Strong international performance

Grosvenor Group, the privately-owned international property group, recorded a total return of 13.1% in 2014, its highest since the start of the financial crisis. 

28th April 2015

  • Total return rises to 13.1%, Grosvenor’s highest since the start of the financial crisis
  • Strong performance across all regions delivers revenue profit of £80.1m
  • Grosvenor well positioned for the future with £5.5bn development pipeline and economic gearing down to 23%
  • Diversification strategy continues, with significant new investment activity in Australia and Sweden
  • New CEO appointed for Grosvenor Asia Pacific to lead further growth in the region

Grosvenor Group, the privately-owned international property group, recorded a total return of 13.1% in 2014, its highest since the start of the financial crisis. The measure, which includes the impact of revaluation and foreign exchange, was up on the previous year driven by strong market performances and active management across all operating companies.

Revenue profit was £80.1m. This figure, which excludes the impact of property revaluation, continues the upward trend of the past decade, excluding the exceptional spike in performance in 2013. Grosvenor’s 10-year compound annual growth rate (CAGR) of revenue profit stood at 7.7% in 2014.  Profit before tax reached a record high of £681.8m in 2014 against £506.9m in 2013.

Operational highlights include:

Grosvenor Americas successfully completed and sold all 39 of its residences at 1645 Pacific Avenue, Grosvenor’s first residential development in the San Francisco Bay Area.  It acquired three residential development sites during the year - near Jackson Square and on Nob Hill in San Francisco, and in downtown Vancouver; and it acquired an existing apartment building in Fairfax, Virginia.  It is also undertaking one of its most significant developments in North America – Grosvenor Ambleside - which aims to rejuvenate West Vancouver’s historic Ambleside Village through a mix of residential, retail and public realm.

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Grosvenor Asia Pacific achieved record sales prices for a residential refurbishment project in Tokyo at The Westminster Roppongi.  It formed its newest development partnership vehicle in Asia and committed to the partnership’s first acquisition - of Forest Nanpeidai in Tokyo.  It also commenced foundation work at the site of Monterey Court in Hong Kong, a project which is due to be completed in 2017.

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Grosvenor Britain & Ireland continued its programme of place-making investment in its London estate, increasing net rental income by £12.7m as new projects came on line. In addition to 2,900 sq m of new office and retail space, it also opened the new five-star art-deco Beaumont Hotel, containing ‘ROOM’ – a unique habitable sculpture by Sir Antony Gormley. It accelerated its place-making activity in North Mayfair by completing public realm works in North Audley Street and Duke Street. Outside London, it continued work as master developer for a new neighbourhood at Barton Park in Oxford: in 2014 it made its first land sale there, committed to infrastructure investment and received Oxford City Council’s commitment to buy all affordable housing in the development.

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Indirect Investment successfully re-entered the Australian market and doubled its total equity commitment to Propertylink’s Australian industrial investment programme, including the development of warehouse facilities for the new Melbourne Market.  It also completed the first phase of its £30m UK industrial investment programme with IO Asset Management.  Sonae Sierra improved its total return, confirmed its first development in Morocco and announced a joint venture to develop a designer outlet in Southern Spain.

Grosvenor Fund Management (‘GFM’) deepened its focus in Europe with a new partnership to invest in European retail property and the acquisitions of Skärholmen Centrum, the 4th largest shopping centre in Sweden, the other 50% of 10 Grosvenor Street in London, and the purchase of La Visitation shopping centre in Rennes on behalf of a new investor.  Overall GFM’s European funds outperformed the INREV European All Funds benchmark.

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Total assets under management across the Group were £11.4bn. Of that, Grosvenor’s property ownership totalled £6.0bn compared with £5.5bn in the previous year. Shareholders’ funds increased 14.8% to £4.0bn in 2014, from £3.5bn in 2013.

