Living cities www.grosvenor.com

Annual Review 2014 Overview Trustees of the Grosvenor Estate (Shareholders) Grosvenor today Grosvenor is privately owned. The Shareholders are the Trustees of the Grosvenor Estate who hold the shares and other assets for the benefit of current and future members of the Our independence and heritage as a private company owned by Grosvenor family. There are six Trustees: the Chairman (the 6th ), the Executive Trustee the Grosvenor family have given us a very strong ethos, based on and four other Trustees. the enduring values of loyalty, integrity, a belief in expertise and concentration on the long term. Limited Grosvenor Group Limited is the Company established by the Grosvenor Trusts as the Our aim is to grow as a private, diversified property group, active holding vehicle for the Grosvenor Estate’s urban real estate interests. internationally across sectors, and taking a long‑term view of markets The seven Non‑Executive Directors on the Group Board include the Executive Trustee and our commitments. The individual parts of Grosvenor, described and two other Trustees, one of whom is the Chairman. The Chief Executive and Finance below, create value based on their own strategies, designed to Director are the two Executive Directors (see bottom of page 11). suit their skills and markets. The Group Executive Committee is a sub‑committee of the Board of Grosvenor Group Limited (see bottom of page 15). Direct Direct investment Indirect investment £4.7bn £1.3bn of Grosvenor capital of Grosvenor capital (also termed ‘Proprietary activities – direct’) (also termed ‘Proprietary activities – indirect’) Our regional Operating Companies are wholly owned Our Indirect Investment portfolio invests in real estate through companies through which Grosvenor makes direct co‑investments in Grosvenor‑managed funds and investments investments in real estate. Each has control over with other specialist companies. It invests 21% of Grosvenor’s its own balance sheet. Together they invest 79% of capital in Asia, , Brazil, Europe and the USA.

Grosvenor’s capital. Read more: Page 44

Grosvenor Britain & Ireland Grosvenor Americas Grosvenor Asia Pacific Co-investment in Sonae Sierra Other Indirect £3.3bn £0.9bn £0.5bn Grosvenor-managed funds Grosvenor Britain & Ireland is fortunate Grosvenor Americas owns and Grosvenor Asia Pacific has been £0.4bn £0.8bn £0.1bn to manage and develop an exceptional develops retail, commercial, residential active in the Asia Pacific region for range of properties and locations and mixed‑use property in , two decades and we are positioning through two business units: our , San Francisco, Los Angeles, ourselves for the long term, given estate, responsible for assets across Seattle and Washington, DC. We also the region’s strong long‑term growth Fund management 300 acres of and , provide structured finance to housing prospects. We continue to work with and Grosvenor Developments, developers in these markets. We aim leading local partners, combining responsible for other proprietary to understand the people who live international knowledge with local investments in Britain and Ireland. and work in the communities where expertise to provide high‑quality £3.0bn Both teams aim to create and manage we are active and seek opportunities service and value‑add returns. of assets under management great places in which people want to for place‑making. (CGI) live, work, learn and relax. Our international fund management business manages investments on behalf of 59 investors, including Grosvenor itself. It operates in Europe, the USA and Asia.

Read more: Funds Page 50

Read more: Read more: Read more: Page 28 Page 34 Page 40 Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 1 Our ‘Living cities’ philosophyphilosophy Overview 1645 Pacific Avenue is Grosvenor Americas’ first residential development in the San Francisco Bay Area. Located at the convergence of three spectacular neighbourhoods (Pacific Heights, Nob Hill and Russian Hill), the building offers 39 homes, sweeping rooftop views, three retail spaces and a number of unique art installations, including a vast mural by emerging artist Zio Ziegler. Image on front cover © Jesse Goff Photography Our ‘Living cities’ philosophy.

Direct In this review: Grosvenor aims to create high-quality places for people Grosvenor today Inside front cover Direct investment to enjoy and which use resources responsibly. Grosvenor Britain & Ireland 28 The benefits that stem from bringing together business clusters, schools and colleges, a skilled workforce and high Grosvenor Americas 34 connectivity are driving urbanisation around the world. The opportunity is for cities to grow in ways that are socially, economically and environmentally resilient in the face Grosvenor Asia Pacific 40 of global challenges. Our ‘Living cities’ philosophy 1 Grosvenor’s long-term success in responding to these Group strategy 6 challenges depends on an imaginative approach to designing Indirect investment 44 Highlights 8 individual buildings, our larger-scale place-making activity and the Chairman’s statement 10 expertise and commitment of our staff. We strive to bring new ideas Indirect Chief Executive’s review 12 to the creation of sustainable cities for future generations, Market overview 16 Fund management 50 while encouraging other city stakeholders to play their part. Portfolio analysis 18 Finance Director’s report 20 We aim to grow our understanding and knowledge of cities and 10-year summary 23 Our history 56 the challenges and opportunities facing them, and by doing so Financial analysis 24 List of offices Inside back cover to evolve our ‘Living cities’ philosophy. ‘Living cities’ in practice 26 Glossary Inside back cover Our legacy will be the degree of our success as city stewards You will find important information about Grosvenor’s current structure under this flap. and creators of long-term value.

The following pages illustrate some aspects of our approach. Funds Annual Financial Annual Environmental Global Reporting Statements 2014 Data 2014 Initiative Index 2014 Our full financial statements for the 2014 Our 2014 environmental results can To see how we continue to benchmark the financial year are available at: be viewed in detail at: transparency of our reporting, please visit: www.grosvenor.com/ www.grosvenor.com/ www.grosvenor.com/ financialstatements2014 environmental2014 gri2014 Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 2 Annual Review 2014 Annual Review 2014 3 Our ‘Living cities’ philosophy (continued) Overview 1 2 5

“ For me, it is great to be in Duke Street and next to Mount Street in Mayfair, and to place my brand among all the incredible existing ones.” Laura Apsit Livens Owner and Creative Director, Laura Apsit Livens Ltd.

1 The Westminster Roppongi 4 The Beaumont Hotel 3 6 This development in , , offers This new five‑star art‑deco hotel in an exemplary standard of living in terms Mayfair, London, UK, contains ‘ROOM’,

of lifestyle, amenity and design quality, a unique habitable structure by artist Direct featuring classic Japanese elements Sir Antony Gormley, and was voted inspired by its unique location. ‘Best Luxury Hotel Opening in the World for 2014’ by Luxury Travel Intelligence. 2 ONE In 2014, we secured the first digital 5 Southampton’s new arts complex store for retailer Argos outside We are working in partnership with London – and a new flagship store Southampton City Council in the UK to for them in North West England – deliver a new arts complex for the city, demonstrating our commitment to including seven new restaurants and bringing new concepts from leading Guildhall Apartments which comprises brands to Liverpool ONE. 38 new homes. The project will complete Southampton’s Cultural Quarter. (CGI) 3 119 Ebury Street Planning constraints for retrofitting 6 Grosvenor Ambleside listed buildings makes significant The 98 new terraced homes in this energy‑saving improvements development in West Vancouver, a challenge. This award‑winning , will sit above street‑level shops, pilot project in London, UK, cafés and restaurants. Residents will be will help to clarify guidance for able to control features in their homes, the sustainable redevelopment such as the temperature, while they of heritage properties. (CGI) are away. (CGI)

4 Indirect

Creating high-quality places In our role as managers of existing properties,

as developers of new projects, as place-makers of larger-scale Funds neighbourhoods and as fund managers, we invest in assets, cultural amenities and public spaces that aim to enrich people’s lives and create a distinctive sense of place. Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 4 Annual Review 2014 Annual Review 2014 5 Our ‘Living cities’ philosophy (continued) Overview 1 2 3 5

4 6 Direct

Supporting 7

strong communities Indirect A commitment to communities drives our efforts to create vibrant, healthy, safe and friendly places in which people can live, work, learn and relax. Learning about communities helps us make our places more relevant and, ultimately, more successful.

1-4 Grosvenor in the Community 6 Liverpool ONE In 2014, we launched ‘Grosvenor in the In the UK, Liverpool ONE’s leisure Community’ in London, UK: a series facilities and award‑winning Chavasse of initiatives – including an open‑air Park are used regularly for community film festival, pocket gardens, a more events. In 2014, the Liverpool ONE sustainable urban ecosystem for the Foundation worked with 44 local local bee population, a community groups and charities in Merseyside “ We are thrilled that arts programme and fitness sessions and in partnership with local schools, – that aim to provide tangible benefits colleges and universities to develop Grosvenor shares to tenants and stakeholders on our educational resources for use while London estate. visiting the shopping centre. our commitment to

Funds 5 Grosvenor Theatre ensuring access to 7 The Reteng Orphanage Our 10‑year partnership with the Grosvenor Asia Pacific, through Kay Meek Centre in West Vancouver, performance excellence the Westminster Foundation, Canada, will sponsor a number of sponsored and provided for the community.” youth initiatives and support future development advice for a new programming at the renamed Paul Tutsch facility that will help 100 orphan ‘Grosvenor Theatre’. Chair, Kay Meek Centre Board of Directors students with their educational and recreational activities. Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 6 Annual Review 2014 Annual Review 2014 7 Group strategy Overview Our objectives “ Our three objectives, relating to returns, diversification and and strategy reputation, are long term and consequently remain constant.” Mark Preston Group Chief Executive

