24 April 2018
Grosvenor Group reports significant increase in 2017 revenue profit
Grosvenor Group Limited, the privately-owned international property group, recorded revenue profit of £143.5m in 2017, over 81% higher than the previous year (2016: £79.2m).
- Revenue profit of £143.5m, an increase of 81% on 2016 (£79.2m), the second highest on record.
- Total return was 2.7%, down on last year’s (8%), reflecting weakness in the UK and sterling’s appreciation.
- Variability between regional results illustrates the benefit of Grosvenor’s geographic and sectoral diversification. The Group’s results were strengthened by its performance in Grosvenor Americas, Grosvenor Asia Pacific and in the Group’s Indirect Investment business. Almost half (49%) of Grosvenor’s property assets are now held outside of the UK.
- Strong financial capacity of £1.4bn (2016: £1.7bn) enables the Group to take advantage of investment and development opportunities even if markets turn and others are unable to readily access finance.
- Although global real estate markets are likely to face a challenging 2018, Grosvenor remains committed to its £5.2bn development pipeline – and to its overriding focus on the long-term.
Grosvenor Group Limited (‘Grosvenor Group’), the privately-owned international property group, recorded revenue profit of £143.5m in 2017, over 81% higher than the previous year (2016: £79.2m). Total return was 2.7%, down on last year (2016: 8%), reflecting weak valuation movements in the UK and Europe, as well as sterling’s appreciation, which produced a negative impact of 1.5% (2016: positive impact of 4.5%).
Both measures were better than predicted due to particularly strong performances in Grosvenor Americas, Grosvenor Asia Pacific and the Group’s diversified Indirect Investment business, as well as better-than-expected returns in the UK market.
Read our 2017 Annual Review here
You can watch a short film below that provides a snapshot of activity from across the Group in 2017 and find the rest of our reporting suite here
Commenting on the Group’s 2017 performance, Mark Preston, Chief Executive of Grosvenor Group, said:
“Our financial performance in 2017 proved much more resilient than expected, leading to the achievement of our second highest revenue profit on record.
“The lack of correlation in the performance of our regional Operating Companies yet again demonstrated the benefits of operating as an internationally diversified property company, thanks, in particular, to Grosvenor Americas more than doubling 2016’s revenue profit and strong results in our Indirect Investment business.
“We are resolutely committed to international diversification. Our plan is to deepen our activity in those cities in which we have developed a presence, which we believe will outperform financially, and which offer opportunities to improve properties and places to provide a positive impact on communities, neighbourhoods and cities.”
Grosvenor Group’s far-sighted approach, judging success on the basis of the long-term impact of our activities, is evidenced this year by the 10-year anniversary of the completion of Liverpool One, a mixed use development widely applauded as one of the most successful UK regeneration projects and one which the people of Liverpool consistently recognise as a catalyst of the city’s revival.
This year will also witness the completion of a project to which the Group is proud to have contributed; namely the 6th Duke of Westminster’s philanthropic initiative to create a Defence and National Rehabilitation Centre (DNRC)*, which will become one of the world's best clinical rehabilitation centres for people with trauma injuries.
Commenting on the outlook for the year ahead, Mark Preston added:
“The global economy is expected to enjoy a strong co-ordinated recovery in 2018, with all regions forecast to record solid growth. Yet, we remain mindful that the cycle is at a fairly mature stage and investors will have to adjust to the prospect of a rising global cost of capital. While we continue to see positive rental growth prospects in a number of our main markets, there is now limited potential for further fall in yields. Indeed, the majority of prime yields in the 25 global cities that we track are now in ‘over-valued’ territory - with low yields and low spreads.
“Despite Brexit, the UK remained fairly resilient in 2017. However, it feels like a uniquely uncertain time - and it is this, more than Brexit per se, which is likely to constrain growth in the economy in 2018 and 2019.
“In this environment, we expect our returns in 2018 not to be substantially different from those in 2017.”
Operational highlights from 2017 include:
Grosvenor Britain & Ireland
During 2017, Grosvenor Britain & Ireland’s revenue profit more than doubled to £48.4m (2016: £23.9m). The result was mainly attributable to the trading profit from the Campden Hill development. Total return was 1.3% (2016: 0.3%), reflecting slightly negative valuation movements but higher revenue profit.
