Profits drop at Grosvenor as retail values fall

The Duke of Westminster’s Grosvenor this morning revealed a 20% fall in pretax profit last year, despite a 7% uplift in the value to £2.96bn of its property empire.

The group recorded a profit before tax of £315m last year – down from £394.8m in 2010 – as faltering European retail values took their toll.

However, the languishing retail sector did not prevent Grosvenor’s net asset value from increasing by 7% to £2.96bn, and the value of its total property assets rising by 7% to £5.8bn.

This resulted in revenue profit – which includes rental income and profit from trading and development activities, but not property revaluation gains and losses – increasing by 26% to £80.8m last year.

Group chief executive Mark Preston (pictured) said the main drivers of the increase were increased efficiency, higher rental income and improved trading profits.

The group delivered a total return of 9% – a dip from 10.9% in 2010, which was “high by historic terms”, according to Preston. The group’s long-term average total return is around 10%.

Preston said the results showed the benefit of “the extensive reshaping of the group over the past few years” and a new focus on operational efficiency and growth in areas such as development and fund management.

At the end of the year Grosvenor’s development exposure stood at 15.7% compared with 13.8% a year earlier, after its development pipeline grew by around £1.2bn to around £3.2bn. Projects include a joint venture with Derwent London to redevelop a rare 1.5-acre Hyde Park corner development site at 1-5 Grosvenor Place, SW1, into offices, flats and a luxury hotel.

The group’s fund management business also had a strong year. Led by new chief executive Jeffrey Weingarten, it launched four new vehicles, invested £762m and added £1.2bn to its £5bn of funds under management.

Grosvenor said it planned to expand further into these areas, as well as boosting “indirect” exposure, which includes its investments in the fund management division and investments run by third parties with specialist expertise.