• Total return of 9% slightly ahead of what we predicted last year and in line with the long term average.
• Indirect Investment helped to deliver revenue profit of £83.3m.
• Lower returns and revenue profit expected over the next few years.
• Continuing investment in a range of development projects in line with our ‘Living cities’ approach and timed to mature in the next cycle.
• Grosvenor Fund Management to become the fourth proprietary business; named ‘Grosvenor Europe’.
• Several key internal promotions announced in Grosvenor Group and Grosvenor Britain & Ireland.
Grosvenor Group (‘Grosvenor’), the privately-owned international property group, recorded a total return of 9% in 2015 (2014: 13.1%), slightly ahead of what we predicted last year. As expected, this measure, which includes the impact of revaluation and foreign exchange, was down on the previous year, due in part to strong revaluation gains in Grosvenor Britain & Ireland in 2014.
Revenue profit was £83.3m (2014: £80.1m). This figure excludes the impact of property revaluation.
Profit before tax of £527m (2014: £681.8m) was around where it was in the pre-crisis peak in 2007.
Operational highlights include:
• Indirect Investment had a particularly successful year, making the largest contribution to Group revenue profit and a total return of 10.0%. This was due in particular to a strong performance by Sonae Sierra, which provides Grosvenor with investment exposure to 35 shopping centres in Continental Europe and a further 10 in Brazil. It was also helped by co-investments in Grosvenor Fund Management funds and new third-party-managed indirect investments in the UK, USA and Australia.
• Grosvenor Britain & Ireland increased its net rental income by £10.3m, driven by development, asset management and operational efficiency. Total return of 10.7% was the sixth successive year of double-digit returns. In London, across Mayfair and Belgravia, planning consent was received for 60,700 square metres of redevelopment to grow income and improve the built environment of the portfolio. In Bermondsey, South London, public consultation has opened on the design and delivery of a 12-acre development to create homes for private rent and affordable housing. Outside London, work has started in Oxford on a 21st century garden suburb across 90 acres, creating up to 885 new homes. Consent for 400 new homes was granted in Edinburgh and, in Cambridge, a 59-acre site will host 1,200 new homes.
• Grosvenor Americas received planning consent for ‘Connaught’, a mixed-use development in North Vancouver. Approval has also been given for the development in California of Los Gatos’ last large undeveloped parcel of land, where Grosvenor Americas will be the primary developer. New developments commenced construction in downtown Silver Spring, Maryland; in the Capitol Riverfront District in Washington, DC; and in Ambleside, West Vancouver, where Grosvenor is infusing new life into this waterfront community and village shopping district. Pre-sales targets at ‘Grosvenor Ambleside’ have been exceeded. The business established a new partnership to quadruple the scale of its mezzanine lending programme and expand the company’s reach in Washington DC.
• Grosvenor Asia Pacific refocused its strategy under its new chief executive, Benjamin Cha. During the year, the team began implementing the strategy, which comprised pressing more deeply into existing markets – specifically, Tokyo, Shanghai and Hong Kong – and increasing development activity, both with joint-venture partners and alone. Revenue profit increased considerably over the previous year due to rising gross rental income and trading profits at The Westminster Roppongi, in Tokyo.
• Grosvenor Fund Management completed the modernisation and refinancing of the Grosvenor Liverpool Fund, which owns the Liverpool ONE shopping centre. The fund generated the best return of all UK unlisted funds in 2015, according to the UK’s Association of Real Estate Funds. Overall, the strategic focus on retail-led properties in European urban environments delivered a strong performance for investors and, with a £23.5m contribution to Grosvenor, for our shareholders. With effect from 1st July 2016, Grosvenor Fund Management will be renamed Grosvenor Europe and become the fourth proprietary Operating Company. It too will invest its own capital, mostly alongside partners, and will be measured by its return on capital, and will have a European and largely retail focus. Managing funds for co-investment partners will remain a very important part of the activity of the business.
Total assets under management across the Group were £13.1bn (2014: £11.4bn). Of that, Grosvenor’s property ownership totalled £6.7bn compared with £6bn in the previous year. Shareholders’ funds increased 10% to £4.4bn.
Grosvenor’s development pipeline stood at £5.6bn at the end of 2015 and economic gearing increased to 27% (23%). Grosvenor has unused committed financial capacity of £0.9bn (£1.1bn) to allow for future investment and development activity, as well as to provide liquidity in the event of , and take advantage of, any market downturn. Development exposure, which is the level of committed development activity as a proportion of total property commitments, stood at 10.8% and is planned to increase further over the coming years.
