Johnny Sandelson: a drive to succeed

Johnny Sandelson does not have an office. Instead, he conducts his business out of his two cars – a red Rolls Royce and a white Alfa Romeo. If he is meeting others it is at either The Beaumont Hotel in Mayfair, W1, or Granger + Co on Westbourne Grove, W11. EG gets the Rolls and The Beaumont. “Sitting in car parks seems to be the best use of my time… I sat in a car park in Edinburgh trying to buy Whiteleys for two months,” he says proudly. Property entrepreneur and investor Sandelson has been pulling the strings behind some of the most intriguing deals of recent years, including the purchase of Whiteleys shopping centre and the Queensway estate, W2; 14 housebuilding sites from Tesco; and the Thomas Goode store in South Audley Street, W1. His name is still synonymous, however, with GuestInvest, the HBOS-backed, buy-to-let hotel company he founded that sold private investors individual rooms. It fell into administration in the weeks after the collapse of Lehman Brothers in 2008 and took him to the brink of bankruptcy. But that fall from grace has not put off some the most respected names in the industry from teaming up with him to do deals, including Meyer Bergman’s Markus Meijer, Cain Hoy’s Jonathan Goldstein and Galliard’s Stephen Conway. Gap in the market With a hatred for red tape, time-wasting and detail, Sandelson is an old-fashioned dealmaker who is decisive, obsessive and infectiously enthusiastic. Thriving off the current uncertainty in the market, he is swooping on opportunities others are running scared of or deliberating over. His speciality is schemes with hitches – schemes he remoulds into more straightforward and attractive propositions. “I think there’s a gap in the market for someone like me now where post-Brexit, nobody really knows what the rules are and funds around the world, because of the uncertainty, aren’t committing the right level of resources,” says Sandelson. His £110m purchase earlier this month of the three-acre King’s Gardens in Kensington, W8, from the Jesuits is a prime example. Put up for sale eight months ago, investors were cautious because of the lack of planning and the sensitivity of the site. Sandelson, however, has bought the site without any predefined vision of what will be built. He believes it is a great site in one of London’s most desirable locations that will undoubtedly come good. More on that later. His attitude is a refreshing reminder of the value of gut instinct and the determination to get a deal done in a sector that is becoming ever more professionalised and bureaucratic, with decisions determined more and more by the numbers on a spreadsheet. With an enviable black book of contacts, he is now looking to buy more large-scale development opportunities in London, and is making a major play for the luxury later-living market. Older and wiser Sandelson began his career at Nelson Bakewell in 1989, measuring buildings and fetching egg and bacon butties for the now Land Securities chief executive Rob Noel. “I didn’t give it enough of a shot, I didn’t feel like I had a place there,” he says. Instead, he left the business and used some family money to start renovating flats in some of London’s most affluent areas. Following successes with that venture, Sandelson began to attract interest from a variety of backers. He reminisces: “Everyone is slightly haunted by the idea that if we’d done nothing else 30 years ago than buy three derelict houses in Holland Park, we’d have outperformed everything.” Later followed the dark days of autumn 2008 and the collapse of GuestInvest. Sandelson says: “It was a £250m business we built and you don’t need much of a share in that to lose serious money yourself. But it was more than the loss of money, it was the loss of belief and of judgment. I would walk down the street and dread seeing people. “I’m a much better businessman now,” he adds. “I feel much more centred around being able to make decisions and what level of risk we want to carry and what kind of expansion we want to have. So, I get offered opportunities every day, and I’m now saying: ‘Actually we’re going to wait on this and this until we’ve done that and that’. Whereas in the old days it would have been: ‘We’re going to have it all, otherwise we’re going to miss out’. So the memories of 2008 are my restraining voice, and I like that voice. It doesn’t harm my enthusiasm to do anything, but it’s on my decision making.” GuestInvest was highly geared with debt from HBOS, which also had a stake in the business, and when values plummeted, the business collapsed. But Sandelson maintains that GuestInvest was at its core a sound concept. “The truth is, it was brilliant. People were buying hotel rooms and