Grosvenor’s development pipeline stood at £5.5bn at the end of 2014, while economic gearing reduced to 23.0%. Grosvenor has unused committed financial capacity of £1.1bn to allow for future investment and development activity, as well as to provide a cushion against the impact of any market downturn.  Development exposure, which is the level of committed development activity as a proportion of total property commitments, reduced to 12.3% in 2014. This measure is expected to increase over the coming years.

Mark Preston, Chief Executive of Grosvenor Group, said:
“2014 saw strong returns across all regions.  Having made significant disposals in 2013 to take advantage of high market values in the London residential sector, we’re now able to focus on investment through our £5.5bn international development pipeline.

“In terms of our markets and their prospects, China is already slowing, the USA and UK are mid-cycle and Continental European markets are still in early recovery, as is Japan.  This lack of correlation means that we can be selective in pursuit of our long-term objective to diversify our investments by geography, asset type and management team.

"This process of diversification began more than 60 years ago with our first North American investment and, with £1.1bn of unused financial capacity, we continue to pursue that objective today.  In terms of performance, we anticipate lower total returns over the next few years in keeping with general expectations of our markets, which are around 8%.”

We took further steps in 2014 in pursuit of our ‘Living cities’ philosophy which underpins our strategy.  Part of this requires the responsible use of resources: like-for-like consumption of energy decreased by 7% and of water by 5% over the year, and 119 Ebury Street in London was the first ‘listed building’ to achieve a BREEAM ‘outstanding’ rating.

There were several key senior appointments around the Group.  At an executive level, Benjamin Cha was appointed Chief Executive of Grosvenor Asia Pacific, in a year in which we celebrated 20 years of operations in Asia, succeeding Nick Loup on 1 April 2015.  Joining the Grosvenor Group Board as Non-Executive Directors were Sir Philip Dilley, the former Global Chairman of Arup, and Christopher Pratt, previously Chairman of Swire Group in Hong Kong.

Read more in the annual review and visit our performance pages.
 

ENDS

For more information contact:
Europe: Sorrel Basher, Media Relations Manager, Grosvenor
44 (0) 207 312 6101 / 07919 321 422 / sorrel.basher@grosvenor.com

Americas: Julie Chase, Chase Communications
001 (202) 997 8677 / jchase@chasepr.com

Asia Pacific: Clara Shek, Ogilvy
00 852 2884 8574 / clara.shek@ogilvy.com
 

Notes to Editors

Grosvenor Group Limited (Grosvenor) is a privately-owned property group with offices in 17 of the world's most dynamic cities. We have regional investment & development businesses in Britain & Ireland, the Americas and Asia Pacific. Our international fund management business operates across all these markets, with a particular focus in Europe. We also have indirect investments, managed centrally within the Holding Company. The Board of Directors comprises seven Non-Executive Directors (Lesley Knox, Chairman; Sir Philip Dilley, Michael McLintock, Jeremy Newsum, Christopher Pratt, Domenico Siniscalco and Jeffrey Weingarten) and two Executive Directors (Mark Preston and Nick Scarles, Group CEO and Group FD respectively). Biographies are available here.

Operating Company and indirect investment highlights

Grosvenor Britain & Ireland

  • Another strong year with total returns up to 17.3% (2013: 16.5%) due to a combination of capital growth, higher rental income, high occupancy rates (2014: 97%; 2013: 93%) and value added through asset management and development activity.
  • As expected, revenue profit was lower than 2013, which had benefited from an exceptional level of trading profits on the sale of high-end residential development opportunities (2014: £45.9m; 2013: £117.5m).
  • Assets under management grew by 9.0% to £5.2bn (2013: £4.7bn).
  • Key achievements:
  • Continued to drive growth in net rental income (2014: £61.0m; 2013: £48.3m) through development, asset management and operational efficiency.
  • On-site development activity on the London estate created £71.7m of value-add in 2014 (2013: £55.4m).
  • Improved customer experience with net satisfaction of rack rented tenants increasing to 62% in 2014 from 56% in 2013. 
  • Developed a leadership programme which will be rolled out to 70+ senior managers to strengthen capacity and capability to deliver its 10-year plan.

