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o Urban property revenue profit of USD$64.9m (2021: $137m) and a total return of 3.5% (2021: 5.2%) reflect solid performance in the face of challenging economic conditions. Revenue profit increases in the UK but is impacted by lower trading profits in both our North American and Diversified Property Investments businesses, while Total Return was lower as rising interest rates led to modest falls in property values.
o Increased new and further investment totalling $134m (2021: $107.9m) in a growing portfolio of 28 Food & AgTech businesses.
o Net profits of $2.6m (2021: $3.3m) across Rural Estates with net income from properties up 8%, while Grosvenor Farms’ trading performance broadly flat due to investment in future projects.
o New global carbon commitment will see all Grosvenor businesses reduce direct and indirect emissions to deliver, at a minimum, a science-based target reduction in line with limiting global warming to 1.5°C.
o The North American property business continues to drive their residential activities while advancing carbon reduction programs in their portfolio of properties.
o Diversified Property Investments business, which backs specialist investment teams globally, to double in size to $1.8bn of equity over the next five years further enhancing sectoral diversification currently encompassing industrials, logistics, student housing, life sciences, etc.
o $4.1m (2021: $4m) donated to philanthropic initiatives – predominantly to support the Westminster Foundation’s work to help provide structure and opportunity to vulnerable young lives.
Commenting on Grosvenor’s 2022 performance and impact Mark Preston, Chief Executive of Grosvenor, said:
“Our urban property, food and agtech and rural estates activities all faced challenging economic conditions yet delivered a solid overall financial performance in line with our expectations and strong examples of environmental and social benefit.
“Our established strategy of international diversification, the enduring appeal of the quality of our properties and destinations, alongside our ability to time a slowdown in our property development pipeline with falling valuations and to adjust to new post-Covid work and consumer trends played a key part in helping to balance our property returns.
“Against this backdrop our long-term view gives us the confidence to continue to invest. In the year, we have set ambitious goals to drive carbon reduction globally; advance our international property investment strategy; and expand our longstanding support for vulnerable children and young people within our communities.
Commenting on the company’s continued investment in the US and Canada, Steve O’Connell, Chief Executive of Grosvenor’s North American property business said:
“Over the course of the year, we were active in the rapidly changing environment around us; in 2022 we grew our assets under management from USD$3.6bn to USD$4.1bn. While doing so, we made meaningful progress on our longer-term strategic objectives of advancing our partnership and net zero ambitions.”
Looking ahead to 2023, O’Connell further noted:
“Supported by a strong employment and immigration backdrop, we have ambitious long-term plans in Vancouver; BC; we are advancing design at one of the city’s largest undeveloped sites, with plans for a new 1.5m sq. ft., mixed-use community. Nearby, in Brentwood, Burnaby, we will transform a 7.9-acre site into a pedestrian-friendly, low carbon development near transit with approximately 3,500 new homes.
In Washington, D.C., we are excited to deliver 260 new rental homes along with an 11,000 sq. ft. public park in Union Market, and in Bethesda, we have begun repositioning our most recently acquired apartment property in our value-add portfolio.
In San Francisco, construction will near completion at our GreenPoint Gold Rated rental tower in downtown Berkeley; also in the East Bay, we are advancing design at 2600 Telegraph Avenue, which will bring 225 new rental homes to Oakland. And in Los Gatos, we will continue to work with the community and town as we contemplate phase II of the North 40 project.
In all the urban gateway metros in which we invest, we see investment opportunities and the ability for us to add value as we reduce the carbon impact of our portfolio of owned properties. We are confident that the many positive attributes of our cities will lead to outperformance as market conditions recover.”
Mark Preston, continued:
“We have set a Grosvenor-wide commitment to further reduce our direct and indirect emissions across all our businesses to deliver, at a minimum, a science-based carbon reduction in line with limiting global warming to 1.5°C. We believe that this is the right thing to do but also see it as an essential value driver which will underpin the resilience of our business.
