Family Office Real Estate

World’s oldest family property dynasty’s results show a big rebound in real estate assets

The landed gentry has invested in real estate for centuries, believing it will always bounce back from a crisis. And the point has just been proved again.

The Duke of Westminster’s Grosvenor estate’s latest accounts show a 5.9% rise in the value of its portfolio in the wake of the pandemic to £8.9 billion at the end of 2021, putting valuations back to levels achieved two years ago. 

Grosvenor’s real estate portfolio now comprises 80% of the family’s total assets of £11 billion.

Property owners see the sector as a good proxy for economic growth, offering a secure income from long leases, with rents charged against tenant turnover at an early stage. Rent reviews help real estate become a decent hedge against inflation, which also erodes the impact of debt. 

In recent years, property values have been outclassed by the equity boom. Now its returns look reassuringly solid.

Profits from urban revenues at Grosvenor also recovered in 2021, rising to £99.7 million from £39.7 million the previous year. 

That said, property needs to face up to new challenges. One of them involves climate change, where Grosvenor is spending £90 million on energy efficiency. It wants to become the first carbon-neutral property company in the UK by 2025, with help from carbon offsets, driving to net zero by 2030. 

Grosvenor also needs to face digital challenges which are making an impact on the 34% of its portfolio devoted to offices and 27% to retail. 

Putting aside the pandemic, the value of its properties has barely changed over three years, suggesting the need to diversify.

Grosvenor is a big believer in busy urban environments. It has committed to a  £1.4 billion development pipeline in London. Over 12 months it has bought buildings in Manchester, Leeds, Birmingham and Bristol. Retail is more of a challenge, but Grosvenor has confirmed it is seeking digital applications.

It has boosted its tilt towards residential and agricultural activities. It took its £630 million Wheatsheaf affiliate in house, changed its management and renamed it Grosvenor Food & AgTech. 

In 2021, it invested in ventures involved in jackfruit (the latest meatless meat) and urban fungi, plus supply chains and protein. It benefited from the listing of Benson Hill, a food technology group. It invested in TemperPack, a plant-based alternative to bubble wrap. 

It has launched a sustainable timber venture based on its Eaton Estate in Cheshire, where it planted 430,000 trees in 2021.

It expanded its Tokyo and Hong Kong residential portfolios and raised capital for equivalents in Canada.

One of Grosvenor’s best-performing sectors has been multi-family apartments, which helped drive its assets in North America up 12.1%. Residential space comprises 26% of its portfolio. 

Grosvenor plans to expand its diverse international property co-investment business at a faster rate, although it will rely less on some internal teams, as it adopts an indirect management model. 

Logistics only comprise 6.8% of its overall portfolio, but Grosvenor chose to take profits on an 8 million square feet logistics development in the West Midlands by selling it to specialist developers. It also cut its stake in Portuguese retail specialist Sonae Sierra from 30% to 20% in 2022.

One of Grosvenor’s less likely deals is funding for H3 Dynamics. It has raised $34 million from investors to develop hydrogen-based air travel, starting with drones which could, at some point, change the way urban centres operate.

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