Early in 2016, it was announced that Jeremy Newsum will retire as Executive Trustee of the Grosvenor Estate on 31 December 2016. From 1st January 2017, Mark Preston will take over this role whilst remaining as Group Chief Executive of Grosvenor Group. In addition, as announced earlier this month, with effect from 1st January 2017, Peter Vernon, currently Chief Executive, Grosvenor Britain & Ireland, will become Group Executive Director, allocating 60% of his time to this role, and Craig McWilliam, who is currently Executive Director, London Estate, will take over Peter’s current role.
Mark Preston, Chief Executive of Grosvenor Group, said:
“2015 results were very much in line with expectations and the long term trend.
“All our businesses performed well, but we were particularly pleased with the performance of our indirect investment portfolio, which demonstrated the real strength of the various partnerships which lie at the heart of our diversification strategy.
“The rationale for our commitment to developing and co-ordinating an internationally diversified property group became even more evident in 2015, which was a year of divergence, with a struggling Brazil, a relatively strong USA and UK, and a recovery in Continental Europe, while the outlook in China is affecting growth prospects globally.
“Jeremy Newsum’s retirement at the end of 2016 will be an important milestone in our long history. Jeremy has done so much for the Grosvenor Group and the Grosvenor Estate over the past 32 years. I regard it as a huge privilege to take over from him and to take on this role which straddles the property company and the other Grosvenor Estate businesses.”
Read more in the annual review and visit our performance pages.
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Notes to Editors
The Grosvenor Estate represents all the business activities of the Grosvenor family, headed by the Duke of Westminster: Grosvenor Group Limited, Wheatsheaf Investments Limited and the Family Investment Office.
The Trustees of the Grosvenor Estate have devolved responsibility for the management of Grosvenor and Wheatsheaf to their respective boards. The Executive Trustee oversees those two devolved businesses and the Family Investment Office.
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 fund management business has a particular focus on European retail. 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 Chief Executive and Group Finance Director respectively). Biographies are available here: www.grosvenor.com.
Operating Company and indirect investment Annual Review highlights:
Grosvenor Britain & Ireland
• Total return of 10.7% – the sixth successive year of returns above 10%.
• Growth in net rental income of £10.3m to £71.3m (from £61.0m in 2014 and £48.3m in 2013) driven by development, asset management and operational efficiency.
• £39m of value-add in 2015 (2014: £83m; 2013: £53m) from development activity on the London estate.
• Net customer satisfaction up to 65% from 58% in 2014.
• Assets under management of £5.7bn, up from £5.2bn in 2014.
• A leadership programme for over 70 senior managers to strengthen capability to deliver our 10-year plan.
• Established a new partnership to quadruple our mezzanine lending programme and expanded its reach to Washington, DC.
• Received planning approval for Connaught, a mixed-use development in North Vancouver, BC, and adoption of the Specific Plan at The North 40 in Los Gatos, California.
• Started construction on three mixed-use developments, acquired three residential properties and sold two investment properties.
• Exceeded pre-sales targets at Grosvenor Ambleside in Vancouver, BC, with over 83% of homes sold, representing over C$155m in revenue.
• Promoted two senior managers, James Patillo and Steve O’Connell, to Managing Director roles.
Grosvenor Asia Pacific
• Established a refocused strategy and secured additional capital from the Grosvenor Group Board to implement it.
• Completed sales at The Westminster Roppongi, Tokyo, exceeding expectations.
• Completed three new deals in Tokyo under the Grosvenor Development Partnership.
• Sponsored artist Antony Gormley’s inaugural public art installation in Hong Kong, ‘Event Horizon’, marking a major ‘Living cities’ initiative in our region.
• Strengthened internal capabilities with new hires in key positions.
• Expanded the portfolio of third party managed investments, beyond Sonae Sierra, to 11 vehicles with a combined equity commitment of £150m.
• Increased our effective interest in Sonae Sierra from 38.75% to 50%, post year end.
• Completed the partial sale of the Grosvenor Liverpool Fund investment releasing capital for reinvestment.
• Leveraged established relationships to launch four new investment vehicles with existing partners.
• Made Grosvenor’s first investment commitment to sub-Saharan African real estate.
Grosvenor Fund Management
• Completed the modernisation and refinancing of the Grosvenor Liverpool Fund, which owns the Liverpool ONE shopping centre.
• Acquired three assets for our Urban Retail V Partnership including two on Via Torino in Milan.
• Outperformed INREV benchmarks.
• Crystallised, for the Grosvenor London Office Fund, significant profit through the contracted disposal of Almack House, a prime London office building.
• Received GRESB ‘Green Star’ for the third year in a row.