What we do… The Group has three objectives: We create value by owning, developing Our strategy: Grosvenor Fund Management and managing real estate, and investing acquired the final 50% of 10 in property‑related businesses, in cities We strive to grow revenue profit Grosvenor Street on behalf of its around the world. We allocate capital to cover dividend and tax obligations, London Office Fund in September 1 2014. Sole ownership of this 5,900m2 strategically between three distinct areas and to deliver total returns above our office building in Mayfair will enable of business, and provide shared services weighted average cost of capital and us to add value to the property to support each of them (see the inside market benchmarks. We control risk through active asset management. Direct front cover for more detail). To deliver by means of conservative gearing and management of liquidity at the a We invest in, develop and manage corporate level, and by rigorous property directly through our regional attractive long-term management of projects at the Operating Companies, using our property level. local knowledge. We invest 79% returns. of Grosvenor’s capital in this way. a We invest indirectly in property by allocating capital to co‑investments in Grosvenor‑managed funds and to other indirect investments. We invest 21% of Grosvenor’s capital in this way. Our strategy: In 2014, our Indirect Investment a We manage capital for third‑party business succeeded in its strategy to Diversification. We diversify by geography, re‑invest in Australia by completing investors through various investment 2 sector, currency, property activity and an investment with Propertylink, vehicles. We receive income from a specialist in the Australian management team. Our structure provides management and performance‑ industrial and logistics sector. three routes to achieving this: direct related fees. proprietary activities, indirect proprietary

To develop and Indirect How we do it… activities, and fund management. Grosvenor has a devolved business model. co-ordinate an ‘Living cities’. We use our expertise as We believe that decisions about real estate stewards (asset managers) of existing are best made on the ground, by local internationally diversified properties, as place‑makers (developers) people who know their markets. of new projects, and as fiduciaries (fund managers) of capital to create In our decision‑making, we draw upon property group. high‑quality places for people to enjoy experience gained over a long period of and which use resources responsibly. what makes for success or failure in urban environments, as well as on the creativity and know‑how of property specialists around the Group. We use this knowledge Our strategy: As part of a wider effort to reduce to create value for our Shareholders and energy usage across its entire for the investors who entrust us with We recruit and develop people who directly‑managed property their capital. 3 share the values of Grosvenor — loyalty, portfolio, Grosvenor Britain & Ireland retrofitted three properties integrity, expertise and long‑term vision to the EnerPHit Passivhaus Why we do it… — and have the skills and ambition to help energy performance standard. Creating value is certainly about To uphold Grosvenor’s us implement our strategy. We stick to our The properties will be the first of promises, build lasting relationships with this standard in the private rented profits, but is also about legacy and sector in London and will have thus reputation. reputation for quality, partners and work closely and responsibly excellent thermal performance Funds with local communities. and exceptional airtightness and Rigorous discipline to ensure financial mechanical ventilation, leading to success allows us, and our investor integrity and an 80% reduction in energy usage. partners, to fund activities whose financial, social, environmental and social responsibility. other benefits may only become evident over the longer term. Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 8 Annual Review 2014 Annual Review 2014 9 Highlights Group operational Group financial Overview highlights highlights

See glossary on the inside back cover for definitions Group analysis:

Assets under management* Property assets* Development exposure* Shareholders’ funds Revenue profit* Total return

£11.4bn (2013: £11.4bn) £6.0bn (2013: £5.5bn) 12.3% (2013: 12.9%) £4.0bn (2013: £3.5bn) £80.1m (2013: £153.3m) 13.1% (2013: 9.7%) 4 160 15 12 6 20 12.0 11.8 6.0 4.0 140 153.3 11.4 11.4 5 12 10.5 5.4 5.4 5.5 16 17.8 3 3.5 120 13.1 9 5.0 17.1 xx 3.2 4 15.0 100 Direct 12 2.9 9 2.6 10.9 9.7 12.9 2 80 9.0 6 3 12.3 8 60 80.1 6 7.2 2 63.6 65.1 3 1 40 50.5 4 3 1 20 0 0 0 0 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Why we measure Why we measure Why we measure Why we measure Why we measure Why we measure To report the total value of the Shareholders’ To identify underlying performance, To show how our property portfolio has To monitor the scale of the portfolio of property To quantify the Group’s financial investment To indicate the level of committed development investment in the Group. excluding market movements. performed, including both income and assets for which the Group’s management teams in property assets. activity, expressed as a proportion of total capital returns. are responsible. property commitments. Comment Comment Comment Shareholders’ funds have hit a new high, largely Revenue profit has returned to the pre-2013 Comment Comment Property assets have increased largely due Comment as a result of the revaluation increases across upward trend following the exceptional profit in A strong return delivered by the Group with Strong revaluation increases across all Operating to significant revaluation uplifts across all our Our current development exposure has fallen, our portfolio. 2013 due to one-off trading profits. outperformance in all Operating Companies. Companies, particularly in Grosvenor Britain Operating Companies. largely as a function of the increasing value of the This translates into a profit before tax of £681.8m & Ireland, were offset by disposals of assets in investment portfolio. Our development pipeline (2013: £506.9m). Grosvenor Fund Management. means that we expect this measure to increase over the coming years. * Restated. Refer to glossary. * Restated. Refer to glossary. * Restated. Refer to glossary. * Restated. Refer to glossary. Operating company analysis: Indirect Occupancy Energy consumption Water consumption Shareholders’ funds** Revenue profit** Total return**

3 95.0% (2013: 95.1%) 120,204MWh (2013: 129,315MWh) 657,089m (2013: 689,402m3) 100 20 100 160,000 700,000 95.0 95.1 95.1 95.0 140,000 600,000 75 45.9 80 93.5 15 17.3% 120,000 500,000 60 100,000 50 400,000 10 80,000 34.2 40 300,000 25 9.7% 9.1% 60,000 8.7% 200,000 6.5 23.4 5 20 40,000 0 20,000 100,000 -10.9 0 0 0 0 -25 2010 2011 2012 2013 2014 2013 2014 2013 2014 Why we measure Grosvenor Britain & Ireland 21,460MWh Grosvenor Britain & Ireland 18,186m3 Grosvenor proprietary activities — direct Grosvenor proprietary activities — direct Grosvenor proprietary activities — direct To help us increase revenue profit. Grosvenor Americas 32,602MWh Grosvenor Americas 307,039m3 Grosvenor Britain & Ireland £2,547.8m Grosvenor Britain & Ireland £45.9m Grosvenor Britain & Ireland 17.3% Maximising occupancy in our buildings is a key driver. Grosvenor Asia Pacific 4,477MWh Grosvenor Asia Pacific 13,462m3 Grosvenor Americas £574.1m Grosvenor Americas £34.2m Grosvenor Americas 9.7% 3 Comment Grosvenor Fund Management 61,665MWh Grosvenor Fund Management 318,402m Grosvenor Asia Pacific £357.8m Grosvenor Asia Pacific £6.5m Grosvenor Asia Pacific 9.1% Our focus continues to be on maintaining high Funds Why we measure Why we measure occupancy levels, with good results across all Proprietary activities — indirect £523.8m Proprietary activities — indirect £23.4m Proprietary activities — indirect 8.7% To monitor our energy consumption To monitor our water consumption our sectors and regions. so we can identify ways to improve our so we can identify ways to improve our Grosvenor Fund Management £0.7m environmental performance. environmental performance. Grosvenor Fund Management (£10.9m) Comment Comment We have reduced energy consumption by 7.0% We have reduced water consumption by 5.0% across our like-for-like directly-managed portfolio across our like-for-like directly-managed ** Exc ludes the and Grosvenor due, in part, to retrofitting initiatives which have portfolio due, in part, to initiatives to improve Fund Management. Total return on property improved energy efficiency. water efficiency. assets is not a relevant measure for Grosvenor ** Excludes the Holding Company. ** Excludes the Holding Company. Fund Management. Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 10 Annual Review 2014 Annual Review 2014 11 Chairman’s statement Overview Continuing financial strength The virtues of ‘patient capital’ Grosvenor’s ‘Living cities’ Investing The Group’s financial performance Grosvenor’s unusual nature derives partly We believe our ‘Living cities’ philosophy continued its strong run in 2014. from being a private company. Free from also marks us out. We aim to contribute Revenue profit was £80.1m, total return the short-term demands of financial to the sustainable growth of the cities in for the future was 13.1% and Shareholders’ funds markets, we are able to set our own destiny which we operate by creating high-quality increased to £4.0bn. This return was and invest for the long term, with no need places for people to enjoy and which use above our expectations at the beginning to churn capital to show immediate results. resources responsibly. of the year thanks largely to another We aim to deliver the highest quality The Westminster Foundation (which robust performance in Grosvenor Britain design, build and service standards, while represents the philanthropic activities of & Ireland. Looking ahead, we expect more developing strong communities through the Grosvenor family, headed by the Duke modest returns as the UK contribution an increasing focus on the public realm. of Westminster, and the Grosvenor Estate) reverts to trend. Changes to our Board had another strong year of grant-making We have long operated far beyond our and charitable activity in 2014. In particular, central London roots and we continue A strong Board is, of course, crucial to the it made a number of grants to several to develop fruitful partnerships with preservation of our values and approach well-respected charities to combat poverty investors and businesses around the world. and so we are delighted to have been able in the areas of the UK where it operates From indirect investments in Australia to appoint Sir Philip Dilley and Christopher and came together with Grosvenor Britain In summary: to partnerships with investors in urban Pratt as Non-Executive Directors. Philip’s & Ireland to launch the Living Communities retail in Continental Europe, our business experience as Chairman of design, Fund, administered by the London Direct A strong result continues to broaden and evolve. engineering and consulting firm Arup will Community Foundation, which makes small Continued strong financial performance be invaluable as the Group embarks on grants to grassroots community groups in As one of the world’s few genuinely in 2014 prepares the ground for the next several large projects. Christopher’s recent south Westminster, London. phase of longer-term projects soon to international property groups, maintaining experience as Chairman of Swire Group in come on stream. a consistent approach and set of values will provide a highly relevant Part of the strength of Grosvenor’s long- is challenging. But I am nevertheless perspective as we continue to expand and term outlook is our ability to withstand struck by the ability of our people to do develop our presence in Asia. short-term pressures, take advantage of Continuing financial strength business across the world in a way which opportunities during periods of market Our diversification strategy continues to is tailored to individual markets while 2014 saw us celebrate 20 years in Asia: two weakness and ride out the property cycle. evolve and deliver. at the same time consistently true to decades of considerable success under the It is typical of our approach that we are Grosvenor’s values. leadership of Nick Loup. Nick hands the already planning for the next downturn Changes to our Board reins over to Benjamin Cha who becomes to ensure we can weather it and invest Chief Executive of Grosvenor Asia Pacific New Board members strengthen the during it. Group’s international perspective. on 1 April 2015. We are ambitious for the growth of this business. Lesley Knox Group Chairman Our responsibility to society 26 March 2015 Our commitment to the long term and the highest quality design, build and

service standards is uncompromised Indirect throughout our global activities. Grosvenor Group Limited – Board of Directors as at 26 March 2015 The Group Board is responsible for setting and monitoring strategy, ensuring adequate funding, formulating policy on key issues, reviewing performance and reporting to the Shareholders. It meets five times a year.

