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Friends in high places

Friends in high places 2007-11-01 Staff Writer A giant residential complex now involved in a real estate controversy was home to a far more scintillating controversy. Dolphin Square in Pimlico near the Thames River in London is a great hulking mass of a building. It was built between 1935 and 1937 by a Briti

A giant residential complex now involved in a real estate controversy was home to a far more scintillating controversy. Dolphin Square in Pimlico near the Thames River in London is a great hulking mass of a building. It was built between 1935 and 1937 by a British construction firm called Richard Costain and comprises 1,250 flats just a short walk away from the British Parliament.

At the time of construction, it was described as Europe's largest self-contained block of flats. Unlike many of the sprawling high-rise estates in other European cities, Dolphin Square became home to some of the most affluent and indeed “poshest” tenants imaginable. High court judges, members of Parliament and civil servants in high-up places moved into the apartments, paying rents, considerably below market levels.

Dolphin Square's arguably most famous resident was Christine Keeler, a woman euphemistically called a show girl and model who at the height of the Cold War caused a political storm in 1960s swinging London. It turned out Keeler, a high-class call girl, was sleeping with War Minister John Profumo, who was already married to an actress. But infidelity was not the reason for the scandal (this was the Sixties after all). It was the unfortunate fact that Keeler was also sleeping with Soviet Commander Yevgeny Ivanov, a Russian spy, and that Profumo lied to the House of Commons about his relationship with her.

The James Bond–style plot, which was later dramatized into a film called The Scandal and even a musical, forced the cabinet minister to resign and also deeply discredited the Conservative government led by Prime Minister Harold McMillan. We do not know whether Profumo ever visited Keeler in her Dolphin Square apartment.

In addition to famous and infamous tenants, Dolphin Square has also had some prominent owners. The freehold has always belonged to UK insurance institution Friends Provident, but the leasehold interest, which expires in 2033, has been passed around. Sir Maxwell Joseph, a hotelier and property dealer born in 1910, acquired it in 1958. Joseph holds a special place in the history of UK real estate: one of his interests, Union Property Holdings, eventually became British Land under different ownership, which today is one of the largest listed property companies in the UK.

When Joseph acquired Dolphin Square, he paid the princely sum of £2.4 million (€3.4 million; $4.9 million), which nowadays would buy no more than just a couple of two-bedroom apartments in the area. He later sold it to Litang Investments, before Westminster Council came to own the lease. The Council, along with Dolphin Square Trust, eventually sold it to US private equity firm Westbrook Capital Partners for around £300million. But that is not the end of the story.

Today the property is engulfed in controversy following attempts from Westbrook to force freehold owner Friends Provident to sell up. In April of this year, Westbrook set up 625 Jersey-domiciled companies, each of which owns two of the flats. The idea is to exploit UK legislation designed to allow individual owners of leasehold interests in a block to club together in order to buy out a freehold, provided two-thirds of the properties in question are held on leases of more than 21 years (which they appear to be at Dolphin Square); 50 percent of the owners vote for the move; and noone involved in the motion owns more than two apartments.

Naturally, Friends Provident are resisting Westbrook, questioning whether the law was meant to be used by a financial investor in this way.

The matter is yet to be resolved. Unlike the Profumo affair, it is unlikely to spell the end to the British Government. It will, however, test its law.