Continuing last week’s profiles of London’s estates, Alex Catalano looks at Grosvenor and Howard de Walden, while Penny Kay talks to Portman
The Grosvenor Estate is the leader of the pack. The largest and wealthiest of the aristocratic London estates, it is also the most sophisticated and corporate.
The contemporary Grosvenor style is a blend of aristocratic tradition and 21st century business practices. It’s epitomised by Grosvenor’s new London headquarters where the gilt-framed portrait of the 2nd Duke of Westminster hangs opposite glass wall-climber lifts, and modular meeting rooms include the odd petit-point Regency chair.
And although today the Grosvenor business spans the globe, the key remains its original 121ha (300-acre) London estate, worth £1.5bn. “It’s what enables us to go off and do the other projects,” says Stephen Musgrave, chief executive of Grosvenor Britain and Ireland.
Grosvenor’s two bits of London – Mayfair and Belgravia – happen to be some of the world’s most valuable real estate. They include the grand squares of Grosvenor, Eaton, and Belgrave, Oxford Street frontages, and more modest – but still expensive – mixed neighbourhoods near Victoria station.
How to capitalise on e-commerce
The issue currently exercising the estate is how to capitalise on IT and e-commerce. It’s part of Grosvenor’s push into less traditional property services.
Most of the London estate does not have IT infrastructure and, as Musgrave points out, suppliers tend to concentrate on big occupiers. “Small and medium-sized enterprises get left behind. The big drive at the moment is to put these together and create critical mass. We, and a lot of the other landowners together, are looking to see where we will throw our hat,” he says.
“The fact that we have 300 acres of contiguous property gives us a significant advantage in providing services to our occupants, whoever they are,” he adds.
Grosvenor already offers its tenants group energy and insurance and is working on getting its services online. Oliver Fenn-Smith, the director in charge of the London residential portfolio, envisages a future in which Grosvenor tenants click on to pay rent, check out their insurance, book theatre tickets and arrange a dog-walker.
Musgrave adds: “The internet allows us to have a direct relationship with people. They can plug into the website and access information. We can provide them with services. That is quite a powerful tool for us.”
On the traditional property side, Grosvenor’s challenge is to increase its quota of modern, open-plan offices. The estate is rich in period buildings, protected by conservation areas and the estate’s own policies. Resources are being channelled into producing new buildings when and where possible. “We’re developing and encouraging other people to do it. It’s not our preserve,” notes Fenn-Smith. “If a leasehold interest comes on the market, we’re out competing to buy it.”
Forty Grosvenor Place is a case in point: a new (215,000) 20,000m2 building taken by Enron last year. Meanwhile, the smaller, period buildings are being smartened up with refurbishments. “You’ve got Victoria, which has a different profile to Mayfair, and a different product suits each of those areas. That’s the key: providing choice,” says Musgrave.
Grosvenor is extending this philosophy to leasing. On the commercial side, the estate is offering flexible leases for smaller occupiers, in less than 1,500m2 – all-inclusive leases, shorter leases, inflation-linked leases. “It’s proved very popular – we recognise that smaller start-up businesses want certainty of costs,” notes Fenn-Smith.
Similarly, on the residential side, where there are headleaseholders between the estate and the tenants, the estate will quote for a new 99-year lease for tenants who have a lease with less than 40 years to run, a mechanism that means that it is effectively granting a direct 125-year occupational lease. That, too, has proved popular.
“It’s enabled us to get close to people who are indirect customers of ours, and widened the choice available to them,” says Fenn-Smith.
The Duke of Westminster fought the extension of leasehold enfranchisement in the 1990s, taking the UK government all the way to the European Court of Human Rights, where he lost. Tenants’ right to buy freeholds is nibbling into the London estate.
“If someone has a valid claim, we will process that application very quickly. The legislation is there and we’ll work alongside it,” says Fenn-Smith.
The London estate’s 1.4m sq ft of property is just over half residential, 36% is offices 36% and 8% retail – though because of long leaseholds, the estate doesn’t necessarily control it all. The issue, for Fenn-Smith, is managing what he calls “vibrant, mixed communities”.
“We try to give our occupiers what they want, from whichever sector. From the property point of view, it’s how we work the portfolio to add value to that business.
“We’ve got this fantastic location, but it’s all in the West End. What we can do is play around with the balance of the mixes of different type of property uses.”
He’s recently put three upscale food shops into Elizabeth Street. “I could have let those to fashion operators, probably the next day. But my vision for that part of Belgravia was to reinstate Elizabeth Street as the village high street, as it was historically. So I kept them vacant until I found the right type of food operator.”
In this, Fenn-Smith sounds more like an old-style aristocratic landlord than a profit-driven businessman. Except that his vision of a born-again high street was backed by surveys of residents and businesses in the area.
Says Musgrave: “It’s about getting the balance right. We’re return-driven, but with a longer timescale than others might be forced to take.
“It’s about creating shareholder value, and our shareholders may have some different values than others, that’s all,” he adds.
