Seaforth’s Tyler Goodwin: Beta, Brutalism and big ideas

Tyler Goodwin has yet to see The Brutalist when we meet. But the trailer for the new movie, which stars Adrien Brody as a fictional architect, has already convinced the chief executive of developer Seaforth Land that his theory is correct: “Mid-century architecture is going through a renaissance.” It’s fitting then that Goodwin meets Estates Gazette in Covent Garden’s Space House. Seaforth and QuadReal bought the 1960s Brutalist building for £165m in 2018. Now, following an extensive renovation, the company is lining up the first office leases. The building feels modern, but also steeped in history: a clock in the lobby has the date set correctly as 20 January, but for 1968; John Coltrane’s Blue Train is playing on a turntable on the reception desk. At an opening party for the building late last year, Goodwin told his team of the project: “You get one of these in your life. This is ours.” Sitting in the reception now, he still seems smitten by the result of years of hard work. Taking visitors on tours is a highlight of any day. “I’ve been in real estate for 35 years and I’ve worked on some exciting schemes,” he says. “To have developed a building with this level of detail and this level of passion and this level of innovation, and have it turn out as it has – that’s pretty fucking awesome.” And the reaction from industry peers to the building – first designed by Richard Seifert & Partners, with the renovation overseen by Squire & Partners – has surprised even Goodwin. “Often architects are really mean to one another,” he says with a laugh. “Behind their backs they walk around, shake their heads and say ‘I wouldn’t have done it this way’. This has got the support of people who really matter.” Smart thinking Goodwin is a former member of the real estate and real asset teams at Deutsche Bank and JP Morgan, who moved to London to establish a UK business for Indian developer Lodha. He set up Seaforth in 2015. As well as Space House – Goodwin has reverted to its original name, although it was known as the Civil Aviation Authority House while that tenant was in place – the company’s projects have included 8 Bleeding Heart Yard at Farringdon’s 20-23 Greville Street, EC1. That building was sold to a Spanish private family office for roughly £52m in 2023. It also teamed up with private equity firm BC Partners to pick up Wingate House in Soho, W1. Goodwin speaks of these and other buildings with great affection. He’s a student of architecture who is passionate about what a well-designed and thought-out building can do for the people inside it, as well as those who own it. But he also knows the numbers have to work. And at a tough time for many parts of the real estate market, he is apprehensive about what the year ahead holds. He heads into each year with what he calls his “big ideas” initiative. Having consumed “an insane amount of research”, Goodwin picks one trend to explore with his team. Past ideas have included sustainability, the post-Covid workplace, densification and net stock absorption in the capital. This year, Goodwin is thinking about change. “I don’t think I’ve ever seen a more disruptive period of time in my career, and I was in Indonesia during the Asian financial crisis, and New York during the dot bomb,” he says. “This is global disruption; geopolitical disruption; the wealth gap and social disruption; life sciences and biotech; demographic disruption; technology and the associated disruption of that; AI cannibalising technology jobs. And then you’ve got climate change.” Investors’ task now, the chief executive adds, is to consider carefully how these disruptive forces will affect real estate supply and demand across asset classes – especially if those investors are looking to allocate into core real estate. “Core real estate is, in our industry, ‘True North’ – what we set our compasses and investment strategies to,” Goodwin says. “Fifty to fifty-five percent of institutional capital around the world is invested in core and core-plus real estate, where most of your returns come from current income and a little bit from capital appreciation.” Core’s definition, which Goodwin rattles off as “long-term reliable cash flows with inflation-hedging characteristics and low correlation to fixed income and equities”, can sound “super boring”, he acknowledges, in the context of more adventurous strategies. But it’s crucial when thinking about institutional appetite for real estate, he adds. “They’re meeting their pension liabilities, or insurance liabilities, or sovereign wealth fund objectives of growing their nation’s wealth,” he says. “So when core real estate today faces this level of disruption, some scary things happen. Investors lose confidence in what core is offering you.” The problem, as Goodwin sees it, lies in beta, or the correlation between an asset’s risk and return and those of the wider market. “People buy core for beta. They go into open-ended funds with large portfolios of assets and now beta is broken,” he says. “Look at the queue of investors leaving core open-ended funds in the US and here. There’s sell-side pressure to leave these funds because people are nervous.” That opens an opportunity for what Godwin calls smart beta – “building up core exposure in assets that we can expect to be resilient over the next 10 years and beyond and taking advantage of the current pricing that reflects illiquidity in the market”. “How much of these buildings are actually smart beta – beta that is looking forward, not looking back?” he says. “Historically, you had OK investors buying OK buildings with the comfort that it’s in the fund, it’s doing what it needs to do, delivering diversified levels of returns. But some investors have been driving a car looking in the rear-view mirror and now we are paying a price for that.” Goodwin knows how he would be playing it if he had the chance. “Man, if I had £10bn, I would be building beta from scratch,” he says. “That’s what I would be doing. I would be building a smart beta portfolio. Looking forward, looking at the disruption, looking at all of these changes.” He adds: “If you were starting today with a pile of dry powder, what does smart beta look like? How do you get in front of these structural changes, these disruptive events and invest in assets that are going to be more resilient to the changes that are coming? That doesn’t mean an easy one [like] data centre development. OK, maybe. But [also] offices in well located, highly amenitised locations, best-in-class buildings.” Waiting game Investors’ focus now on opportunistic and value-add deals is “fine”, Goodwin says. “But fundamentals remind me that when institutional capitals that are lagging their targets significantly say, ‘We really need allocation to real estate’, they remember, ‘I actually need good beta. I need to buy good buildings. I want to buy into whatever sectors are going to benefit from this next cycle’. “On a demographic basis it might be senior housing. It might be health sciences. It might be data centres. I think investors that are investing in core will be rewarded far more than investors investing in value-add and opportunistic, on a risk-adjusted basis.” While investors piece together their own reactions to Goodwin’s “big ideas”, the Seaforth boss himself is wary about what 2025 looks set to bring to real estate markets. “The recovery is not going to be as fast as we think,” he says. “We’re past the bottom, But we’re bouncing around on the bottom now. There’s optimism, you can see light on the horizon and that is these big investors looking at buying big buildings. Liquidity will return. But I think it’s going to take another year to be properly functioning. In the meantime, if you think about the geopolitical risks, the inflationary pressures and our government’s challenges to generate economic growth, I think these all point to a cautionary year ahead.” We talk of potential projects that Goodwin is hopeful to pick up the pace on soon, and return to filling out Space House. Even though Goodwin knows you only get one of these, he can dream about the next. “I would love to do another one,” he says. “I think, honestly, given what’s going on with construction costs today, given what’s going on with financing costs and what’s happening with regards to planning policy… Who has appetite to push the button on another large-scale office scheme? It’s going to come when investors can clearly see that they are being rewarded with the level of returns that are [aligned] with the level of risk that you have to take.” In the wrong market, those risks are ever more pronounced. “Think about the risks that we went through [on Space House],” Goodwin adds. “Through Covid, through the [Ukraine] war, through supply chains breaking. We are fortunate. We bought it at a really good price and we locked in construction costs prior to the world blowing up. To do this building again, just the construction costs would be 35% more. I can’t make the numbers work. How many years is it going to take for the right building to come up and pay me the levels of returns that I need to take? That’s beta. You have to wait for beta to recover.” Images © Gareth Gardner