MEDIA CENTRE - Events

SANG, London (01.24)

Philip luxuriated on a sofa at the latest Serviced Apartment Networking Group (SANG) event and brought back the following take-away nuggets:

• Gove’s rejection of the Marks & Spencers scheme near Marble Arch in London was based on the premise that retrofitting is preferred to dropping and redeveloping thus putting the focus very much on the retention v redevelopment debate and which is better from a carbon efficiency perspective.
• The predominating planning view is to retain a building, but this can impact on investment as retrofitting can be an uncertain approach. Redevelopment offers more visibility and certainty, especially for any prospective lender.
• The carbon calculation is complex and needs to incorporate not just imbedded carbon but also operational carbon implications of retaining an outdated structure. Operational carbon is of particular interest to operators and should be for investors.
• Are there any tax advantages to retaining? None for the moment. Some capital allowances were in place previously but no incentives at present.
• Operators prefer C1 use classifications, or sui generis, as these produce the highest ADRs and margins. However, residential values may be higher than for an aparthotel, so a mix of uses could be appropriate. Which is best depends on the investor/owner’s preferred exit or hold strategy.
• The City of London is open to changing uses of buildings and offers a fast-track process for conversion of old office buildings in secondary locations to hotel use. Retrofit teams in other councils do not provide such a fast-track service.
• Current political uncertainty and cautious debt providers mean finance and deals are simply ‘treading water’ in early 2024. It is taking a long time to do deals.
• There are different VAT treatments between limited service venues (less VAT) and venues providing some services (more VAT). Strongly advised to take credible tax advice.
• When considering which use classification to apply for, bear in mind that C3 imposes minimum size standards and affordable housing requirements (both additional costs to a project). C1 is more flexible and less onerous.
• The planning process in UK is very inconsistent in its decision making, even when supported by all necessary reports. The process remains onerous, time consuming and expensive, all major burdens on investment.
• 2024 is an election year and consequently even more inconsistent committee decisions are likely. Advised to not submit a planning application before an election.
• On a more positive note, with millions of sqft of empty and/or low-grade office space in London there could be plenty of opportunities for refitting to extended-stay use (C1 or C3 depending on your cup of tea).

Many thanks to the hosts (Cheval Collection) for their wonderful breakfast buffet and cosy seating arrangement in one of their stunning apartments overlooking a verdant Kensington Gardens.