Duke of Westminster calls time on London property bubble

Tony Gosling tony at cultureshop.org.uk
Wed Apr 30 00:15:56 BST 2014

Grosvenor Estates sale marks top of London property market


The Duke of Westminster's property group has sold 
off £240m of its property portfolio in the 
Capital in the face of a cooling London market

White, Enterprise and property correspondent - 3:09PM BST 29 Apr 2014
Controlled by the 
of Westminster, Grosvenor Estates, which owns 
swathes of mansion blocks in Belgravia and 
Mayfair, has sold off £240m of its London 
portfolio, a further sign that the prime property 
market in the Capital is starting to cool.
The international real estate group reported a 
38pc rise in pre-tax profit for the financial 
year ending March 2014, driven by the sale of 
super prime property in the West End at historically high prices.
The privately-owned company 
a bumper set of results today, with pre-tax 
profit coming in at £506.9m, while revenue profit 
moved from £84.5m to £175.1m over the period.
“We doubled our revenue profit, chiefly through 
timely disposals in London which took advantage 
of favourable conditions,” said Mark Preston, the 
chief executive officer of the Grosvenor Group. 
“We are always buying and selling in London as a 
matter of course but we have been concerned about 
the high level of residential prices for some 
time and wanted to harvest some returns.”
Finance director, Nicholas Scarles, said: “Higher 
real estate lending margins, driven by a 
combination of increased bank capital 
requirements and better risk-based pricing by 
lenders, translate into increased potential 
profitability for commercial real estate lenders. 
The result is increasing levels of new debt and 
rising maximum loan to value ratios. There is a 
risk that a bubble is developing.”
In December the group offloaded five luxury homes 
on Grosvenor Crescent for £114m and pumped the 
sale proceeds into rental schemes in more 
affordable areas of London, such as a five 
hectare site in Bermondsey, just south of London Bridge.
“We have redirected [funds] to another segment of 
the London market,” Mr Preston said, “There’s a 
midmarket professional cohort of people who live 
and work in London and are priced out of the 
market when it comes to buying and are therefore 
looking to rent - but there is not enough supply 
to satisfy that demand. We are developing at 
scale which is not possible in the West End where land values are not viable.”
Mr Preston said this strategy will allow domestic 
and international talent to continue to locate to 
London. It is thought that the company's London 
portfolio makes up around £5.8bn of its entire 
assets. While concentrated in the affluent areas 
of W1, 25pc of units in its London estates are affordable housing.
“The group is well placed to tolerate 
volatility,” he said, and cited the Crimean 
crisis, Scottish independence and Britain’s 
potential exit of the European Union as 
“potential peaks and troughs. “For London to 
retain its safe haven [investment] status [for 
overseas buyers] a lot of things have to continue 
to go right here and wrong elsewhere, such as 
economic growth, favourable tax and immigration 
policies. We wouldn’t bet against london but we 
are keen to diversify and manage our risk,” he added.
Grosvenor Group evolved from the Grosvenor 
family’s property estate which has owned land in central London since 1677.

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