Duke of Westminster's Grosvenor Group returns to profit
The Duke of Westminster and his family saw their dividends increase for a tenth consecutive year in 2024 as their vast property empire returned to profitability.
Grosvenor Group, which runs a multibillion-pound portfolio of assets including its 300-acre estate in the West End of London, posted a pre-tax profit of £24 million for the 12 months to the end of December, having sunk to a loss of £175 million in 2023.
'That's a big shift relative to a difficult market environment and a significant movement from last year but I think it's fairly easily explained,' Mark Preston, chief executive of Grosvenor, said. 'Strong rental growth, a very high level of occupancy — 97 per cent; a testament to the quality and the attractiveness of what we're offering, and also that valuations have held up very well.'
In 2023 the value of Grosvenor's buildings was written down by £141 million as higher interest rates dented values which weighed on its profitability. However, the underlying valuation of its portfolio was broadly stable last year as an increase in the value of its offices, shops, flats and hotels in the UK was offset by some lingering weakness in North American valuations. Underlying profits increased by 17 per cent to £86.4 million from £74.1 million.
Grosvenor has been a beneficiary of the 'flight to quality' in the commercial property market since the pandemic, which has pushed up rents for its offices, shops, restaurants and flats, most of which are clustered to the north and west of Buckingham Palace.
Such is the competition for space that it has next to no units sitting empty in London and its West End offices are fetching dearer rents than ever. Its leasing team believes they could have let out 65 Davies Street, which sits above the Bond Street Elizabeth Line station and which was completed at the end of 2023, 'several times over'.
'This polarisation is now such a feature, particularly of the office market,' Preston, 57, said. 'Well-located [buildings] with amenities and that are energy-efficient and close to parks, theatres, restaurants and so on, that's where people want to be and we, very fortunately, have that in abundance on the London estate.'
Grosvenor Group owns 300 acres of land in Mayfair and Belgravia that have been under the control of the Grosvenor family since the late 1600s. It also owns billions of pounds worth of property outside the UK and almost half of its portfolio is now overseas, including student housing in Brazil and warehouses in Poland.
The group is almost entirely owned by trusts, one of the ultimate beneficiaries of which is Hugh Grosvenor, the 7th Duke of Westminster, who inherited the title when his father died in 2016. Dividends of £52.4 million were paid last year, a small increase on the £51.1 million that the family received in 2023. They have seen their annual payouts increase every year since 2014.
Despite the underlying value of its UK buildings having increased in 2024, the absolute value of the portfolio declined by £400 million to £8.2 billion, which reflected Grosvenor's decision to sell its 23 per cent stake in the Liverpool ONE shopping centre as well as a slice of its Mayfair portfolio to Norway's sovereign wealth fund.
Grosvenor will use the money to fund its development pipeline, which stands at £6.6 billion. A big chunk of that is at South Molton Lane, the largest mixed-use development being built in the West End, which comprises offices, retail and hospitality units, leisure space and a new five-star hotel.
In addition to property, Grosvenor Group also has a portfolio of investments in food and agriculture technology businesses, including Gousto, the meal kit delivery company. The value of those investments increased by a fifth to £469.6 million. Some of the growth reflected the additional £48.5 million of investments that Grosvenor made during the year, including into Ostara, which makes eco-friendly fertilisers.
Investing in the US
The commercial property market in the United States is likely to remain challenging 'for a bit yet', but that is not deterring Grosvenor Group from investing heavily across the Atlantic (Tom Howard writes).
Mark Preston, chief executive of Grosvenor, warned a year ago that the commercial property market in the US and Canada was struggling more than in the UK, in part because of landlords' extra indebtedness there, and his view has not changed over the past 12 months.
'It's definitely a bit tougher over there than here,' Preston said. 'The UK does still have a very strong attraction for the international investor, lender, shopper, resident, tourist. It is a reliable and predictable and safe place to be and invest, whereas things are different now in the US. I suspect that [the weak property market] in the US that we talked about last year, and which is certainly still the case this year, will be much the same next year.'
He expects President Trump 's 'liberation day' trade war to harm the world's largest economy by hindering growth and increasing inflation. Worryingly for landlords, whose buildings' values closely track interest rates, Preston believes central banks will respond by keeping rates higher than most people anticipate.
Despite his near-term concerns, he remains convinced by the 'long-term attractiveness' of the US and Canada, where Grosvenor owns £2.6 billion of property. Along with two other Canadian investors, Grosvenor has committed to building several blocks of flats in Vancouver that will deliver 1,730 homes, most of which will be rentals.
'If we were in the business of making short-term bets then we wouldn't be excited about [North America],' Preston said. 'But we're in the business of making long-term decisions and we still find the demographics and the overall growth story in the longer run attractive.'
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