or sixth floors, but they’d all gone before I’d even got my cheque book out. In all, mine had 1,030sq ft, including a glorious reception room with six tall gothic windows, a main double bedroom with en-suite bathroom, and a second bedroom adjoining a shower room-WC which it shared with visiting guests. It had an aura, a grandeur that no modern apartment block could begin to match. Demand was so high that buyers were restricted to one apartment each. To use Handelsman’s words, “They’re limited editions of a masterpiece.”
So far, so wonderful. For four years I watched as the scaffolding went up and the project came to life, all the time thinking how lucky I’d been to come upon such an amazing opportunity. House prices were still soaring, mortgages were easily available; all was going to plan until the summer of 2009, when I thought it might be a good moment to sell. Very soon I was going to have to come up with the full agreed price, which I didn’t have easily to hand, and it would save a lot of angst and hassle if I could sell it at a profit before the day came. And just at that very moment, right there and then, the economy came to a full stop. As one businessman I know put it, “Business fell off a cliff.” There were people who were happy to take the apartment off me at some £70,000 or so below the price I was still obliged to pay but nobody was offering to pay the same, let alone more. Nothing for it, then, but to buy and hope to rent it out and then sell it on later.
That was when the nightmare began. The last time we’d taken out a mortgage we were youngish and house prices were comparatively low. A nice long (25-year) capital-and-interest repayment mortgage was easily affordable on our salaries and as inflation took off it got easier all the time. This time round I was a lot older and the amount I needed huge. It was my venture (or folly?) and I didn’t want to trouble the husband.
For mortgage purposes, my apartment in one of the country’s most historic buildings was designated a “buy-to-let new-build flat”, which meant that the banks regarded it as if it were a jerry-built bit of flim-flam that might collapse at any moment. The combination of my age and the words “buy-to-let new-build” was so toxic that not a bank would touch it. Handelsman made it clear that my options weren’t attractive: “If you aren’t able to complete when the day comes we’ll be down on you like a ton of bricks,” he said sweetly down the phone one day, though, to be fair, he did offer to try and find a buyer.
I was saved from the debtors’ prison by my wonderful financial adviser, David Alexander, CEO of AAG, who strode into action and got his mortgage expert on to the case. But even she couldn’t perform miracles. Sixty-five per cent of the value of the flat was the largest (interest only) loan she could arrange and the valuation – wouldn’t you know – was lower than the price I had agreed to pay. At least bank rates, I comforted myself, are low. Well, so they were (0.5 per cent, to be precise), but the Royal Bank of Scotland appeared not to have got the news. It graciously agreed that in return for my paying a £12,578 product fee (yes, you may well ask) and a £245 mortgage account fee (no idea about that one) it would lend me 65 per cent of the value of the flat, and would be charging me 5.89 per cent annually for the privilege. I still break out in a rage every time I think about it, but that was the only deal in town. They knew and I knew that they had me over a barrel.
And that, dear reader, is how I became a landlord and entered the world of buy-to-let. But in order to let I had to furnish it, and here – I think – I made a really good decision. I called in Taylor Howes, an interior design company whose partners, Karen Howes and Gail Taylor, I knew well and who had a special arm, TH:2, which offers ready-prepared packages for what on its website it calls Dress to Rent (there’s also Dress to Sell and Dress to Live). It’s most basic pack is its Essentials, which for £5,999 includes all the basics for a one-bedroom apartment – double-bed mattress, sofa, dining table etc, but not curtains or accessories. For a two-bed apartment like mine it would cost £7,899. I found the whole package, if I may be truthful, on the dull side (for buy-to-let it has to be), but I found that by mixing in some of my own finds, it worked a treat.
The people at TH:2 were brilliant at organising the whole thing. Everything they and I bought went to their warehouse so that the whole lot could be delivered to the apartment on a single day in a single van. They knew that neutral colour schemes please the maximum number of people so we settled on grey, a colour that anyway I love. I bought the beds, bedheads, mattresses, sofas and pouffes from the package but for the desk in the second bedroom, the occasional chairs and lights I went off-piste. I fizzed up the look with a wonderful tin-topped Pondicherry dining table from The Conran Shop (£695), a beaten aluminium coffee table, Indra, from Habitat (£250), a silver drum side table from India Jane (discontinued), a “distressed” Chinese console table (£120 in the sale) also from India Jane, cream-covered Echo dining chairs from Oka (£156 each), and an ornate silver mirror for £349 through www.ayersandgraces.com.
I brought in pictures and a small antique hall table from our house. TH:2 tracked down special lights for me (I didn’t like the ones in the package and lighting was a nightmare due to English Heritage restrictions) and a creamy, slightly Chinesey cupboard to replace the hideous one that came with the flat. “Your trouble,” they spotted, “is that you just want everything to look lovely.” In other words, I couldn’t bring myself to buy anything I didn’t love (one day I’d be selling the flat and then what would I do with the dull stuff?), which meant that the final cost was much higher than it would have been if I’d been “sensible”. (Interestingly, TH:2’s packages have since become much more enterprising and these days clients have some gorgeous pieces to choose from.)
TH:2 dressed our apartment with its Wow pack (cushions, hurricane lights, photograph frames, from £300) to show it – and what a difference that made, too. It was let almost the minute it came on the market, though not for as much as I’d hoped. Rents of £900 a week were being bandied about; we got £675 from two delightful German students who fell in love with the flat and the way it was furnished. It was almost enough to make the whole enterprise “wash its face”. The students have gone home and our flat has immediately been let again, this time on a year’s let for £700 a week. I’m out of pocket, of course, but not enough – yet – to keep me awake at night.
So what is the lesson? Property investment isn’t for cissies. I was foolish. In my bright, optimistic way I hadn’t even considered the downside. Nor had I done my sums properly. Service charges are horrendous (£4.50 per sq ft had been mooted when I decided to buy; the reality comes in at twice that). The high cost stamp duty came as a very nasty shock.
Sympathetic friends have come up with consoling thoughts. “If you come out of this recession having only lost the profit you’d hoped to make, you’ll have done very well,” said one. “You could have lost just as much if your money had been in equities,” said another. To look on the bright side (my speciality), I am still the (35 per cent) owner of an utterly gorgeous apartment in one of London’s most historic buildings. And one day very soon, when all the building is finished, the scaffolding is down and the swanky hotel is up and running, it’s going to be one of the most stylish places in the world to live.