From left to right:

Jeremy Newsum FRICS Lesley Knox Domenico Siniscalco PHD Non-Executive Director Chairman and Non- Non-Executive Director Executive Trustee, Executive Director Vice Chairman, Country Head Grosvenor Estate Trustee, Grosvenor Estate; of Italy and Head of Government

Non-Executive Director, Coverage EMEA, Morgan Stanley Funds Jeffrey Weingarten Centrica plc and SABMiller plc Non-Executive Director Michael McLintock Non-Executive Director, Nicholas Scarles Non-Executive Director Aviva Investors FCA ATTORNEY AT LAW Trustee, Grosvenor Estate; Executive Director Chief Executive, M&G Group Mark Preston FRICS Group Finance Director Executive Director Christopher Pratt Group Chief Executive; Sir Philip Dilley Non-Executive Director View interview with Lesley Knox at: Non-Executive Director, Non-Executive Director Non-Executive Director, www.grosvenor.com/ Read biographies online at: Trustee, Arup; Johnson Electric Ltd about-grosvenor/performance www.grosvenor.com/group-board Chairman, UK Environment Agency Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 12 Annual Review 2014 Annual Review 2014 13 Chief Executive’s reviewreview Overview 2014 has been a further year of strong Likewise, in Vancouver we are Diversification Consistent strategy, financial results, and of good progress undertaking one of our most significant We achieve a diversified investment against all three objectives (see pages 6-7). developments in the Americas – Grosvenor portfolio through our three proprietary My report on each of those objectives is Ambleside (see caption 2 below and Operating Companies in Britain and Ireland, new projects... set out under the next three headings. caption 6 on page 2) – which will help North America and Asia Pacific; via indirect rejuvenate the historic Ambleside Village Returns property investments, backing managers through a mix of residential, retail and with specialist skills and investing in We focus on two primary measures of public realm investment. new markets; and through our property return: revenue profit and total return. Our UK business continues to focus on fund management business (Grosvenor In my statement last year, I described the London market but has reduced its Fund Management). Having been closely our revenue profit in 2013 as exceptional exposure to upmarket residential, believing correlated during, and immediately (resulting from significant residential sales there are better opportunities elsewhere following, the global financial crisis, our in London) and indicated that the 2014 (see caption 1 below). markets are now at different points in the figure would be lower, but in line with the cycle, with slowing, the USA and trend of prior years – and indeed this has Outside the UK, Grosvenor Americas UK mid-cycle, and Continental European been the result. The total return of 13.1%, acquired several residential development markets still early in recovery. The benefits however, exceeded expectations yet again, sites during the year, including one adjacent of a strategy based on diversification due mainly to strong outperformance in to Jackson Square in San Francisco In summary: derive from such a lack of correlation and Grosvenor Britain & Ireland. As a result, and another in downtown Vancouver. we allocate capital to take best advantage

Meanwhile, it made a particularly notable Direct On trend Shareholders’ funds grew to £4.0bn of this. Our new Group Research Director, (2013: £3.5bn). contribution (£34.2m) to revenue profit for Graham Parry, expands on this issue on The Group’s revenue profit is in line with the year. the trend maintained over recent years. Grosvenor’s commitment to delivering pages 16-17. returns over the long term is partly Grosvenor Asia Pacific entered into Today we invest circa 40% of our balance Outperformance demonstrated through our £5.5bn a new development partnership and its sheet outside the UK. This in itself first site has now been acquired in Tokyo. Grosvenor Britain & Ireland’s strong development pipeline, much of which sets us apart from many other major performance contributes to the highest involves many years of planning and Returns from both our new indirect property groups, which tend to have a total return since the start of the pre-construction activity. investments and from co-investments domestic focus (and are increasingly financial crisis. To pick two examples, we are involved in in 2014 were in the mid-teens and single-sector). We invest in an in-house discussions with the planning authorities these two areas continue to lead our research capability to add insight, from an International in the London Borough of Southwark over diversification strategy. investor’s perspective, to other sources of information on global markets, sectors We celebrated the 20th anniversary of the development of a five-hectare site Looking ahead, property broadly defined and trends. On-the-ground property investing in Asia. Benjamin Cha succeeds in Bermondsey (see caption 6 on page 33), is expected to produce returns of up expertise and knowledge in our 17 offices Nicholas Loup as Chief Executive of which could create 800 new homes and to 8.0% over the next several years complements this central resource. Grosvenor Asia Pacific. help to transform this part of London. and we consider this to be a realistic expectation for Grosvenor too. While we ‘Living cities’ remain focused on generating long-term returns , we will be in a position, financially

We are putting ‘Living cities’ into Indirect practice across the Group. and strategically, to act swiftly and opportunistically where appropriate. Long-term view We continue to emphasise the importance of the long-term view.

1 69 Grosvenor Street 2 This 18th century period townhouse in Mayfair, London, UK, was redeveloped into an office, completing at the end of 2014. Its modern design, complemented by carefully restored historical features, offers an alternative 1 to traditional office space. Funds 2 Grosvenor Ambleside Ninety-eight individually designed homes will rise in terraces in two buildings and will be connected by a glass-covered galleria – an animated and View interview interview with with Mark Mark Preston Preston at: at: engaging streetscape filled with www.grosvenor.com/ music, art, people and life. (CGI) group-executive-committeeabout-grosvenor/performance Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 14 Annual Review 2014 Annual Review 2014 15 Chief Executive’s review (continued) Overview 2014 was the year in which we celebrated This part of the Group also co-invests “ It is a dynamic time for each market As a final note on the topic of diversification, These are the reasons why I feel We encourage our Operating Companies our 20th anniversary of investing in in funds managed by Grosvenor Fund in Asia where we have a presence. one of the challenges and opportunities for proud to have celebrated my own to contribute to the local communities in Asia (see pages 40-41 and back cover). Management. This is an important means With our long-standing commitment any international group is how best to share 25th anniversary at Grosvenor in October the cities in which we hold assets. It is part We were early international investors in by which we diversify and pursue our to the region, our strong partnerships and learn from its collective knowledge 2014. I find it rewarding to see through of their responsibility to their communities the region’s property markets and have search for new opportunities, while offering and carefully developed strategies, and experience across the world. For the the consequences of decisions made to do so. been steadily building a reputation in the our property expertise to institutional, Grosvenor Group, part of the ‘glue’ which in previous years – a privilege which I am confident we will be able to One example of this is our Grosvenor residential sector in particular (see caption private and other large investors. brings us all together is our approach to is regrettably rare in an increasingly expand on previous successes. Ambleside development in West 3 below). The celebration in Hong Kong was creating and managing places in cities, short-termist world. Grosvenor Fund Management has I look forward to being part of Vancouver. As part of our commitment suitably upbeat, conveying well what has which we term ‘Living cities’. deepened its focus in Europe and the process.” I was delighted to be appointed as global to place-making, we entered into a been achieved there, and in and two events in particular illustrate the This approach underpins our strategy and Chairman of the ’s partnership with the Kay Meek Centre Tokyo, under the leadership of Nick Loup, significance of this: a new partnership is summarised on page 1, and detailed on (ULI) Center for Sustainability’s Advisory to support a number of youth initiatives who is succeeded as Chief Executive of with a large North American investor to pages 26-27. Board. Sustainability is central to the ULI’s as well as future programming. The Kay Grosvenor Asia Pacific by Benjamin Cha invest in European retail property and Benjamin Cha mission, and the Institute has a long history Meek Centre will, in turn, manage the (see quote to the right and caption 2 the acquisition of Skärholmen Centrum Managing Director, Reputation of examining best practices in land use performance space we are creating on page 43) on 1 April 2015. Ben joined Grosvenor Asia Pacific (see caption 4 below and pages 50-51), and community-building that promote at Ambleside. us in September 2014. He has a deep Succeeds Nick Loup as Chief Upholding Grosvenor’s reputation for the fourth largest shopping centre in Executive on 1 April 2015 responsible resource use and long-term understanding and experience of the quality, integrity and social responsibility is Grosvenor encourages individual , together with an Asian and a resilience for the benefit of people, profits Asian property market and his background the third of our objectives. More than anything initiative and teamwork throughout the European investor. 3 and the planet. is suitably international. else this relies on recruiting, retaining and organisation. I would like to thank all developing people with values and skills that