Grosvenor Americas

  • Revenue profit was up at C$62.1m (2013: C$38.3m) due to strategic disposals
  • Total return was down to 9.7% (2013: 10.5%) due to property acquisitions for future development in Vancouver and San Francisco.
  • Assets under management increased to C$3.0bn (2013: C$2.6bn) due to some key acquisitions.
  • Occupancy rates remained consistent at 94.6% due to maintained leasing demand.
  •  Key achievements:
  • Sold all homes at 1645 Pacific Avenue in San Francisco in eight weeks.
  • Completed 15 West in North Vancouver with development partner Citimark, and completed Millennium VI at Annacis Island, Delta, British Columbia.
  • Acquired three development sites, commenced construction of two residential developments and sold three apartment buildings.
  • Expanded the multi-family apartment portfolio to Washington, DC.
  • Originated structured development loans in key markets: C$10.2m in the USA and C$23.0m in Canada.

Grosvenor Asia Pacific

  • Trading income was up this year reflecting strong sales at the Westminster Roppongi in Tokyo.
  • Revenue profit increased from HK$54.8m in 2013 to HK$83.1m.
  • Total returns were up to 9.1% (2013: 5.4%).
  • Assets under management decreased to HK$8.3bn (2013: HK$8.9bn) due to some strategic project disposals.
  • Key achievements:
  • Marked the 20th Anniversary of Grosvenor Group in Asia.
  • Secured Benjamin Cha as successor to Chief Executive Nick Loup.
  • Recorded significant value growth at the Opus Arisugawa Terrace and Residence in Tokyo.
  • Achieved record sales prices for a residential refurbishment project in Tokyo with The Westminster Roppongi.
  • Established its latest development partnership in Tokyo and secured the partnership’s first investment.

Indirect investments

  • Grosvenor’s Indirect Investment portfolio of £1.3bn represents 21% of the Group’s capital (2013: 25%)
  • Revenue profit decreased to £23.4m (2013: £39.1m (restated)).
  • The reduction in capital and profits is primarily a result of the sale of a fund investment together with asset sales and development provisions in Sonae Sierra.
  • Total return increased to 8.7% (2013: 3.6%), reflecting strong capital growth, particularly in the UK and Sonae Sierra.
  • Key achievements:
  • Doubled its total equity commitment to Propertylink’s Australian industrial investment programme to AUS$60m.
  • Completed the first phase of its £30m UK industrial investment programme with IO Asset Management.
  • Sonae Sierra confirmed its first development in Morocco and announced a joint venture to develop a designer outlet in Southern Spain.
  • Closed a €20m co-investment in Grosvenor Fund Management’s new investment vehicle: Urban Retail Fund V.
  • Invested SEK190m in Skärholmen shopping centre in Sweden: an acquisition by Grosvenor Fund Management.

Grosvenor Fund Management (GFM)

  • Fee income for management services amounted to £15.3m (2013: £17.7m).
  • Assets under management at the end of 2014 were £3.0bn (2013: £3.2bn).
  • Total acquisitions were £0.1bn, but including the Skärholmen Centrum shopping centre transaction which completed in February 2015, were £0.4bn.
  • Key achievements:
  • The acquisition of the 4th largest shopping centre in Sweden: Skärholmen Centrum.  This was carried out on behalf of the Retail Centres V (Sweden) Fund, backed by two major new investors and Grosvenor.
  • The acquisition of 10 Grosvenor Street: The Grosvenor London Office Fund, which invests in Central London offices, raised £95m of new capital from existing third party investors, purchased the other 50% of 10 Grosvenor Street at below valuation and refinanced its debt at attractive rates.
  • Investments with three new investors, including the purchase of La Visitation, a shopping centre in Rennes.
  • The creation of its fifth European urban retail platform with a major North American investor.
  • Overall GFM’s European funds outperformed the INREV European All Funds benchmark.
     

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