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The Earl of Cadogan’s property company, which owns almost 100 acres of London’s Chelsea, is making a push into running hotels as it seeks higher returns and more control over hospitality in the high-end neighbourhood.
The £5.4bn estate now operates five hotels with various partners, having added two new properties to the portfolio over the past year.
Hotels have enjoyed a post-pandemic boost, making them one of the few areas of strength in the wider commercial property market and prompting a spate of dealmaking.
For Cadogan Estates, the investments form part of a strategy to boost its returns by taking on riskier business ventures beyond its traditional role as a landlord.
“The strategy on hotels is to take operational risk,” said Hugh Seaborn, the estate’s chief executive. He said the new approach was “very different to renting something out and letting someone else take the risk and the benefit”.
Playing a bigger role in operating the hotels would also give the estate more control over the mix of accommodation, restaurants and bars in the neighbourhood, Seaborn added.
The move by Cadogan is the latest by large London-based estates to push into new ventures to boost returns. The Duke of Westminster’s Grosvenor estate in Mayfair and Belgravia has invested in operating more flexible workspaces and has also launched a new lending strategy.
Cadogan’s latest hotel opening, in September last year, is At Sloane — a 30-bedroom, five-star hotel operated with French hotelier Jean-Louis Costes. The estate this year completed the refurbishment of the former Draycott Hotel, which it bought and rebranded The Chelsea Townhouse.
The new properties add to an existing portfolio that includes The Cadogan Hotel — best known as the scene of the arrest of Oscar Wilde — which reopened in 2019 after a big refit. The estate traces its history back over 300 years to Sir Hans Sloane.
Cadogan reported on Wednesday that its operating profit, before capital items, increased 22 per cent to £120mn in 2023. The value of its properties increased 3 per cent, up from £5.1bn, adjusted for sales, purchases and capital expenditure.
Its retail portfolio, which makes up the largest share of its holdings at 46 per cent, had its first full year of recovery from the Covid-19 pandemic. Retailers on the estate reported footfall and turnover were about 10 per cent above 2019 levels. Cadogan booked a 10 per cent increase in gross rental income from retail, rising to a record £96mn.
Seaborn said the estate was seeing the benefit of financial support it extended to its tenants during the pandemic, including only charging restaurants rent based on their turnover, which helped those businesses bounce back.
Cadogan also worked with the borough of Kensington and Chelsea — the UK’s wealthiest — to add 1,000 tables and chairs in the neighbourhood, which it has maintained. Seaborn said the changes had created “a much more alfresco atmosphere in Chelsea”.
