Grosvenor invests indirectly in property in two ways. We currently have co-investments in 23 investments vehicles managed by Grosvenor Fund Management - five in the UK, four in the US, six in Continental Europe, six in Asia Pacific and two international funds. We also have indirect investments in property, managed by third parties. Our largest indirect investment is our shareholding in Sonae Sierra, a shopping centre specialist whose sector focus and geographical reach complements our own. We first invested in Sonae Sierra in 1996 and since then have twice increased that holding: we now control 50% of the company.
Our indirect portfolio is managed centrally by a small team in the Grosvenor Holding Company, led by Chris Taite, Group Investment Director, based in our London office.
The Group's objective, through indirect investments in property, is to diversify its property portfolio further and achieve strong risk-adjusted returns by exposure to sectors, countries, investment types and management teams which its direct property investments do not provide. We achieve this by investing in funds, clubs and other investment vehicles run by Grosvenor Fund Management, and by investing with specialist third-parties.
INVESTING THROUGH GROSVENOR FUND MANAGEMENT
We took the important strategic decision to establish a separate investment vehicle for global real estate equities. This global real estate equity fund commenced trading in October 2012 and has made a very promising start.
We also made a strategic investment in a new Swedish shopping centre with the existing investors in the Grosvenor European Retail Partnership; a committment to invest in core real estate in the USA; and are looking forward to the possibilities offered by Grosvenor Fund Management's joing venture with Harvest Fund Management for funds in Greater China.
In total these fund and club investments amount to £286m of equity which delivered a total return of 1.0% in 2012, reflecting the difficult investment conditions in UK retail markets on the one hand, compensated by strong returns in our office investments on the other.
The Group is also a client of Grosvenor Fund Management in respect of separate accounts totalling £187m of equity for assets in Australia and in Continental Europe. The Australian investments are by far the largest part of this portfolio, and delivered a total retun of 15.3% in 2012.
INVESTING THROUGH SONAE SIERRA
Our investment in this very experienced retail developer and manger remains an important contributor to our overall diversification strategy. Given the high quality and dominance of the shopping centres in its portfolio in Continental Europe, we believe it will continue to perform relatively well despite the ongoing challenges in the consumer economies of these countries, while its exposure in Brazil is becoming increasingly important.
Sonae Sierra performed well given the travails of the economy in its heartland of southern Europe. Occupancy held up and revenue profits before trading losses remained at 2011 levels. Returns were impacted, however, by valuation falls and trading provisions, resulting in a total return for the year of 0.5%. It opened its two new shopping centres - in Italy (Le Terrazze in La Spezia in March, a 50/50 joint venture with ING Real Estate) and Brazil (Uberlandia Shopping). It delivered strong growth in management services to third-parties - with 27 new contracts including seven instructions in Algeria for the first time, through Sierra Cevital, jointly-owned with an Algerian group, and nine further instructions in Morocco, for the new EMEA Sierra Services division. It also continued its policy of recycling capital, with four sales during the year (Shopping Penha, Tivoli Shopping and Patio Brasil Shopping in Brazil, and Munster Arkaden in Germany) and three projects now at advanced stages of construction (Boulevard Londrina Shopping and Passeio das Aguas in Brazil and Hofgarten Solingen in Germany).
NEW INVESTMENTS IN PROPERTY OR PROPERTY-RELATED COMPANIES
In April 2012 we made our first new investment in a third-party manager with the creation of io Investment LLP, managed by io Asset Management, which is buying multi-tenanted industrial estates and small business parks throughout the UK. It has an initial £35m to invest and at year end it had already made three investments totalling £9.7m.
In Novemeber we complemented this with an investment in a third party US east coast industrial and logistics fund, High Street Realty Fund IV. This fund focuses on existing industrial and logistics properties in the eastern half of the USA, investing in assets with recurring income and strong current cash yields.