Our performance

Grosvenor Americas had another highly active year. In 2019, our activities were focused on near-term defensive positioning and longer-term planning. As anticipated, reduced trading activity resulted in lower revenue profits of £22.8m (2018: £39.0m). Positive revaluation gains contributed to a total return of 7.0% (2018: 5.7%). We sold value-add investment properties in San Jose, CA, and Washington, D.C. and ended the year with our investment portfolio over 97% leased with robust valuation growth. We also cleared key development milestones; breaking condominium sales price records in San Francisco, CA, welcoming homeowners in Vancouver, BC, receiving planning approval for apartment projects in Berkeley, CA, and Washington, D.C.; and advancing large multi-year projects in Metro Vancouver and San Francisco, CA.

Our 2019 performance in Asia was mixed following exceptional results in 2018. The macro backdrop was challenging. US-China trade tensions combined with the economic transition already in motion in China created economic uncertainty across the Asia region. Most significantly, political crisis and social unrest dominated in Hong Kong where we have significant investment exposure. The Japan market proved more resilient, and investor demand for quality assets across the region remained strong. Leasing and sales activity was moderately positive across the rest of our portfolio, and valuation gains were better than expected for almost all our assets. As a result, Grosvenor Asia Pacific generated £2.3m revenue profits (2018: £26.9m). Total return of 3.8% (2018: 6.6%) reflected modest revaluations and disposal profits including those realised from the sale of part of our interest in Grosvenor Place Kamizono-cho, a luxury residential investment in Japan. At the end of the year we exchanged contracts on the acquisitions of what will be our second retail asset in Ginza, Tokyo. This investment calls for the development of a vertical retail building and will be our first proprietary development project in Japan. During the year, we brought in ReBITA – a local Japanese property investor – as a strategic investor in Grosvenor Place Kamizono-cho. Construction progressed well at DAYU VILLA, our residential joint venture development in Nanjing, China, with residential pre-sales launching well at the end of the year.

For the UK at large, 2019 was a challenging year dominated by an uncertain political backdrop which held back economic growth. In the property markets, this uncertainty was most evident in the retail sector, which faced particular pressure, and through lower volumes of investment than usual. In this context, Grosvenor Britain & Ireland performed strongly. We delivered full year revenue profits of £41.1m (2018: £39.2m), ahead of budget. Total return was 3.1% (2018: 3.2%) reflecting positive valuation movements, above expectations. Leasing activity across our London estate remained strong although transactions were often protracted. Our occupancy rates stood at 93.6%. We signed 80 new retail and office tenants to our estate and achieved 81% net customer satisfaction rating.

Pricing remained competitive in all of Grosvenor Europe’s markets in 2019. Despite these challenges, we grew our income producing office portfolio in both Paris and Madrid and are examining the potential to enhance the sustainability credentials of these assets, with the aim of achieving our first net zero carbon building in 2020. Financially, we delivered a revenue loss of £(0.9)m (2018: £11.6m profit) which we expect to improve when the full benefit of our office acquisitions in Paris and Madrid, made towards the end of this year, will be realised. Total return of (0.8)% (2018: 3.3%) reflected revaluation losses in relation to our retail assets, which were impacted by market sentiment. In Madrid, we completed our first residential development scheme, Jorge Juan 53, while off-plan sales progressed well across the rest of the portfolio. In Sweden we are repositioning several assets by repurposing underused retail space into leisure, service and community uses, including introducing healthcare, education and fitness facilities. Meanwhile in Paris we invested in an eight-storey 1,800 sq m redevelopment project and a 3,300 sq mixed-use property in the Pantin neighbourhood, a booming area popular with businesses due to various urban regeneration projects.

2019 was a successful year for our Indirect Investment team. We committed to the delivery of student accommodation in Brazil, expanded our investment programmes in both Australian healthcare and the US affordable housing sectors and achieved successful planned exits from three of our partnerships in the office and industrial/logistics sectors. In terms of financial performance, 2019 reflected the full year impact of our reduced interest in Sonae Sierra (from 50% to 30%), with revenue profits of £25.5m (2018: £33.6m). This was also impacted by the sale of income producing assets in early 2019. Lower revaluation gains in Sonae Sierra and our third-party managed assets resulted in a total return of 5.1% (2018: 9.1%) being delivered. Our current portfolio of 12 investments, including our 30% shareholding in Sonae Sierra, gives us access to assets and expertise in five continents, 13 countries and seven different property sectors.