During the year, the business launched a 20 year vision to transform its London estate and help tackle the pressures facing the capital. It underlined its early commitment to the vision by, amongst other things, starting a substantial digital infrastructure upgrade across it. The business also submitted a planning application for one of London’s largest build to rent developments. The proposed mixed-use neighbourhood in Bermondsey includes 1,350 new homes for rent, a new 600-place secondary school and over 20,000m² of new office space, retail, food, leisure and community uses.
Revenue profit more than doubled in Grosvenor Americas to £71.6m, a record for the business (2016: £28m) thanks to the completion of the F1RST and Central development projects in Washington, D.C. and the sale of development land in Vancouver. Total return was 8.9% (2016: 6.4%).
As part of advancing its residential development programme, Grosvenor Americas entered the final stages of completion and almost fully sold the first phase of the mixed-use Grosvenor Ambleside development in West Vancouver. Partners in True North LP increased their financial commitment to the Structured Development Finance programme, and in Washington, D.C., the heritage office asset 1500K underwent a major renovation.
Grosvenor Asia Pacific
Grosvenor Asia Pacific sold a number of well-priced assets during the year to provide capacity for new opportunities. As a result of the reduced income following sale, revenue profit was lower at £6.9m (2016: £10.6m). Total return was 7.2% (2016: 6.3%), arising largely from valuation increases in Hong Kong.
The business completed the refurbishment of two luxury residential schemes in Tokyo; Opus Arisugawa Terrace and Residence and The Westminster Nanpeidai. These schemes support the business’ strategy to expand its residential development activity in the region. The team also acquired Namikikan Ginza, a retail asset located in Ginza, Tokyo’s prime shopping district.
In its first full year as an Operating Company, Grosvenor Europe delivered a small revenue loss of £0.6m, broadly the same as last year (2016: £0.5m loss). Although income was slightly up on the previous year, this was offset by the cost of building-up a specialist capability to deliver new developments in Spain, heavily reinvesting in standing assets and reduced net rental and fee income as a result of some portfolio sales. Total return was 1.1% (2016: 1.4%).
This is the first time that Grosvenor has focused on residential development in Spain and the team has made six acquisitions across the city. The first, Jorge Juan, will be developed into seven apartments.
Indirect Investment revenue profit increased to £35.9m (2016: £31.8m) due largely to improved performance in international retail real estate company Sonae Sierra SGPS. Total return was 8.5% (2016: 12.7%), with strong performance from the third-party managed portfolio.
The Indirect Investment business helped to further diversify the Group’s property activities by sector, geography and management team. For example, a deal with New York-based Alden Street Capital provides exposure to the student housing sector across the US and the existing partnership with RMB Westport in sub-Saharan Africa acquired its first site in Ghana to create a new shopping centre.
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Notes to editors
About Grosvenor Group:
Grosvenor Group is one of the world’s largest privately-owned property companies. We develop, manage and invest in property in more than 60 cities around the world.
Through the activities of Grosvenor Britain & Ireland, Grosvenor Americas, Grosvenor Asia Pacific and Grosvenor Europe we diversify the Group’s property portfolio by geography, sector, activity, currency and management teams.
Our Indirect Investment business further diversifies the Group’s property interests beyond the expertise and strategies of our four regional Operating Companies. It invests Grosvenor’s capital in Africa, Australia, Europe and North and South America.
Grosvenor Group’s purpose is to deliver lasting commercial and social benefit. To live up to this ambition, for over 10 years we have adopted an approach we call 'Living cities' which aims to guide and inspire our property activities.
Achieving strong commercial returns enables our activities to be enduring. Applying our expertise with a far-sighted perspective to improve properties and places provides a positive impact on communities, neighbourhoods and cities.
* The Defence and National Rehabilitation Centre
2018 will mark the realisation of the 6th Duke of Westminster’s initiative to create a Defence and National Rehabilitation Centre (DNRC) which will become one of the world's best clinical rehabilitation centres for people with a trauma injury.
With its state-of-the art facilities, it will be the 21st century successor to Headley Court in Surrey, which has fulfilled this role since opening 70 years ago, and will provide the best possible care for members of the armed forces who are injured on operations or in training.
The Centre, which is nearing completion, is located on the Stanford Hall Estate near Loughborough. It will have a Defence establishment operated by the Ministry of Defence, and there is also the opportunity to change the way in which clinical rehabilitation from trauma injury is made available to civilians, creating, on the same site, the first ever specialist facility open to the public.
Grosvenor Group is proud to have contributed to the successful development of this initiative.