“As part of our revised international urban property strategy, we are aiming to double the size of our Diversified Property Investments business to $1.8bn over the next five years. Its current portfolio ranges from an industrial logistics hub in Poland to student accommodation in Brazil. We’ll be looking to expand our partner network and identify opportunities to build our property portfolio across different property sectors, applying a near term focus on Europe and Asia.
Commenting on Grosvenor’s core sectors of activity, Mark Preston added:
“Within our international urban property business, revenue profit was $64.9m, compared to $137m in 2021. This was primarily the result of reduced trading activity in our North American and Diversified Property Investment businesses, both of which had very strong years in 2021, boosted by one-off trading profits. Total return of 3.5% (2021: 5.2%) reflects the impact of higher interest rates across key property markets, contributing to higher yields and falling property valuations, especially in the UK where our commercial values fell by 3.7% in 2022. In contrast, our investments in sectors such as residential and logistics experienced an overall increase in values.
“Beyond our commercial performance, I was delighted to see our UK property business become the first European property company to have a long-term carbon target validated by the Science Based Targets Initiative. It continues to lead the industry on sustainability – delivering, over the past two years, a 24% reduction in emissions across all scopes, and recently making significant biodiversity and social impact commitments.
“In our food & agtech business, we committed a further $134.2m (2021: $107.9m) to new and existing portfolio companies, whose combined value now total $566m (2021: $491m). Particular highlights included Ostara, a producer of a highly efficient and sustainable phosphate fertiliser and Temperpack, a manufacturer of sustainable plant-based packaging, both of which raised fresh funds to respectively invest in a new manufacturing facility and expand production capacity. AeroFarms, the commercial leader in fully controlled vertical farming opened a new facility in the US and significantly expanded in the Middle East. Oxbury, the UK’s only bank dedicated to serving British farmers and the rural economy raised new equity and from being founded in 2021 is now on track to exceed £1bn in lending by 2024 with at least 50% of the funds being used by farms to transition to more climate friendly production.
“Our rural estates’ commercial activities are predominantly centred around Grosvenor Farms, one of the leading sustainable dairy and arable farms in the UK, a rural portfolio of more than 750 properties, and a business producing sustainably grown British timber. Although asset values increased to $468m (2021: $465m), net profits remained flat at $2.6m (2021: $3.3m), due mainly to the development of potential projects in Grosvenor Farms.
“From a macroeconomic perspective, we expect the remainder of 2023 to be very challenging, which will continue to weigh on property values but also provide opportunities for the long-term investor. Likewise, in the food and agtech sector we expect elevated economic uncertainty and inflation risks to continue to depress company valuations for some time.
“Notwithstanding that backdrop, I am clear and confident that we will stay the course with our strategy. Property as a tangible asset, and food as a basic human need, make for defensive investment options in a low-growth, inflationary world.
“Reflecting on 2022, we emerged from the pandemic a stronger organisation, primarily as a result of the way in which we acted quickly to support communities, which has helped to strengthen our internal and external relationships. Doing the right thing in hard times underpins the foundations for long-term success and is true to our history as an organisation and to that of the Grosvenor family.”
Grosvenor has been an active property owner and developer in the US and Canada for over 70 years. We focus on vibrant urban locations, making positive contributions to neighborhoods and communities. As of December 31, 2022, we had assets under management of USD$4.1bn, including 74 high-quality properties, and are executing on a USD$4.7bn development pipeline across our active markets.
In North America, we signed the World Green Building Council’s Net Zero Carbon Buildings Commitment in 2019 and have been publicly reporting our annual consumption and reduction values for over 10 years. We are guided by industry leading ESG business principles and we report to the Global Real Estate Sustainability Benchmark (GRESB).
Part of an international property company with a track record of over 340 years, we develop, manage, and invest to improve property and places across many of the world’s leading cities, promoting sustainability within the built environment, and enhancing the wellbeing of our customers and communities.
We are a values-led organization which represents the Grosvenor family. Our work in property, alongside Grosvenor’s other activities in food & agtech, rural estate management and support for charitable initiatives, shares a common purpose – to deliver lasting commercial, social and environmental benefit –addressing today’s needs while taking responsibility for those of future generations. www.grosvenor.com
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