The benefits of diversification to Grosvenor 3 Grosvenor has an important 524 staff for playing their part in the Direct In Grosvenor Americas, we remain continue to be as valuable as ever and so match our ethos and strategy. However, responsibility as a major player in real evolution of the Group and in upholding focused on the cities of Vancouver, Calgary, we will grow our international exposure merely listing the values of the Group – estate. We participate in many different and enhancing our reputation – every San Francisco and Washington, DC, but and develop new partnerships. Meanwhile, loyalty, integrity, expertise and long-termism – ways in the public realm, so it is right contribution makes a difference. are also actively managing investment political, economic and fiscal uncertainties reveals little about what sets us apart. that we have a voice on issues which properties in Seattle and Los Angeles. Mark Preston continue to emerge on the horizon and we What differentiates us? Because we are affect our various stakeholders, via the Group Chief Executive Our Indirect Investment business has plan for these by maintaining a low level of private and have a stable ownership ULI, London First and several other 26 March 2015 investments in the logistics sector in the balance sheet gearing (23.0% at the end of we can think, plan and act for the long industry organisations. UK, USA and now Australia, in addition to 2014 – see page 24) and generous financial term; because we have a long history We have commissioned a leading research an exposure to this sector via a portfolio of capacity (£1.1bn – see page 25). in, and deep understanding of, cities, company to look at how we are seen by listed securities. We also continue to hold we can share this with our partners and a wide range of audiences, including the a significant investment in Sonae Sierra, clients and make a contribution to the public at large. We suspect that many giving us exposure to the recovering retail evolution of sustainable communities; perceptions of Grosvenor are still rooted sector in Southern Europe and to shopping and because the long-term relationship is in the past and that we therefore need centres in Brazil. more important to us than the short-term to communicate more actively to convey opportunity, we bring a unique perspective the changing Grosvenor of today and to our interactions with partners, lenders, the future. occupiers, advisers and staff. Indirect

4 Grosvenor Group Limited – Executive Committee From left to right: Nicholas Scarles FCA ATTORNEY AT LAW as at 26 March 2015 Andrew Bibby Group Finance Director Chief Executive, Grosvenor Americas The Group Executive Committee is responsible for co-ordinating Peter Vernon FRICS Nicholas Loup the implementation of Group strategy. It meets three times Chief Executive, Chief Executive, Grosvenor Britain & Ireland a year. Benjamin Cha succeeds Nicholas Loup on 1 April 2015 Grosvenor Asia Pacific James Raynor (see page 14). Mark Preston FRICS Chief Executive, Chairman, Executive Committee Grosvenor Fund Management Group Chief Executive

3 The Belgravia Azabu ‘The Belgravia’, together with ‘The Grosvenor’ and ‘The Westminster’ residential brand names in Asia, are increasingly recognised for the high- quality design and finishes that they bring to the market. The Belgravia Azabu in Tokyo, Japan is our latest addition to this portfolio. Funds 4 Skärholmen Centrum Grosvenor Fund Management acquired this leading shopping centre in , Sweden, on behalf of its Retail Centres V (Sweden) fund, just after the year-end. The 98,000m² asset comprises more than 175 retailers and boasts exceptional community facilities. Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 16 Annual Review 2014 Annual Review 2014 17 Market overview Limiting risk in a Overview world of opportunity

Still an uncertain world Diversification enhances Risk mitigation is Indeed, the extra cushion provided by The enduring attraction The property cycle The global economy remains a global real estate returns particularly important currency diversification can be particularly of well-connected cities is not dead important during large global demand challenging environment for property From a property perspective, the current In addition to offering greater potential The latest data on global real estate Part of the recent bias toward large shocks, which tend to hit all real estate investors. While global momentum has mixed fortunes in the global economy are returns, the uncorrelated nature of global investment suggests a renewed appetite gateway cities has also been a retreat markets simultaneously, but which cannot, improved, it continues to be buffeted by reinforcing the benefits to investors of property market cycles means that amongst real estate investors for global from risk in a period of enduring global by definition, hit all exchange rates at the periodic setbacks and disappointments. holding a diversified real estate portfolio, diversification can provide a significant diversification: cross-border investment uncertainty, which has kept investors same time. In other words, while local There have been a number of false starts, which extends the investment choice reduction in the volatility of portfolio flows increased again in 2014, but are still anchored in safe-haven markets. The fact property markets often become more including a stalling Eurozone recovery, to a greater range of potential market returns, relative to the level of risk in any not back to pre-crisis levels. However, a that the global recovery remains patchy correlated during a global shock, currency- heightened geopolitical risk and turbulent opportunities. No single location or single market. The chart opposite shows major theme since the crisis is that global has been reflected in continued periodic adjusted returns do not.

emerging markets. property sector outperforms all other the correlation between commercial investors remain particularly selective bouts of investor uncertainty, and a bias Direct The net effect is that the world has not markets all of the time. property returns in London and 53 other It takes local knowledge about which global real estate markets toward large, liquid markets. This has global cities. they are willing to invest in. pushed yields in a number of key global been able to shake off a general feeling Total investment returns can be enhanced to deliver ‘alpha’ returns real estate markets to record lows and of unease. Although the bulk of the through a mixed portfolio, which offers While there is a high correlation (above There has been a particularly strong The key difficulty with global property created concerns about overheating. available evidence still points to a gradual the chance to increase exposure to leading 0.90) between London and other UK cities, diversification is how to put theory into demand by large global investors with a normalisation in the global economy, the markets early in the cycle and then take many markets have low or even negative practice. Despite the clear benefits narrow focus on only top prime assets in In this environment, the main risk is recovery remains contingent on continued profit at the top of the cycle before those correlation with the London market. Thus, from global diversification, real estate the largest leading global gateway cities. complacency. While a diversified portfolio extraordinary policy stimulus from central markets overheat. by holding a diversified portfolio of lowly of leading global cities will provide strong investors have tended to have a greater This shift reflects both structural and banks and there are continued doubts correlated global markets, the investor can returns over the long run, investors will As different regions move to different home-country bias than investors in other cyclical factors. Globally integrated and about what exactly the new normal now is. avoid taking a compounded hit to returns need to look more closely at market points of the economic cycle it will assets classes. This partly reflects the vibrant cities like London, New York In the meantime, this prolonged period of in all markets all at once. fundamentals to distinguish which regions accelerate the divergence of real estate inherent nature of real estate markets. and San Francisco have enjoyed more abnormally low interest rates has boosted and sectors offer the best value, based on returns and reinforce the benefits of Diversification benefits are further Although property returns are closely tied dynamic population and employment a wide range of asset prices, including real where they are in the cycle. With interest geographic and sector diversification. enhanced when local market returns to the economic cycle, there is often an growth and are increasingly becoming estate, to unprecedented levels. rates expected to remain low for at least are adjusted for currency movements. opportunity in real estate to outperform incubators for a knowledge-based another year, there is a risk that investors Further complicating the outlook is the When local currency returns are converted the market by exploiting greater local economy. This economic dynamism, in begin to under-price the prospect of an increasing divergence in regional growth to Sterling (the white circles on the chart knowledge and expertise to generate turn, creates greater potential real estate eventual normalisation in growth and prospects. The USA and the UK have pulled opposite) the relative performance of ‘alpha’: a better risk-adjusted return than opportunities for local operators to exploit interest rates over the medium term. away from their beleaguered European and major global cities becomes even more the market average. However, there are few local knowledge to deliver above-market This looks to be a particular concern in Japanese counterparts. At the same time, uncorrelated, increasing the stabilisation global investors who are able to be effective returns. Real estate in these leading global Indirect some of the larger prime global markets uncertainty about the strength of demand benefits from a diversified portfolio. direct investors in a broad range of global cities is a good investment, particularly for that have benefited the most since the in China and other emerging markets is property markets. Most are forced to long-term investors. continuing to cloud investor sentiment. access property opportunities indirectly by crisis, but which are often the most finding local experts with aligned interests advanced in terms of the property cycle. and values, which is itself a challenge. Graham Parry Group Research Director 26 March 2015

Correlation between London property returns and other global cities (in local currency and GBP) 1.0 0.8 0.6 0.4 0.2 0.0 -0.2

-0.4 Funds -0.6 Graham Parry

Group Research Director (2004-2013) returns London with Correlation -0.8 -1.0 Oslo Paris Paris Milan Milan Perth Porto Porto Seoul Seoul Rome Tokyo Berlin Dallas Dallas Miami Miami Dublin Dublin Lisbon Lisbon Boston Boston Madrid Madrid Seattle Sydney Sydney Denver Denver Atlanta Munich Munich Geneva Geneva London London Calgary Toronto Toronto Chicago Chicago Houston Houston Portland Portland Brisbane Brisbane Montreal Montreal Shanghai Shanghai Hamburg Hamburg New York Frankfurt San Diego Diego San Barcelona Edinburgh Stockholm Vancouver Rotterdam Cape Town Dusseldorf Melbourne Melbourne Hong Kong Kong Hong Amsterdam Amsterdam Manchester Los Angeles Angeles Los Minneapolis Philadelphia Birmingham Copenhagen San Francisco Johannesburg Johannesburg Impact of currency movement Property level correlations Correlation in GBP Washington, DC Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 18 Annual Review 2014 Annual Review 2014 19 Portfolio analysis A diversified Overview portfolio

