Total return rises to 13.1%, Grosvenor’s highest since the start of the financial crisis
April 28 2015, London: 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.
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.
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.
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.
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.
1645 Pacific Avenue is Grosvenor Americas’ first residential development in the San Francisco Bay Area. Located at the convergence of three spectacular neighborhoods Nob Hill, Russian Hill and Pacific Heights – the building offers 39 homes, sweeping rooftop views, three retail spaces, and a number of unique art installations including a vast mural by emerging artist Zio Ziegler.