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The Grosvenor Estate |
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One big sale aside, the estate has virtually kept its 1677 form |
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Source: Grosvenor |
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Global business centred on London estate |
Grosvenor – as the estate now calls itself – is big business. It is also global, with a third of its investments spread across North America, continental Europe, Australia and Asia. The past five years have been active and successful ones for Grosvenor. It has doubled the value of its properties, to £2bn and has earned returns of 16.4% pa compound on those assets. The group borrows, and gearing at the end of 1999 was 46.5%. Grosvenor has been run as a company since 1979 but last year a major reorganisation reconfigured the business along geographical lines, moved its 400-odd London staff into a new state-of-the-art headquarters, and published a corporate report and accounts. The board is chaired by the 48-year-old Duke of Westminster, who plays an active role in the business. Jeremy Newsum is chief executive. The core holding is the London estate, and its performance is crucial. “We’ve got to put enough investment in it to make it thrive,” says Stephen Musgrave, chief executive of Grosvenor Britain and Ireland. “The opportunities are huge. We often use others by selling or letting other people develop because we simply can’t do it all,” he explains. Indeed, the estate contains 8.3m sq ft (771,400 m2) of housing, 5.3m sq ft (493,800m2) of offices and 1.2m sq ft (109,100m2) of retail, including a stretch of Oxford Street. It is still highly reversionary. About 200 staff look after the estate. Some buildings are managed in house, while others – like some of the commercial properties – are handled by managing agents. “We have 30m sq ft, 5,000 buildings – the sheer statistics of it means being fairly hands-on,” notes Musgrave. But Grosvenor has extensive holdings elsewhere in Britain and Ireland. It started developing shopping centres in the 1960s. The current £800m development programme is focused on London, Edinburgh and Dublin, and on town-centre redevelopments. The group’s activities in North America and Australia date from the 1950s. Here, Grosvenor develops and invests, both on its own account and in partnership. In 1995 it went into continental Europe with its partners, the Government of Singapore Investment Corporation, Soci,t, Fonciere Lyonnaise and Sonae Imobiliaria. Grosvenor holds a stake in the latter two, and in a Spanish property company, Hermanos Revilla. The offices in Singapore and Hong Kong are even more recent. Grosvenor has taken a 15% stake in Asia Standard International, a listed property company, and has a joint venture with Hongkong Land to set up a residential fund. Grosvenor has traditionally used partnerships and this continues a dominant theme. In this context, it is now growing its fund management business. It has 12 funds with $2.5bn under management and last year launched GMETRO, to invest in central London offices, with an initial £175m. Putting its own and partnership holdings together, Grosvenor manages £4.2bn of assets worldwide. The estate also wants to add on other property-related services. It’s involved in the consortium bidding for the BBC’s private finance initiative and is also looking at IT and e-commerce. The international divisions are now run autonomously, with the main board allocating capital and “ensuring the continuation of the unique Grosvenor culture”. |
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Turnover and pretax profits (£m) |
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Last year the estate earned less from sales of investment properties |
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Source: Grosvenor report and accounts |
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Properties and net assets (£m) |
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Grosvenor’s properties have doubled in value over the past five years |
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Source: Grosvenor report and accounts |
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From EG 13 January 1900 |
The Grosvenor name originates with Hugh Lupus, the first Norman Earl of Chester. He was chief huntsman – Le Gros Veneur – to his uncle, William the Conqueror.
But the family’s London estate was acquired six centuries later through marriage. In 1677 the 21-year-old Sir Thomas Grosvenor, owner of the Eaton Estate in Cheshire, married 12-year-old Mary Davies, heiress to the Manor of Ebury. At the time, the manor was open fields and undrained marshland on the outskirts of the expanding City of London. It stretched from the Thames up to what is now Oxford Street. Today, one big sale aside, the estate is virtually intact: 40.5ha (100 acres) of Mayfair and 81ha (200 acres) in Belgravia.
Mary’s son, Sir Richard Grosvenor, started developing in Mayfair. Grosvenor Square, begun in 1725, was the largest and grandest the capital had seen. The marshlands of Belgravia did not get going until the early 1800s. Thomas Cundy, the estate surveyor, laid out the masterplan in the classic Georgian pattern of squares, streets and crescents.
The speculative builder Thomas Cubitt leased five fields in 1825 and started work. Being near the newly styled Buckingham Palace, it attracted the aristocratic and wealthy; it was only after the second world war that institutional and commercial uses began to move into the area.
Belgravia’s success spurred Cubitt to embark on an even larger scheme for Pimlico, again on Grosvenor land. But this part of the estate went to seed after troops were billeted there during the first world war. It was sold in 1952.
Unlike some other estates, Grosvenor did not suffer much from seeing its properties become slums in Victorian times, when the long leases meant landlords had little control over their buildings. However, it did redevelop rundown parts of Mayfair, building terracotta-and-brick shops, offices and artisans’ housing on Mount and Audley Streets.
Commercial uses gradually crept onto the estate, increasing its value. The second Duke of Westminster, who inherited in 1899, was said to have an income of £1 a minute. He extended the Grosvenor empire, buying estates in England and land overseas.
His death in 1953 triggered a then-staggering £20m of death duties. Farmland was sold, but the London estate was kept intact.
The first post-war building boom largely passed over the estate, but in 1971 it produced a novel and visionary strategy for Mayfair and Belgravia. The long-term plan tackled development, housing, employment, traffic and architectural issues. The emphasis was on conservation, keeping redevelopment and bigger commercial uses to the perimeter along Oxford Street and Buckingham Palace Road.
Since the war, the Grosvenor Estate has been run more like a business than a traditional landed interest. Today it is a company, owned by the Duke of Westminster and family trusts. The current Duke inherited the title in 1979.