Segmental analysis Diversification of our property portfolio is achieved by investing in property, both Proprietary activities — direct property assets: rent and yield profiles directly and indirectly, and across various geographical locations, sectors, activities and management teams. Our exposure is measured in terms of our share of property assets Rent profile £m Yield profile % held on the balance sheet and assets under management (which includes property 80 7 assets that we manage on behalf of third parties). During 2014, Grosvenor’s share of 70 6 property assets grew 9.0% to £6.0bn and assets under management remained at £11.4bn, 60 5 50 reflecting the valuation increases across the proprietary business, offset by a reduction in 4 40 the assets under management in Grosvenor Fund Management. 3 30 See glossary on the inside 20 2 back cover for definitions 1 10 Direct Office Retail Residential Hotel Industrial Office Retail Residential Hotel Industrial PropertyProperty assetsassets Passing rent Estimated rental value Running Reversionary Grosvenor’s share of investment properties, development properties and financial investments in property assets. Proprietary activities — indirect Grosvenor Fund Management Hotel Asia Pacific Development

Other £110m Americas £534m Fund management £555m Managed by Grosvenor Industrial Office 1.8% 8.9% 9.2% Fund Management Managed by £190m Retail £880m £2m third parties Office £61m Other £652m Other 3.2% £2,284m 14.7% 0.0% £381m 4.8% 21.7% 30.0% £61m £89m £33m £126m 38.0% 4.8% 7.0% 2.6% 4.2%

By Operating By activity By sector Company Assets under Property assets– Property assets– management– by category by sector by sector

Office Indirect Investments Indirect £1,654m Residential Britain & Ireland Investment 27.6% £1,265m £1,763m 21.1% £3,320m £5,446m Sonae Sierra Retail Retail 29.4% 55.3% 90.8% £826m £1,084m £2,230m 65.2% 85.6% 74.1%

Assets under management Development analysis Assets under management represent the total investment in property assets (belonging to both Grosvenor Group and third-party The combination of the completion and disposal or transfer of some of our mature development projects, together with investors), including the future costs of committed developments. the continued strong appreciation in the value of our investment portfolio, means that our development ratio (measured as the value of trading and development property assets as a proportion of the total property portfolio) has fallen to 12.3% Hotel Indirect Investments Development from a peak in 2012 of 17.8%. This fall in the development ratio, which includes cost to completion, needs to be considered Other £180m Retail £887m Asia Pacific £909m alongside the Group’s development pipeline of key projects that are either currently on the ground or have plans which are 1.6% £289m £4,912m 7.8% £683m 7.9% well progressed (including projects which are not yet committed). The chart below shows the expected gross development 2.5% 43.0% 6.0% value of the development pipeline projects (£5.5bn) together with potential completion dates.

£bn 2.0

By Operating By activity By sector Company 1.5 Funds

1 Americas £1,666m Britain & Ireland 14.6% Office Fund £5,192m 0.5 £2,907m Residential management 45.3% Investment 25.4% £3,148m £3,008m £10,527m 27.5% 26.3% 92.1% 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 onward Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 20 Annual Review 2014 Annual Review 2014 21 Finance Director’s reportreport Overview Group performance Grosvenor Asia Pacific’s revenue The total return from Indirect Investment at 8.7% (2013: 3.6%) was due in part to a Group financial performance in 2014 was profit increased by 44.4% to £6.5m The financial recovery in Southern Europe – Portugal in strong. Of course we recognise that this (2013: £4.5m), driven by increased rental particular – and strong performance from was driven in part by markets, as well as income from new acquisitions and profits our investments in funds. capacity to seize our teams’ operational performance. from The Westminster Roppongi development in Tokyo. Revenue profit of £80.1m returned to Treasury the pre-2013 upward trend. As I said Indirect Investment’s revenue profit opportunities reduced by 40.2% to £23.4m (2013 £643.0m of wholly owned and managed last year, the revenue profit comparison restated: £39.1m), due to reduced holdings debt refinancings took place during the should be with 2012 (restated £65.1m) year, taking advantage of low interest rather than last year’s exceptional spike of co-investments, together with trading property impairments in Sonae Sierra. rates and the financial strength of (2013 restated: £153.3m). Profit before Grosvenor and the joint ventures and tax increased 34.5% to a record £681.8m Grosvenor Fund Management reduced its funds which we manage. We adopt (2013: £506.9m). Total return, which losses by 27.0% to £10.9m (2013: £14.9m a co-ordinated approach to treasury includes both income and capital returns, loss), benefiting from the first full year of management, whereby negotiation, was 13.1% (2013: 9.7%), the highest its more focused strategy. approval and responsibility is at the local since the onset of the financial crisis. level while benefiting from central, shared Shareholders’ funds increased by 14.8% Total return professional treasury expertise and In summary: to £4.0bn (2013: £3.5bn). The rationale for our diversified portfolio relationship management. is to smooth the impact of peaks and Direct Strong performance Operating Company performance troughs in different geographical markets. Taxation Another exceptional year, driven We expect markets to be at different Revenue profit The 2014 effective tax charge was 21.3%, by markets and Group-wide points in their cycle, yet 2014 proved Grosvenor Britain & Ireland’s performance similar to last year, after taking account of operational performance. to be a year in which all our markets in 2014 should also be compared with the distortive effects of changing tax rates. performed positively. the trend established up to 2012 and not It is perhaps not surprising that property, Growing portfolio with the exceptional trading profit of 2013 For the fifth consecutive year, Grosvenor being physical and immovable, is taxed Unusually for a diversified portfolio, arising from the decision to take advantage Britain & Ireland delivered the highest total where it exists, so our effective tax rate all markets performed well. of prime residential pricing. Their revenue return amongst our Operating Companies, is driven by the blend of tax rates in the profit in 2014 was £45.9m (2013: £117.5m), at 17.3% (2013: 16.5%). This figure reflects jurisdictions in which our investments and a 30.4% increase on 2012. continuing strong revaluations and active Reduced gearing developments are located. Gearing was reduced in preparation management of the London estate. Grosvenor Americas’ revenue profit for the next phase of development. increased by 44.4% to £34.2m Grosvenor Americas’ total return of 9.7% Borrowing and investing (2013: £23.7m) due to the successful was down slightly from last year’s six-year While we challenge each of our Operating Prepared completion and sale of developments, high (2013: 10.5%), and Grosvenor Asia Companies to maximise income and total We are well set up for a downturn, including the 39 residences at 1645 Pacific Pacific’s 9.1% was up on the previous return, we do this within a comprehensive whenever that may come. Avenue in San Francisco, . year (2013: 5.4%) due to positive set of financial and operational parameters revaluation movements. designed to ensure Grosvenor’s survival.

Resilient future Indirect Grosvenor remains committed to making the property industry more resilient. Economic property interests by city

2013 2014 2013 2014 UK UK Australia/Asia Pacific 61.6% West End, London 48.2% 52.6% Hong Kong 4.9% 4.8% Australia/ 2013: 58.8% Asia Pacific Other London 4.7% 3.3% Tokyo 2.8% 2.2% 10.3% Liverpool 2.9% 2.9% Beijing 1.5% 1.5% 2013: 10.3% Other UK 3.0% 2.8% Shanghai 0.7% 0.7% Australia 0.0% 0.6% North America Osaka 0.4% 0.4% Vancouver 3.5% 3.3% Other Asia 0.0% 0.1% Washington DC 3.2% 3.3% Seattle 3.5% 2.8% Continental Europe Other USA 2.5% 2.7% Other Portugal 2.3% 2.1% San Francisco 2.1% 2.6% Lisbon 1.7% 1.6% Funds South America Calgary 1.2% 1.1% Germany 1.7% 1.4% 2.2% North America Other Canada 0.1% 0.1% Porto 1.3% 1.2% 2013: 2.4% 15.9% Spain 1.3% 1.1% 2013: 16.1% South America Italy 1.3% 0.9% São Paulo 1.5% 1.4% 1.7% 0.7% Continental Europe View interview with Nicholas Scarles at: www.grosvenor.com/ Other Brazil 0.9% 0.8% Other Europe 0.8% 0.7% about-grosvenor/performance 10.0% 2013: 12.4% Sweden 0.3% 0.3% Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 22 Annual Review 2014 Annual Review 2014 23 Finance Director’s report (continued) 10-year summary Overview We prefer to understand what events, We plan to continue development during Our structure and way of working also however unlikely, might cause Grosvenor less benign conditions when development provides career opportunities for our to breach its financial obligations, and then costs are lower and to seek to capitalise on finance team, and I was delighted that Ian Consistent progress, seek to avoid them. buying opportunities when others might be Mair was able to move from Grosvenor doing the opposite. Britain & Ireland during the year to become Our appetite for gearing risk is set in year-on-year Finance Director of Grosvenor Asia Pacific. terms of the extent to which property Euro risk values across our portfolio can fall without Over my time in this role, I have breaching Holding Company debt facility Normally, we do not hedge the foreign increasingly felt that the property industry Below are the summary income statement and key lines from financial covenants and assuming no exchange rate risk arising on the net should contribute more, beyond the the balance sheet for the years 2005-2014, presented on a responsive action, such as selling assets. investment in overseas assets, other than physical fabric, to supporting the wider This ‘resilience’ at the end of 2014, was to the extent of natural hedging arising economy. While property contributes proportional basis*. 80.0% (2013: 77.0%) – well above our from both local debt and assets being significantly to economic growth most internal minimum. denominated in local currencies. There are of the time, it has also demonstrated its Over the 10-year period, revenue profit has increased at a three reasons for this. First, we do not potential to undermine financial stability compound annual growth rate (CAGR) of 7.7% and Shareholders’ With economic gearing reducing to 23.0% believe that wealth over the long term during the market crashes which almost (2013: 29.3%), we have headroom in funds have increased at a CAGR of 7.4%. should be measured in one currency – in inevitably follow periods of excessive preparation for the phased execution of our case, Sterling – but by reference to a lending. Responsibility for devising our development pipeline. We have £1.1bn portfolio of currencies. Second, our capital a market structure which supports Income statement of financial capacity, in the form of spare allocation exercise is aimed at identifying commercial real estate’s contribution — proportional 2005** 2006** 2007** 2008** 2009** 2010** 2011** 2012** 2013** 2014

