• Revenue profit £80.8m versus £64.2m
• Total return 9.0% versus 10.9%
• Pretax profit £315.0m versus £394.8m
Grosvenor, the privately-owned international property group, reported higher revenue profit and a stronger balance sheet in 2011. Total return was 9.0% compared with 10.9% the previous year.
The 26% rise in revenue profit to £80.8m reflected underlying improvements in the business due to increased efficiency, higher rental income and improved trading profits. Pretax profit, which includes property revaluation gains and losses, was lower due to falls in values, notably of retail properties in Europe. Shareholders’ funds rose from £2.65bn to £2.86bn.
Mark Preston, Group Chief Executive, said: “The increase in revenue profit, which is the best measure of underlying performance, rewards the efforts of our staff and the judgements they have made over the past year, particularly in our core London estate.
“We are now beginning to see the benefits of the extensive reshaping of the Group over the past few years. This has involved redefining our strategic aims, making consequential changes to our structure and implementing a rigorous drive to improve operational efficiency. Together with our strong balance sheet, we are in a good position for the future.
“The outlook is far from certain and we expect the coming decade in the global property market to be tough, but we are confident that we will find opportunities which meet our returns and diversification objectives. With this in mind we are investing judiciously in proprietary development activity and have allocated additional capital to our Asian proprietary business; we are pursuing vigorously our new strategy for indirect investment; and we are investing in expanding Grosvenor Fund Management, which launched four new investment vehicles in 2011 under its new management team.”
During 2011 Grosvenor continued the reinvestment which began in 2010, after four years of declining development exposure. At the year end, development exposure stood at 15.7% compared with 13.8% a year earlier: the Group’s managed development pipeline of opportunities at year end was around £3.2bn of which £1.2bn was committed during 2011. Over the year, Grosvenor Fund Management invested £762m and launched new investment vehicles in the UK, Continental Europe and the US.
Despite significant investment, Grosvenor’s financial capacity (cash and undrawn facilities) has been maintained (£855m, compared to £829m in 2010).
Operating Company and indirect investment highlights
Grosvenor Britain & Ireland (‘GBI’)
Grosvenor Britain & Ireland (GBI) significantly improved its performance as a result of the ‘Fast Forward’ programme to improve the management of the London estate. Revenue profit more than doubled from £8.0m to £16.4m and total return was 16.2% compared with 15.5% the previous year. With 90% of its capital invested in the London estate, GBI benefited from the strength of high-end residential property in London. However, 5.7% of total return was due to value-added measures we took, as opposed to market growth. On the development side, GBI increased its development pipeline reflected in an increased development ratio of 25.5%, compared to 18.2%. The highlight of the year was the completion of 15 luxury apartments in Belgravia, at 3-10 Grosvenor Crescent. GBI also started constructing a luxury hotel in Balderton Street in Mayfair. It raised £125m in the bond markets with a US private placement last year at a very competitive rate. It remains confident about the future and believes London will remain attractive as place to live and as a destination for visitors.
2011 was a year of consolidation at Grosvenor Americas (GA) and financial performance was stable. Revenue profit increased from C$12.1m to C$20.3m and total returns were 8.9% compared with 8.4% in 2010. The strategy is to focus on urban centres with potential for growth and in the long-term GA intends to have 20% of its capital in development activity and 80% in income-producing investments. Over the year GA made six new development and investment acquisitions and its development exposure increased slightly from 7% to 10.5%.
Grosvenor Asia Pacific
Grosvenor Asia Pacific (GAP) performed strongly with a 67% increase in revenue profit to HK$154.8m and a higher total return of 8.0% compared with 4.5% the previous year. Assets under management increased from HK$5.6bn to HK$7.6bn. One of the most significant events of the year was the acquisition of Roppongi Arents in Tokyo, the first deal in GAP’s joint venture with a sovereign wealth fund and two private Hong Kong investors to develop high-end residential property around the Pacific Rim. GAP believes this is an appropriate moment in the cycle to be investing again in Tokyo and that the medium-term prospects for China and Hong Kong are good. GAP now accounts for 7.2% of Group capital compared with 6.8% a year ago, in line with a key element of the Group’s strategy.
Grosvenor’s indirect investments, which account for just over one-quarter of Group equity, produced a revenue profit of £59.1m, up from £46.4m the previous year, but total return was 3.0%, down from 6.5% in 2010. Indirect investment comprises mainly investments in Grosvenor Fund Management funds (62%) and the international shopping centre business, Sonae Sierra (38%). 2011 was the first year in which responsibility for this indirect portfolio was held centrally. The lower total return reflected the challenging conditions, particularly for investors in retail in the UK and Southern Europe. In 2012 Grosvenor will be looking for new opportunities to diversify both through Grosvenor Fund Management vehicles and other specialist third-party managers.
Grosvenor Fund Management
Funds under management grew from £3.8bn to £5.0bn during 2011 as Grosvenor Fund Management (GFM) launched four new investment vehicles in the UK, Continental Europe and the US, including a Shariah-compliant partnership with the Kuwait Finance House to invest in US healthcare facilities. For the second time in three years GFM won the IPD award for UK Property Investment House of the Year. The revenue loss of £1.6m, compared with a £12.5m profit in 2010, reflected lower performance fees and significant investment in developing the business. Jeffrey Weingarten took over as Chief Executive of GFM in March 2011 and there is new senior management in place in the UK, US, Continental Europe and Asia Pacific. Since year end, GFM has also opened a new office in Stockholm.
For more information contact:
Naomi Curtis/Sorrel Basher, Press Office
020 7312 6479/6101