they were getting a good return. The value of London hotels and the average room rate have only gone up since. The occupancy has been maintained. The areas I was investing in, Paddington and Notting Hill, have carried on growing,” he says. Later life living Sandelson was rescued from the collapse of GuestInvest by an old school friend from Brunei, Shuif Hussain, chairman of their SIAHAF business. Hussain and subsequently another South African friend and former banker began backing Sandelson on a new set of deals. It is the South African money that has backed the purchase of King’s Gardens. Sandelson is laid back about the future of the site, unlike his more hesitant competitors. “All I know is that it’s the most phenomenal piece of property in the middle of Kensington. I trust that there are enough smart, creative architects, who can articulate that into a profitable development opportunity,” says Sandelson. And that development opportunity may well include Sandelson’s high-end later living company, Auriens. Auriens, says Sandelson, will operate in prime central London locations and offer the well-off elderly the opportunity to buy a flat and pay a service charge for care. The first Auriens development is a 55-flat scheme on Dovehouse Green by the King’s Road, SW3. “We’re designing beautiful buildings with beautiful apartments where elderly people can be cared for and looked after in comfort, and on the ground floor and the lower floors have all the things you’d want to have in a community like restaurants and bars and spas and hairdressers,” he says. “You’re trying to encourage people out of a family house which doesn’t work into an apartment which does work, which is so comfortable it makes the grandchildren desperate to visit.” Persistence pays off Inspired by his stockbroker father, he is strikingly bold in his attitude and believes you have to get ahead of sentiment. He says that this boldness, combined with a persistence that extends as far as sitting in car parks for weeks on end, is what puts him ahead of rivals. The 2013 purchase of Queensway shopping centre Whiteleys, W2, and the surrounding Queensway estate is a case in point. Sandelson managed to convince Scottish-headquartered Standard Life to sell him Whiteleys ahead of a tide of interested parties before a process really got going. He underwrote the deal with his Brunei backer, and then brought in Meyer Bergman to fund the deal when he was in a position of control – a process from which he is rumoured to have made a considerable profit. “Whiteleys was extraordinary,” he recalls of the project he still has a minority interest in. “The guy had a filing cabinet of people who had tried to buy it from him in the past. Other people write a letter, and then they say, ‘We’ve written a letter, and no-one’s written back. Ok, well we wrote a letter’. I call him up, and then I go and see him, and I say: ‘Just give me a spare five minutes’. It’s persistence.” Sandelson adds: “The other thing I’m prepared to do is set my own market and decide what I think the value is. Other people think I’ll bid this because then I know that I’m in the mix, and you don’t lose your job if you’re in the mix. “If I think there’s a red book valuation of £100m, I’ll offer 10% or 20% more because I think it is worth it. By doing that, he can then go to his people and say, ‘We’ve got some guy, he seems to usually perform; he’s offering more than we think it’s worth, and it’s very discreet, shall we do it?” With the current state of flux in London, Sandelson is expecting that is a question that will be being asked more and more in the coming months. And with the dealmaker’s unfaltering confidence and powers of persistence, you can bet plenty will be saying yes. Sandelson’s most notorious deals 2003-2008 – GuestInvest Builds up £250m buy-to-let hotel investment company with funding from HBOS. Company falls into administration following financial crisis. 2013 – Jericho Wharf, Oxford Buys derelict but historically sensitive boatyard to redevelop into £20m scheme including townhouses, community centre and new square. 2013-2014 – Whiteleys and Queensway estate, W2 Secures control of £100m west London shopping centre from Standard Life with Brunei backing before bringing in funder Meyer Bergman. 2015 – Tesco sites Assists Meyer Bergman in £250m deal for 14 housebuilding sites. 2015 – Thomas Goode store, W1 Buys 17-22 South Audley Street, W1, for £80m and brings in funder Cain Hoy, which is planning a 50,000 sq ft retail and leisure redevelopment. 2017 – King’s Gardens, W8 Three-acre site bought for £110m from Jesuits in Britain for a mixed-use redevelopment. • To send feedback, e-mail david.hatcher@egi.co.uk or tweet @hatcherdavid or @estatesgazette