cash and committed facilities to support Direct cities where property will outperform over to economic growth, while protecting future investment and development Net rental income 112.0 138.3 144.3 172.6 201.1 184.4 195.8 195.6 172.2 175.3 the medium term. Given that property financial stability following commercial activity as well as to provide a cushion Fees and other income returns and exchange rates tend to be real estate crashes, should not be the sole in the event of a market crash. and expenses 45.3 70.1 68.4 58.7 63.6 75.7 60.5 58.5 63.1 63.9 correlated with GDP growth, we plan to responsibility of regulators and bankers. Our capital allocation by region in 2014 benefit from expected foreign exchange The real estate sector – to my mind – has Net gains/(losses) on changed little from the previous year. movements over the long term as a duty to contribute its knowledge and trading properties (0.8) (175.2) 2.7 (100.8) (2.8) (3.6) 2.5 4.7 115.2 30.7 There was a slight increase in our allocation part of our capital allocation strategy. expertise to the debate. I was therefore Administrative expenses (79.2) (105.4) (114.4) (124.0) (125.7) (123.8) (120.5) (118.8) (128.6) (127.3) Over the six decades since Grosvenor’s to the UK, reflecting higher revaluations pleased to chair the Real Estate Finance Net financing costs (36.4) (39.4) (32.6) (66.3) (83.9) (82.2) (74.7) (74.9) (68.6) (62.5) first venture overseas with the acquisition during the year. Group; a group of senior commercial real Group revenue profit/(loss) 41.0 (111.6) 68.3 (59.7) 52.3 50.5 63.6 65.2 153.3 80.1 of Annacis Island in Vancouver, Canada, estate market individuals brought together Net gains/(losses) on The real estate cycle this approach has generated significant specifically for this purpose. value. Third, hedging foreign exchange revaluation and sale of Grosvenor remains cognisant of the next over the long-term has a cost, which can be Our 2014 report – “A Vision for Real Estate investment properties 336.9 640.7 475.6 (491.7) (266.1) 386.6 329.5 320.1 380.9 638.0 downturn, both as a potential risk, but significant, and entails a number of risks, Finance in the UK. Recommendations Other (7.3) 4.8 5.5 (47.2) (23.6) (16.4) (67.4) (11.9) (20.9) (15.8) also as an opportunity. As memories of particularly counterparty credit risk where for reducing the risk of damage to the Tax and non-controlling previous crashes fade and as a boom our tolerance limits are better used for financial system from the next commercial interests in joint ventures (2.5) (25.3) (25.4) 4.7 1.3 (25.9) (10.7) (5.6) (6.4) (20.5) market delivers exceptional returns, we managing our spare cash. real estate market crash” – followed Profit/(loss) before tax 368.1 508.7 524.0 (593.9) (235.8) 394.8 315.0 367.8 506.9 681.8 recognise the emotional pressure to over a year of detailed discussion and increase gearing and take additional risk, Nevertheless, we have made an exception, industry consultation. requiring a firm resolve to maintain risk based on our concerns about the weakness Indirect within acceptable parameters. of the Euro. In 2011, we put in place One of the principal recommendations Balance sheet foreign exchange hedges in anticipation is the creation of a UK Commercial Real — proportional 2005** 2006** 2007** 2008** 2009** 2010** 2011** 2012** 2013** 2014 Our commitment is to the long term, of medium- and long-term cash flows Estate (CRE) loan database containing which transcends short-term volatility, Total property assets including from the Eurozone. There was both a information on every CRE loan made by exemplified by our incorporation of long- share of joint ventures 3,386.7 4,177.3 5,438.9 5,574.0 4,689.8 5,031.0 5,358.9 5,440.7 5,491.4 6,001.2 currency and a cash flow rationale – bad both regulated and non-regulated lenders. term resilient cities research data into our Net debt (303.3) (432.3) (910.2) (1,956.7) (1,452.7) (1,567.8) (1,606.4) (1,454.0) (1,140.6) (1,031.4) news in relation to the Euro-area economy As part of its commitment to look at all capital allocation process. During these Deferred tax (489.7) (659.0) (765.2) (585.9) (473.2) (382.1) (593.5) (491.1) (665.0) (739.3) would reduce expected cash flows, but measures which could have been taken to recent years of exceptional performance, be compensated by the receipt of a gain protect financial stability after the financial Other assets and liabilities (407.2) (519.3) (700.0) (195.0) (220.6) (305.2) (195.9) (217.0) (144.9) (175.6) we have worked even harder to ensure that on the hedges. To date, the hedges have crash of 2008, the Bank of England has Net assets 2,186.5 2,566.8 3,063.5 2,836.5 2,543.3 2,775.9 2,963.1 3,278.6 3,540.9 4,054.9 our cost-base is appropriate for a range of proved successful, and the additional cash given a positive response to our proposal. Minority interests 94.9 148.9 175.1 186.2 156.5 126.6 107.8 86.4 85.8 88.3 different scenarios in the changing cycle. generated in the period 2011-2014 as a I very much hope that the CRE industry Shareholders’ funds 2,091.6 2,417.9 2,888.4 2,650.3 2,386.8 2,649.3 2,855.3 3,192.2 3,455.1 3,966.6 Of course, we do not know when any form result of the hedges maturing in our favour, will engage constructively with the Bank * Non-statutory basis. Incorporates both Grosvenor-controlled activities and share of joint ventures and associates. of market correction will occur but, as I have partially compensated the reduced of England in 2015 to ensure that we move ** Restated figures. Refer to the glossary for details. stated last year, our own analysis indicates cashflows from our Eurozone operations. closer to the creation of such a database. the prospect of a correction is increasing. Nicholas Scarles Revenue profit £m Total return % Working together Group Finance Director For real estate companies, a crash is ‘won’ 200 20 During my 10 years with Grosvenor, we 26 March 2015 not by crisis management developed after 150 15 have developed strong finance functions the crash commences, but by the planning 100 10 and positioning undertaken during the within our Operating Companies. In 2014, we rolled out a new cross-Operating 50 Funds boom. We have dusted down the plans 5 Company Finance Forum to share best 0 we developed in 2007, and updated 0 and improved them, with a focus on practice across the Grosvenor Estate, –50 including Wheatsheaf and the other -5 preparations within each of our businesses –100 operations owned by our Shareholders. in 2015. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2007 2008 2009 2010 2011 2012 2013 2014

Our full financial statements for the 2014 financial year are available at See glossary on the inside www.grosvenor.com/financialstatements2014 back cover for definitions Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 24 Annual Review 2014 Annual Review 2014 25 Financial analysis Thriving in Overview cyclical markets

Managing cyclical risk Financial capacity and liquidity

Overconfidence in cyclical markets is dangerous. Grosvenor, UK All Property Index We manage financial capacity and liquidity not only with the aim of limiting exposure during periods of global economic however, has survived through around 30 downturns over the stress, but also to position ourselves to take advantage of opportunities at times when others are unable to access finance. 1600 last 340 years. Capital values in many of Grosvenor’s markets This is achieved by maintaining sufficient financial capacity – i.e. the amount of spare cash and undrawn, committed, 1400 have been rising for some time and, while this presents many general use facilities which are immediately available. At 31 December 2014, financial capacity was once again strong at 1200 opportunities, it also raises concerns about their sustainability, £1.1bn (see first chart below). While there is a cost in maintaining such capacity, the benefit far outweighs that cost, ensuring 1000 which we are addressing in a number of ways. that we are well positioned as we increase our exposure to development activity. The second chart below illustrates the 800 spread of maturities of our wholly owned debt facilities, split between those which are drawn and undrawn. The weighted We have a strong in-house research team which supports 600 average life of facilities is 7.1 years and the Group has sufficient spare cash to repay all wholly owned facilities maturing rove the business with a carefully considered forward view. 400 the next 11 years. Direct Forecasting can never be perfect, but it provides a solid 200 reference point against which to test business plans. Financial capacity £m Maturity profile of wholly owned facilities £m 2011 1981 1991 1972 1974 1976 1987 1978 1992 1985 2013 1983 2014 1989 1998 1996 1980 1994 2007 2002 2003 2005 2009 2000 We also have an exciting and challenging pipeline of significant 1,200 450 investment projects. The business has been built on a long- Source: Investment Property Databank (IPD) 1,000 term view of property investment and we are therefore 360 Economic gearing % 800 planning to develop through the next downturn whenever 270 90 and in whatever form that may be. 600 80 180 A key element of our planning is the management of 70 400 financial capacity and of gearing in particular. We expect that 60 90 200 economic gearing will rise in the coming years as our major 50 projects proceed, but at the end of 2014 our gearing was a 40 2007 2008 2009 2010 2011 2012 2013 2014 <1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 Years until maturity healthy 23.0%, providing ample headroom to support our 30 Financial capacity Drawn facilities Undrawn facilities investment ambitions. 20 10 In terms of liquidity, we challenge each Operating Company 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 to maintain sufficient spare cash and committed facilities to Development risk cater for two years of financial and property market turmoil. In last year’s Annual Review we introduced Grosvenor’s development risk dashboard, showing a near-term forward We assume no financings or refinancings, virtually no sales, and Operating Company returns range relative to Group % significant value falls and operational challenges based upon view of development risk as measured by the Profit at Risk (PaR) metric. This allows us to analyse upside and downside Indirect 20 our recollection of the 1990s UK property crash. development risk for the immediate future across four key drivers, namely potential changes in capitalisation rates, rental 15 income, development costs and project timelines. This forward risk view is of increasing importance as markets heat up and From time to time, we consider deliberately extreme scenarios 10 the likelihood of a market correction grows, and complements our longer-term forecasting. which help us understand the extent of specific financial, 5 market or economic risks. Examples include a halving of all UK The dashboard includes data for all committed projects and for those which are expected to be committed within six months. 0 asset values and the complete write off of all Euro-area assets This results in a pattern of risk which falls away over time as risks either crystallise or are eliminated. Current downside and financial sources. These scenarios give us a feel for the -5 risk is lower than last year, due in part to a number of material projects, such as The Beaumont Hotel in London reaching

