Rugby plans Covent Garden push

A BRITISH property company and a Dutch financial services giant are planning a £500m shake-up of Covent Garden with the help of Middle East money.

Rugby Estates and ING are quadrupling their Covent Garden Limited Partnership fund, now valued at £117m, to buy up large swathes of the 100-acre district. The area attracts thousands to its shops, restaurants and bar and is home to numerous media-related companies.

The fund would be ING's biggest British property fund, dwarfing its £300m Lionbrook Property Partnership which invests UK-wide.

To begin with Rugby and ING are targeting roads leading down to the Strand from the central piazza. This 'Southern Gateway' includes Bedford Street and Southampton Street.

The fund already owns the Pret a Manger and TGI Friday's properties on Bedford Street and Dixons in the Strand.

The Covent Garden investment will involve a considerable bet on the revival of a central London office market, with properties split roughly 60-40 in terms of space between office and retail.

Rugby chairman David Tye believes many properties on streets leading off the central plaza would benefit from a widening of their ground floor shop front fascias, making them a similar size to the Marks & Spencer store on Long Acre.

Tye and Rugby chief executive Andrew Wilson have singled out the growing number of wealthy foreign individuals, particularly from the Middle East, who want to invest in London office and retail property.

Nick Cooper, UK managing director of ING Real Estate Investment Management, who is in detailed discussions with many foreign investors, said: 'Covent Garden is a real village and the local office market-benefits from not being overexposed to the financial sector.'

UK property pundits claim many Gulf investors are pulling out of America due to the US government's general distrust of so-called 'Arab money' in the wake of 9/11 and are looking instead to London.

Tye expects to raise a further £125m for the Covent Garden fund, in which Rugby has a 9% stake, by the end of the year. Another £125m will follow shortly afterwards, 'depending how quickly we find a home for the money', Tye said. ING already has around £50m of its assets in the fund.

Rugby and ING's faith in Covent Garden echoes moves by other listed property companies including Shaftsbury and Derwent Valley, which opened their new Davidson building on Southampton Street this summer with Sainsbury's on the ground floor.

Derwent chief John Burns says West End office rents are stabilising, after three years of falls.