Grosvenor Group reports strong and ‘on trend’ 2018 revenue profit


Grosvenor Group recorded revenue profit of £131.0m in 2018, the third highest performance over what has been a positive 10-year run of property returns.

  • Better than expected revenue profit of £131.0m (2017: £143.5m), the third highest on record, with trading profits contributed from around the Group. Taxes borne of £97.7m (2017: £100.9m).

  • Total return more than doubled to 5.5% (2017: 2.7%), reflecting increased property returns and Sterling’s depreciation.

  • Indirect Investment and Grosvenor Asia Pacific delivered particularly strong performances.

  • International diversification continues to even out regional variations. Approximately half of the Group’s property assets are now held overseas.

  • Liquidity enhanced through partial sale of our interest in Sonae Sierra coupled with long term bond issuance, giving us strong financial capacity of £1.7bn (2017: £1.4bn) to fund our £4bn development pipeline and take advantage of market corrections with the objective of generating long-term value through delivering lasting commercial and social benefit.

  • Demonstrating the Group’s equal focus on delivering lasting social benefit as well as strong commercial returns, an impact assessment report coinciding with the 10-year anniversary of Liverpool ONE shows how Grosvenor’s transformative development welcomed 286m visitors since 2008, helped the city attract over £8.6bn of investment, delivered £3.3bn in total Gross Value Added (GVA) to the Liverpool City Region and created just under 5,000 jobs for residents in the region.

Grosvenor Group Limited (‘Grosvenor Group’), the privately-owned international property group, recorded revenue profit of £131.0m in 2018, the third highest performance over what has been a positive 10-year run of property returns.

Total return doubled to 5.5%, including property returns of 4.7%. Sterling’s depreciation contributed 0.8%.

Both measures were better than expected due to higher re-valuations, trading profits and the impact of Sterling’s depreciation.

Commenting on the Group’s 2018 performance, Mark Preston, Chief Executive of Grosvenor Group, said:

“Against a background of moderate global growth, our 2018 financial performance proved better than we had expected.

“This was again largely due to our international diversification, which has helped to even out regional variations in results over the past year and over the cycle.

“We have built up significant financial headroom from asset sales, financing and the sale of a 20% interest in Sonae Sierra to fund both our £4bn development pipeline and potential acquisitions in the wake of a downturn in any of our markets. At the same time, we are continuing to run with an historically low level of gearing, reflecting the uncertainties in geo-politics and economic growth.  

“A very important non-financial event in June this year was the handing-over of the Defence element of the Defence and National Rehabilitation Centre (DNRC) Programme to the UK Prime Minister, who accepted it on behalf of the nation. The DNRC was the personal initiative of the 6th Duke of Westminster whose founding gift of £50 million has since been increased by the Grosvenor family to £105m, one of the largest philanthropic gifts to a single programme in the UK’s history. We are proud as Grosvenor Group to have contributed both financially and in terms of knowledge and expertise to the realisation of this wonderful rehabilitation facility for treating serving injured members of the armed forces.”

Commenting on the outlook for the year ahead, Mark Preston added:

“Looking ahead, after a remarkable near 10-year run of strong property returns, global markets have reached a mature stage in the cycle. As a result, we will have to work harder and cleverer to deliver returns anywhere near those we have seen in recent years.

“As a long-term investor with diversification as a key objective, we will continue to invest in those cities we believe will outperform financially and where we are already engaged and have an understanding of local communities.

“Our financial capacity is considerable and we are therefore well-placed to take advantage of market corrections and the opportunities which may follow. This does not mean we will be chasing short-term returns. Instead we will keep our focus on generating long term value and on making a positive impact in the communities in which we are active, much as we have done over the last ten years by helping to regenerate the city centre of Liverpool through our management of Liverpool ONE; creating a new hub for independent businesses in Belgravia and bringing new vibrancy to a community by developing a neglected waterside area of West Vancouver.”