potential limits of financial risk. Total return relative to Group -10 completion, while new projects, such as Ball Park Square in Washington, DC, join the list. The major development projects -15 in Grosvenor Britain & Ireland represent a significant proportion of the total development activity and the risks associated Diversification is another important element of the Grosvenor with these are being managed, in part, by scheduling development over a number of phases. The chart below also includes 2007 2008 2009 2010 2011 2012 2013 2014 strategy and this has brought a number of benefits. The a measure of invested capital (the net of cumulative capital invested in development projects and receipts from associated Group result Highest Lowest expertise of Operating Company management teams means sales). This remains relatively stable over the period with projects completing as others ramp up. Combining this with the PaR that our geographic diversification has allowed us to tap into trend indicates that we expect to have a stable development pipeline over the next two years with acceptable levels of risk. total returns beyond the limits of prime central London, and has provided some protection against the worst of the market Aggregate forward projection of profit £m cycle. In combination with prudent management of gearing and at risk and invested capital financial capacity, we believe that this will place us in a good 150 position to survive and prosper through the coming cycle. 300 100 200 Funds 50 100 Invested PaR Capital £’m £’m -50 -100 -200 -100 Current 6 months 1 year 18 months 2 years -300 -150 Capitalisation rate Rental income Development costs Delay Invested capital Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 26 Annual Review 2014 Annual Review 2014 27 ‘Living cities’ inin practicepractice Overview Our Grosvenor Asia Pacific team partnered Our Group-wide absolute energy Our challenges Demonstrating with Daimler/Mercedes Benz on a ‘Smart’ consumption decreased by 7.0% and water Engaging the diverse range of tenants, car initiative at The Westminster footprint decreased by 5.0%, reflecting other occupiers and visitors to the London Roppongi (see caption 2 below) our changing portfolio of properties estate is a sizeable challenge, as well as our philosophy in Tokyo, Japan. under management. a huge opportunity. Grosvenor Britain & Through our Indirect Investment team’s More detailed results are published online Ireland launched many new community partnership with Propertylink, forward in our Annual Environmental Data report initiatives, from public art and small funding has been secured to develop the for 2014. parks, food banks and fitness classes, warehouse facilities for a new wholesale to an outdoor film festival which fruit, vegetable and flower market in Research partnerships attracted over 2000 people during the Melbourne, Australia. This initiative will and industry leadership Summer (see captions 1-4 on pages 4-5). Our approach provide amenities to the community and In the UK, Kate Brown (see quote below), We are also preparing to market our new To help us put our ‘Living cities’ philosophy into practice, reduce delivery vehicle traffic, improving energy-efficient homes by highlighting Underpinning the strategy of the Group, our Group Sustainability Director, we have identified eight key attributes of successful cities, air quality (see pages 44-45). their wider benefits: they are healthier, our ‘Living cities’ philosophy is to create helped to establish and chaired the Urban and strive to align our activities to them: Land Institute’s UK Sustainability Council. more comfortable and more peaceful high-quality places for people to enjoy Grosvenor Fund Management has, places to live. and which use resources responsibly. once again, achieved ‘Green Star’ The Council’s mission is to accelerate Climate resilient Connected status in the Global Real Estate the rapid uptake of sustainability across Continually improving the environmental Highlights ‘Living cities’ are resilient to long- ‘Living cities’ are well connected internally, Sustainability Benchmark. the UK real estate sector. Four events performance of our buildings, particularly were held in 2014 engaging various city within the lifetime of funds, requires creativity. Here is a selection of our achievements term climate change and extreme regionally and internationally in terms of Direct stakeholders and Kate (along with around the Group in 2014: weather events. transport and communications. Our environmental In 2014, Grosvenor Fund Management performance Michael Ward from our Vancouver office obtained investor approval to buy five In Grosvenor Britain & Ireland, we retrofitted – see caption page 38), was recognised as Our Group-wide like-for-like energy hectares of solar panels for the rooftops of 200 housing units to improve energy one of the top 40 real estate professionals consumption reduced by 7.0% and the Liverpool ONE shopping centre, with a efficiency, as part of our ambitious Good governance Economically resilient under 40 globally by ULI – in part, for the water consumption reduced by 5.0%. payback period of just five years. 10-year strategy across our historic ‘Living cities’ have good governance ‘Living cities’ are resilient to economic success of this new Council. London estate. This included our first Significant improvements came including clear policies, high levels shocks, and support a diverse economy, Grosvenor Americas continued to sponsor Our 2015 priorities three private rental homes refurbished from Grosvenor Fund Management of community participation, strong innovation and entrepreneurism with with a 9.0% energy and 2.0% water research at the University of British Our Operating Companies have a range of to the EnerPhit Passivhaus standard institutional capacity, a clear vision a strong skills base. efficiency reduction across the portfolio Columbia into the success of cities (see sustainability priorities, but at Group level (see page 7 and caption 2 on page 31). and strong leadership. they manage, thanks to a number of page 39). we have adopted the following: The 1,200 new homes built in retrofitting initiatives. a Employee engagement Researching digital trends and Trumpington Meadows, Cambridge, technologies that will help cities to alongside our extensive wetland Healthy environment High-quality place The Grosvenor Liaison Group (see become more sustainable. restoration, received the ‘Built for Life’ ‘Living cities’ support healthy ecologies ‘Living cities’ have a physical environment quote below) brings together our teams award (see page 32), reflecting our a Seeking indirect investment with areas of accessible green space, that enriches people’s lives and a internationally to share knowledge and long-term vision for this community. opportunities in real estate companies low levels of pollution and diverse habitats, distinctive sense of place of which its best practice, promote long-term thinking, “ Cities face unprecedented challenges that have a particular focus on Our Grosvenor Americas team introduced all supporting a high quality of life. citizens can be proud. looking up to 20 years ahead, and help due to globalisation, climate change, resource efficiency. a bike share concept at Smith, deliver initiatives that are in line with our resource depletion, and ageing a Indirect a residential development in Calgary, ‘Living cities’ philosophy. Researching the long term global populations. While daunting, Canada (see caption 1 below). Our office implications of climate change for Sustainable resources Strong community these trends also offer enormous in Vancouver was retrofitted with an aim real estate. opportunities for cities to adapt and to achieve the LEED Gold standard and we ‘Living cities’ manage natural ‘Living cities’ have communities that reinvent themselves.” have sponsored a centre for performing arts resources sustainably to meet long- are vibrant and healthy, safe, tolerant, – the Kay Meek Centre – in West Vancouver term needs. Resources are conserved diverse and affordable. (see caption 5 on page 4). and responsibly sourced.

Kate Brown Group Sustainability Director

1 Our full Annual Environmental Data 2014 1 Smith “ We leverage knowledge and report is available at: Smith, our residential development www.grosvenor.com/environmental2014 in Calgary, Canada, has a bike- experience across the Group and our Global Reporting Initiative Index 2 share programme that will allow to enhance our understanding for 2014 is available at: residents to sign out bicycles and of cities and promote our www.grosvenor.com/gri2014 explore Calgary’s surrounding Beltline region. (CGI) ‘Living cities’ philosophy.”

2 The Westminster Roppongi Funds Two electric ‘Smart’ cars are available to rent seven days a week at this residence in Tokyo, Japan, providing residents with a convenient and low-carbon way of travelling within the city. Ian Morrison Chairman, Grosvenor Liaison Group Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited 28 Annual Review 2014 Annual Review 2014 28 Annual Review 2014 Annual Review 2014 29 Grosvenor Britain && IrelandIreland Overview

Ensuring long-term value Mayfair, London, UK We have worked continuously to enhance the quality of Mayfair and create a vibrant mixed-use neighbourhood. This year saw an acceleration in our place-making activities in the

