Closure of two UK retail funds and value falls hit performance, with losses also expected for 2013
Grosvenor’s fund management business made a £10.3m revenue loss last year and is projected to make further losses in 2013.
In a tough year, Grosvenor Fund Management’s managed assets fell from £5bn to £4bn, partly due to the UK Shopping Centre Fund and Festival Place Fund, both retail vehicles, being wound up, and lower than expected investment volumes.
Almost £2bn of the managed assets is equity, of which GFM’s parent owns 24%, or £474m, and from which Grosvenor’s total return was 1%, compared with 3% in 2011.
Grosvenor’s whole indirect investment portfolio, which includes investments with other third-party managers as well as with GFM, fared slightly better, returning 1.5%.
The best results came from assets in Australia and France, while Grosvenor’s 50% stake in shopping centre property company Sonae Sierra returned 0.5%, reflecting negative revaluations in its southern European schemes, offset by positive ones in Brazil.
Grosvenor chief executive Mark Preston said: “The 2012 result was what we expected, with the wind-down of UK retail funds and retail values falling.
“In the year ahead we expect further losses, based on what we know about assets under management and values. But next year we expect to move into profit again.”
He said fund management was a long-term business and is still an integral part of Grosvenor’s diversification strategy.
“We have made good progress in some areas. In others, because of difficulties raising equity, it has been a harder slog than we might have expected.”
An example was GFM’s European retail assets, where the business had planned to raise a follow-on fund to Grosvenor Retail European Properties.
Preston said that in response to investors’ changing requirements, GFM had instead found interesting deals and matched them to clients’ requirements. Last year, GFM bought 30 retail assets in Lyon for a client for €350m; and the Burlov Center, Malmo, for the European retail club it set up in 2011 with Dutch investor bpfBouw and the Canadian Public Sector Pension Investment Board.
“But we are not giving up on the bigger fund-raising picture because in due course, it will be the most efficient way for some investors to invest,” Preston said.
In June, James Raynor, GFM’s UK and European head and chief investment officer, will take over from Jeffrey Weingarten as GFM chief executive.
Group pre-tax profits, including property valuations, rose from £315m to £354.4m, driven by the London market.
Revenue profit, which excludes the effect of valuations, rose 8.2% to £87.4m. The UK business contributed £38.1m to revenue profit. Indirect investments contributed £49m, down from £59.1m last year, £37m of which was from Grosvenor’s share in Sonae Sierra.
Fees from development, fund management and other income increased by 4% to £57m.
GFM reaps first Chinese Harvest deal
GFM has approved its first co-investment with China’s second largest asset manager, Harvest Fund Management.
GFM set up a joint venture with the group’s Harvest Real Estate Investments last November. The Harvest property team is led by experienced local fund manager Rong Ren.
The first co-investment will be to provide finance to local developers and property firms. Grosvenor’s early experience in China was mixed. In 2008, GFM launched the China Vega Fund, which subsequently made just one investment.
“We were going to make slow progress on our own in China but our joint venture with Harvest is exciting and gives us access to deals and investors,” said Grosvenor chief executive Mark Preston.