Grosvenor Group Limited (‘Grosvenor Group’), the privately-owned international property group, recorded a total return of 8% in 2016 (2015: 9%). Revenue profit was £79.2m (2015: £83.3m).
Both measures were down on the previous year, but still higher than predicted due to Sterling’s depreciation and a strong performance from Grosvenor Americas, Grosvenor Asia Pacific and Indirect Investment.
Mark Preston, Chief Executive of Grosvenor Group, said:
“With just under half of our assets outside the UK, our long-standing strategy of international diversification has yet again helped to deliver solid returns of 8%.
“Strong performance from Indirect Investment and our operating companies in North America and Asia, significantly boosted in Sterling terms by its depreciation against other currencies, offset cooling market conditions in London.
“Investor and occupier unease before and after the UK’s EU referendum, and the imposition of higher stamp duty on purchases, greatly contributed to a slowdown in the London residential market which we anticipated and planned for.
“Looking ahead, we expect our returns in 2017 to be significantly weaker due to limited room for market value appreciation and a reduction in revenue profit following some well-timed disposals. The proceeds of these sales will be re-invested into our £6bn pipeline of projects to be delivered in several years’ time, resulting in a recovery in returns.
“We will continue with our long-term approach of investing in vibrant commercial and residential projects with the aim of delivering both good returns and making a lasting positive impact on their communities”
At the end of 2016, total assets under management across Grosvenor Group were £12.7bn (2015: £13.1bn). Of that, Grosvenor Group’s property ownership totalled £6.6bn compared with £6.7bn in the previous year. Shareholders’ funds increased from £4.4bn in 2015 to £4.8bn.
Grosvenor Group’s development pipeline stood at £6bn at the end of 2016 and economic gearing reduced to 16.9% (2015: 27%). Grosvenor Group has unused committed financial capacity of £1.7bn (2015: £0.9bn) to support future investment and development activity, as well as to provide liquidity in readiness for new opportunities in the event of any market downturn. Development exposure, which is the level of committed development activity as a proportion of total property commitments, stood at 15.7% (2015: 10.8%).
Operational highlights include:
- Indirect Investment had another very good year, generating a total return of 12.7% (2015: 10.0%). Its strategy of taking advantage of opportunities in markets or sectors that are undergoing cyclical change continues to pay off, helping the Indirect Investment portfolio grow to over £600m. Highlights included the agreement of a third partnership with Australian real estate company Propertylink to invest in secondary offices in North Sydney, and an exit from the first investment with Propertylink, which delivered a significant return (27% per annum IRR). The largest investment, in international property group and retail specialist Sonae Sierra, continued to do well. Our investment has delivered an average net return on equity of 8% per annum since this was first made in 1996.
- Grosvenor Britain & Ireland’s total return declined to 0.3% (2015: 10.7%) following six successive years of returns above 10%. This was due to a fall in market values in its investment portfolio, offsetting the value created through its development and asset management programme, reversionary gain and income returns. In 2016 it focused on a programme of strategic sales, recycling capital in readiness for new market opportunities and to fund its development pipeline, and on a rolling three-year improvement programme to grow income and strengthen the long-term resilience of its assets. Planning approval was achieved in key locations in London to deliver new retail, leisure and community spaces, a creative hub for entrepreneurs and independent retailers, and a hotel. The Barton Park joint venture with Oxford City Council to create a 26-hectare garden suburb and the Trumpington Meadows 24-hectare, 1,200 homes neighbourhood development in Cambridge remain on track. Grosvenor Britain & Ireland’s ambitions to create and manage a new urban neighbourhood in Bermondsey made substantial progress to allow planning proposals to be submitted later this year. 2017 has already seen the unveiling of a 20-year Vision to make Mayfair & Belgravia more active, more open and more integrated.
- Grosvenor Americas performed well, with a total return of 6.4% (2015: 8.4%). Developments in all of its primary markets progressed well and it co-invested with developers in Vancouver, San Francisco, Los Angeles and Washington DC. It began construction on two mixed-use developments, completed construction on one residential tower, acquired three office and retail investment properties and sold five investment properties. Grosvenor Americas also gained planning permission for two new residential developments in San Francisco. A key strategic shift has been to ensure that the portfolio is located in central areas: all of GA’s developments are within 15 minutes’ walk of public transport.
- Grosvenor Asia Pacific had a good year, with a total return of 6.3% (2015: 6.6%). Over the course of 2016 it sold Parkside Plaza, Shanghai, having transformed it into a premier family entertainment and leisure destination. It agreed a new development partnership, the Grosvenor Hong Kong Value Partnership, which completed Grosvenor’s first ever retail investment in Hong Kong. It also launched residential sales at The Westminster Nanpeidai, Tokyo, disposed of China Merchants Tower, Beijing and hosted its inaugural Neighbourhood Series event entitled Hong Kong Neighbourhoods: a ‘Living cities’ Perspective.
- Grosvenor Europe completed its transition from Grosvenor Fund Management to Grosvenor Europe, which will invest its own capital in six target cities, and continue to work in partnership with existing and new third party investors. It invested €70m into a €140m joint venture for residential development in Madrid and achieved five GRESB Green Stars, including a corporate ranking 13 points above industry benchmarks. It also continued to drive improvements on value growth in its existing portfolio, from a 47,000 sqm renovation project in its Skarholmen shopping centre in Stockholm, through to Liverpool ONE, which welcomed the centre’s 200 millionth visitor in March 2016.
You can read our Annual Review, Financial Statements and Financial Data Report for 2016 here.
About Grosvenor Group
Grosvenor Group is one of the world’s largest privately-owned property businesses. We develop and manage property, and invest in property-related businesses in more than 60 cities globally.
We aim to diversify our property portfolio by geography, sector, activity, currency and management teams through our four regional Operating Companies and our Indirect Investment business.
Grosvenor Britain & Ireland, Grosvenor Americas, Grosvenor Asia Pacific and Grosvenor Europe operate in a devolved structure model, each being responsible for its own property strategy founded on local experience and assessment of market opportunities.
Grosvenor Group’s Indirect Investment business is tasked with further diversifying Grosvenor’s property related interests beyond the expertise and strategies of our four regional Operating Companies. It invests Grosvenor’s capital in Africa, Australia, Europe, South America and the USA.
We create, invest in and manage properties and places applying rigorous financial discipline to achieve commercial success. But we do so with the aim of making a lasting contribution, today and for future generations, to the economic, social and environmental wellbeing of the urban communities we are part of and on which our own success is dependent. It is what we call our Living cities philosophy, which guides our activities to help foster thriving places which reflect the spirit of individual cities, ultimately contributing to their enduring success.
Part of the Grosvenor Estate
We are one of three constituent parts of the Grosvenor Estate which encompasses all the activities of the Grosvenor family. The others are:
- Wheatsheaf Group Limited, which operates and invests in companies in the food and agri‑business sectors that contribute long-term solutions to meet the food production demands of a changing global population; and
- the Family Investment Office, which manages the Grosvenor family’s other interests including securities investments, rural estates in the UK and Spain, The Westminster Foundation, a fine art collection and a family archive.
Grosvenor Group’s Shareholders are the Trustees of the Grosvenor Estate. They hold the shares in the business for the benefit of current and future members of the Grosvenor family.