Grosvenor Americas is dedicated to pursuing profitable and sustainable development and investment opportunities in the USA and Canada. We do this by focusing on select product types and eight North American cities, four of which have Grosvenor offices staffed with experienced teams.
In 2007, we leased approximately 800,000 sq ft, with occupancy averaging 97%. We completed $6m of building renovations and commenced two new developments. Additionally, we acquired more than C$124m worth of new properties in key metropolitan areas, while selling approximately C$162m worth of assets. In July, we reopened an office in Calgary, Alberta, where our focus is on multi-family residential, retail and mixed use development.
During the summer, US credit markets tightened following the news that many financial institutions were facing massive losses on their subprime mortgage holdings. Asset prices began to fall or level off as buyers began seeking higher returns to mitigate increased financing costs and risk. In the US, the for-sale housing market continued to deteriorate; we believe it will take three to four years to return to normality. In western Canada, however, strong economic conditions continue to support growth in the for-sale housing market and low vacancy rates, resulting in rental rates that have increased far in excess of inflation.
Recognising market changes, the majority of our 2007 acquisition efforts targeted value-added residential apartments and retail projects rather than core performing assets, which have declined in profitability as a result of the shift in the capital markets. We also created a joint venture with Rockwood Capital to expand our residential apartment portfolio, and we continue to pursue mezzanine financing investments in select markets.
To implement our overall strategy, we sold a number of non-strategic assets and allocated the resulting capital to development and targeted residential and retail acquisitions. Sales included a multi-level parking garage in Calgary, Alberta; 1777 F Street, a Washington, DC office building; and two retail properties in San Francisco. Acquisitions included two residential apartment projects in suburban Seattle; La Colonnade, a retail/office mixed-use project in Beverly Hills; and DVC Plaza, a San Francisco Bay Area community shopping centre with redevelopment potential.
The year saw substantial progress on our development projects. The RISE, our C$138m retail/residential development in Vancouver, was substantially completed, as was Avondale, a C$34m, 79-unit condominium tower in North Vancouver. We commenced construction on 5955 Balsam, a C$62m condominium tower in the Kerrisdale suburb of Vancouver; several retail buildings at South Edmonton Common, a ‘big box’ shopping centre in Alberta, Canada; and Hamilton Marketplace, a US$52m grocery-anchored retail centre in the San Francisco Bay area.
Grosvenor Americas’ development pipeline continues with the advancement of planning approvals for a two-tower, residential condominium project in Calgary, and planning approvals for High Street, a C$40m retail/residential mixed-use project in suburban Vancouver. We also advanced negotiations and design work with Marriott to re-brand and renovate an existing 220-room Holiday Inn hotel in Chevy Chase, Maryland.
A highlight of the year was the signing of a long-term lease with De Beers to anchor our 185 Post Street project, a US$31m prime retail building in San Francisco’s Union Square district, following our recently completed full-building renovation. We also substantially leased our US$23m, 42,000 sq ft restaurant/retail park in a Maryland suburb of Washington, DC.
We expect a challenging property market throughout 2008 due to a weakening US economy, exacerbated by a struggling housing market, high energy prices, and cautious consumer spending. This may create opportunities for buyers who have the cash to acquire property on more favourable terms.
Bill Abelmann, Chief Executive, retires at the end of 2008 after a career with Grosvenor spanning 32 years. Andrew Bibby, currently Chief Development Officer, will succeed him.
© Grosvenor 2008