Summary financials

 

Revenue profit

Total return

Assets under management

Property assets

Shareholders’ funds

 

Economic gearing
(economic borrowings divided by equity capital)

 

Development exposure
(the level of committed development activity as a proportion of total property exposures and commitment)

2018

£131.0m

5.5%

£12.3bn

£7.0bn

£5.0bn

20.3%

12.5%

2017

£143.5m

2.7%

£12.6bn

£6.8bn

£4.9bn

23.8%

14.4%

2016

£79.2m

8%

£12.6bn

£6.5bn

£4.8bn

17.0%

15.7%

 

Operational highlights from 2018 include:

Grosvenor Britain & Ireland

Recurring income was again bolstered by trading profits, largely arising from the Campden Hill residential development, resulting in revenue profit for the year of £39.2m (2017: £48.4m). Total return was 3.2% (2017: 1.3%), reflecting low but positive valuation movements.

In London, we plan to invest £1bn in commercial property and new public spaces to improve the West End’s appeal.

We issued £250m of long term debt to provide long term liquidity to position us for future opportunities.

To help address the country’s housing pressures, plans were unveiled to triple the size of Grosvenor Britain & Ireland’s Strategic Land business, targeting a portfolio of at least 30,000 homes.

During the year we opened a public consultation on proposals for new offices, shops and improved public realm in the West End’s ‘South Molton Triangle’ in anticipation of the arrival of thousands of extra visitors expected from the Elizabeth Line.

We are also examining the role we play in helping to meet the challenge of London’s expansion in the years ahead through a bid to create a new neighbourhood in Bermondsey, aimed at the increasingly overlooked majority of Londoners who cannot afford to buy, do not qualify for social housing and want the benefits of a secure, professionally-managed home to rent.

We have also opened one of the largest surveys of public opinion to seek ways in which trust in the planning system can be improved.

Grosvenor Americas

Grosvenor Americas delivered on-trend revenue profit of £39.0m (2017: £71.6m). Total return was 5.7% (2017: 8.9%)

Highlights for the year included trading gains realised on two mixed-use residential developments: from the sale of units at 288 Pacific in San Francisco and from the sale of development land in Calgary. During the year the first phase of Grosvenor Ambleside was completed, which has helped to revitalise West Vancouver’s beloved waterfront neighbourhood.

New sites were acquired in San Francisco, Washington DC and Seattle.

Grosvenor Asia Pacific

Generated revenue profits of £26.9m (2017: £6.9m) driven by trading profits on disposals of our residential development Opus in Tokyo. Total return was 6.6% (2017: 7.2%) with marginally lower positive revaluation gains offsetting the improved revenue profits.

In Nanjing, China, Grosvenor Asia Pacific entered a new partnership to invest in the residential portion of a mixed-use residential development and supported the local community by opening a Neighbourhood Kitchen to provide residents of sub-divided flats in Shek Tong Tsui a safe place to cook and bond over food with their family and neighbours.

Grosvenor Europe

Following the planned expansion of the business, Grosvenor Europe delivered revenue profit of £11.6m (2017: £0.6m loss). Total return was 3.3% (2017: 1.1%), again impacted by weak revaluations.

We celebrated the 10th anniversary of Liverpool ONE, the visionary regeneration project at the heart of the city. The development has helped Liverpool attract £8.6 billion of investment, delivered £3.3 billion in total Gross Value Added to the region and created just under 5,000 jobs for residents. Grosvenor Europe also acquired its first wholly-owned property assets, sold two retail assets, embarked on two residential projects in Madrid and agreed a new Paris office refurbishment joint-venture.

Indirect Investment

Revenue profit remained broadly stable at £33.6m (2017: £35.9m), reflecting a continued improved performance of Sonae Sierra, which largely negated the impact of the reduction of the Group’s interest in the company from 50% to 30%, the result of a sale to our co-shareholder.

Total return was 9.1% (2017: 8.5%), with marginally lower revaluation gains in Sonae Sierra being offset by improved gains in other third-party investments.

During the year our Indirect Investment team continued its diversification strategy, broadening into two new sectors: US affordable housing and Australian healthcare.

Ends

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 team. Our Indirect Investment business further diversifies the Group’s property interests by backing specialist third-party management teams. It invests Grosvenor’s capital in Africa, Australia, Europe and North and South America.

Approximately half of the Group’s property assets by value are held outside the UK.

The purpose of the Group is to improve properties and places to deliver lasting commercial and social benefit. This is achieved by adopting a farsighted perspective, by being locally engaged and sharing and benefitting from our international experience – we call this our Living Cities approach.

To read more about Living Cities please click here.

www.grosvenor.com

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