During the autumn of 1996, we decided to jump back in to the market with both feet, purchasing five apartments in the Docklands. This included three one-bedroom units in the Atlantic Wharf development in Limehouse, which was the first time we had ever bought off plan. We also purchased two completed apartments in the Ringwood Gardens development, overlooking Millwall Dock on the Isle of Dogs.
We thought this was a good blend of investments and risk. We only needed to exchange contracts with a 5% deposit for the off plan purchases, and the other two units totalled less than £130,000 but gave a yield of nearly 15%.
By the time the Ringwood Gardens apartments completed we had already sold two of the three off-plan apartments for a healthy profit. These funds were rolled into the purchase of three more off-plan units in Arnhem Wharf on the Isle of Dogs, overlooking the River Thames. Two of these units were also sold prior to completion, generating further investment capital.
By the end of 1997, we had enough capital from sales and rental income to reserve a block of 11 flats in The Boardwalk. This was the real catalyst for the growth of the investment portfolio. Although the purchase price of £180 per square foot seems extremely low today, that figure was over the market level in 1998. A number of agents doubted us – they just couldn’t see how we could make a profit. But by the start of 1999 when the properties completed, the values were more than 40% higher, which meant we could obtain mortgage funding for 110% of the purchase price. This release of capital funded the purchase of more off-plan properties in the Docklands.
The availability of high gearing from the banks and the growth in prices led to all of our new acquisitions being rented rather than sold. By the end of 1999, Knight Frank Residential issued a letter stating we were the largest private residential investors in the Canary Wharf area. This was based on a portfolio of nearly 80 flats with over £2,000,000 in equity, grown from 3 flats which had less than £50,000 equity in 1996.