area with the delivery of a unique mix of retail, residential, office and Direct hotel developments, art installations, improvements to the public realm and new community initiatives and programmes. Indirect Funds Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited 30 Annual Review 2014 Annual Review 2014 30 Annual Review 2014 Annual Review 2014 31 Grosvenor Britain & Ireland (continued) Overview Another strong year These plans also help us to actively manage The commissioning of ROOM reflects “ Our new space in the heart of Grosvenor Britain & Ireland In 2014, we reaped the financial benefits of the mix of businesses, architecture, public the importance of art in the creation Mayfair is a key investment for us. the organisational improvements we put realm and community involvement – of inspiring places. During the year, It will allow us to have good quality the alchemy that helps us create successful we also commenced redevelopment of Business objective into place in 2010-2012 and successfully conversations with our clients in delivered a programme of development places in which people want to live, work, 20 Grosvenor Hill which will house the new an innovative and exciting space.” Our objective is to create value through our skills in place-making and design, projects that we had started in the learn and relax: ‘Living cities’. Gagosian Gallery. This new double-height repositioning locations in ways that change customer perceptions and deliver commercial art gallery in the heart of the downturn. It was another strong year with In 2014, we accelerated our place-making outperformance for our Shareholders and co-investors. Mayfair Conservation Area will be near total return up to 17.3% (2013: 16.5%) activity in north Mayfair in anticipation of two other public art installations we have due to a combination of capital growth, the increased connectivity that the new been involved in – one at 50 Grosvenor higher rental income, high occupancy Bond Street Crossrail station, which is due Hill with artist Neal French and the other Key achievements rates (2014: 97%; 2013: 93%) and value to open in 2018, will bring to the area. at Carlos Place with architect Tadao Ando. a Continued to drive growth in net rental income (2014: £61.0m; 2013: £48.3m) through added through asset management and We completed public realm works in development, asset management and operational efficiency. development activity. We want each one of our retail streets North Audley Street and Duke Street Simon Collins to have a unique character, so we curate UK Chairman a On-site development activity on the London estate created £71.7m of value-add in As expected, revenue profit was lower and our redevelopment of Brown Hart them carefully. Identifying the right KPMG 2014 (2013: £55.4m). than 2013, which had benefited from an Gardens (see image on page 28) – a raised retailers – many of them independents a exceptional level of trading profits on the terrace garden above the old Duke Street Improved customer experience with net satisfaction of rack-rented tenants increasing and/or unique to London – is crucial. to 62% in 2014 from 56% in 2013. sale of high-end residential developments. substation – won the Mayor’s award “ Grosvenor has delivered on its We continued to reinvigorate our retail Revenue profit before trading profit was for ‘Best New Public Space in London’ commitment to Southampton by a Developed a leadership programme which will be rolled out to 70+ senior managers marginally ahead of last year due to offering in north Mayfair in 2014; place-shaping an innovative mix of at the London Planning Awards in Direct to strengthen capability to deliver our 10-year plan. new tenants to Mount Street included increased levels of income partially offset February 2014. uses. Particularly impressive is their a Achieved a total return of 17.3% – the fifth successive year above 13.0%. by investment in growing our development Roksanda Ilincic (see caption 3 below) and commitment to developing a skills and pipeline. Assets under management grew The transformation of Brown Hart Gardens Christopher Kane. Luxury fashion brand training programme which will leave a by 9.0% to £5.2bn (2013: £4.7bn). was completed when we delivered to our Roland Mouret, whose flagship store legacy for the City and the project.” Revenue profit Total return Assets under partners, Corbin & King, the new five-star has been located at Carlos Place since management A sense of place art-deco Beaumont Hotel (see caption 4 2011, renewed its lease for a further on page 2 and image on page 28), which 15 years. Duke Street, which links Our strategy is centred around overlooks the gardens and contains ‘ROOM’ our retail offer on Mount Street with £45.9m 17.3% £5.2bn place-making, which began over – a unique habitable sculpture by leading Oxford Street, underwent a renaissance (2013: £117.5m) (2013: 16.5%) (2013: £4.7bn) 300 years ago when the Grosvenor British artist Sir Antony Gormley. This is with a deliberately eclectic mix of family embarked on the development the first time we have developed a hotel high-profile lettings. Dawn Baxendale Grosvenor’s share of property assets of its London estate. We have ambitious Chief Executive in this part of Mayfair, and it has already location and asset management plans Southampton City Council 4 1 1 Residential £1,304.6m 39.3% become an exciting new destination in and these inform our investment and the West End, bringing new life to the 2 Office £1,062.0m 32.0% development decisions. Sector neighbourhood. The Beaumont was voted 3 3 Retail £853.2m 25.7% ‘Best Luxury Hotel Opening in the World for 4 2 Hotel £100.4m 3.0% 2014’ by Luxury Travel Intelligence.

2 1 1

London £3,174.2m 95.6% Indirect

2 Outside London £146.0m 4.4% Region

1 2 1 Investment £2,986.5m 89.9%

2 Development £333.8m 10.1% Activity 1 1 20 Grosvenor Street 3 Roksanda This new 3,700m2 Grade A office Roksanda Ilincic saw the building in Mayfair, London established fashion hub of Mayfair incorporates large floor plates, as the perfect fit for her label and period features on each floor, and new flagship store, Roksanda. Number of assets by city an outdoor roof-terrace. (CGI) 2 EnerPhit Passivhaus Britain: Oxford 1 Our EnerPHit Passivhaus-compliant 3 Bournemouth 1 Southampton 1 properties in London – the first of Cambridge 4 this standard in the private rented sector – have excellent thermal Ireland: Edinburgh 11 Peter Vernon performance and exceptional Liverpool 1 Dublin 2 airtightness and mechanical Chief Executive, 2 London 1,521 Grosvenor Britain & Ireland ventilation, leading to an 80% reduction in energy consumption. Funds

Like-for-like energy consumption MWh Like-for-like water consumption m3

2013 22,364 2013 19,988 -4% 2014 21,460 -9% 2014 18,186 Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited 32 Annual Review 2014 Annual Review 2014 32 Annual Review 2014 Annual Review 2014 33 Grosvenor Britain & Ireland (continued) Overview In order to maintain the intensity of More milestones And in Southampton, we launched “ London is growing and our Building organisational We also appointed Simon Harding-Roots use and vitality in the area, we have We also reached a number of milestones Guildhall Apartments (see caption challenge is to accommodate this capability through our people as an Executive Director to lead our major committed to developing new office space 5 on page 2 and quote on page 31), growth while creating and managing projects for the London estate. He joined in our place-making activities off-estate. We invest financial capital to increase in Mayfair. In 2014, we pre-let our new the residential component of our new great places to live and work. us in March 2015 from Imperial College 2 the value of our portfolio. We also invest 3,700m Grade A office scheme at In South London, having assembled a five- arts complex development which also Our estates should be vibrant London, where he was Chief Operations in our human capital: we want to stretch 20 Grosvenor Street (see caption 1 on hectare development site in Bermondsey incorporates seven restaurant/retail parts of the West End.” Officer, and will be appointed to the page 31) to KPMG nine months ahead (see caption 6 below) in 2013, we focused units, alongside facilities for City Eye, the our people, get the best out of them and Grosvenor Britain & Ireland Board. of completion, and have fully let both on formulating our strategy for the site, University of Southampton’s John Hansard help them grow with the business. We get 50 Grosvenor Hill and 33 Davies Street. engaging with the local community Gallery and a multi-purpose performing a great return when they deliver more A forward look and the London Borough of Southwark. arts space. The 38 homes will have a new than they dared hope for in a manner In 2013, we were appointed development The UK market has improved and London, Cultural Quarter on their doorstep and which exemplifies our values. This is manager for a 50/50 partnership In Oxford, one of the most constrained notably the West End, has seen commercial offer unparalleled views across the city dependent on our people knowing what between the Grosvenor Trusts and The cities for housing in the UK, we are master yields close to historic lows. In 2015, we and its parks. is expected of them, and emphasising HongKong and Shanghai Hotels, Limited to developer for a new neighbourhood at Craig McWilliam plan to review how Mayfair and Belgravia Executive Director that conducting business in a way that can benefit from London’s continued redevelop 1-5 Grosvenor Place to become Barton Park – responsible for master of the London estate A sense of belonging exemplifies Grosvenor’s values is critically success as a world city and how Mayfair in the Peninsula London, with associated planning, installing infrastructure and Grosvenor Britain & Ireland important in building the Grosvenor brand apartments. During 2014, we worked on setting challenging design standards with In all the places we manage, we work particular can contribute further to making hard to foster a sense of belonging and strengthening our culture. We have the West End a global destination, an advancing the design and feasibility of our partner, Oxford City Council (OCC). “ Places and communities take time shown how the Grosvenor values work in the development, and expect to submit amongst the local community. After the economic hub and a cultural attraction for We aim to create a place that not only success of our ‘Summer in the Square’ to mature. Our approach to design practice through six business principles domestic and international visitors alike. a planning application in the second half meets the area’s housing needs, but also and management recognises this and that we promote so that Grosvenor events in Grosvenor Square in 2012 and Direct of 2015. As a long-term investor, we are organised enhances and revitalises the character 2013, we launched ‘Grosvenor in the seeks to help create neighbourhoods people understand how we expect them to operate through cycles. We are targeted We also continued to invest in our and spirit of the area and provides a Community’ (see captions 1-4 on page that endure.” to conduct themselves. We continue to about new acquisitions, recycle mature ambitious retrofit programme across range of facilities that residents can enjoy 4) in 2014: a series of initiatives which recognise those who go above and beyond assets where appropriate and continue the London estate. We progressed three together as a community. In 2014, we enabled local residents, businesses in living those principles. In 2014, we took to build our development pipeline so that unique EnerPHit Passivhaus units made our first land sale, committed to and stakeholders on our London estate our business principles a step further we can choose to commit when the time (see page 7 and caption 2 on page infrastructure investment and received to participate more in the life of the and incorporated them into our training is right. 31) – one in Adam’s Row in the Mayfair OCC’s commitment to buy all affordable neighbourhood. The initiatives were programme for suppliers who interact with Conservation Area and two in Belgravia housing in the development. The project wide ranging and included open-air film our customers on the London estate. Peter Vernon – which reduced energy consumption for won the award for ‘Planning for Housing Will Bax Chief Executive, Grosvenor Britain & Ireland festivals in Grosvenor Square and Belgrave We also re-designed our leadership 26 March 2015 Growth’ at the 2014 Planning Awards. Director of Place-making, these existing properties by 80%: a first for Square, a community arts programme, London estate development programme (see caption 4 London’s private rental sector. In Cambridge, Trumpington Meadows the introduction of parklets (temporary, Grosvenor Britain below), which gives people the opportunity & Ireland (see caption 5 below) won ‘Best Large mobile pocket gardens managed by local to develop those leadership characteristics Development’ at the Evening Standard people) and the creation of an urban that we believe are central to the long-term Awards, with judges commenting that it eco-system for honey bees. success of our business. ‘raises the bar’ for the next generation of In Bermondsey (see caption 6 below), communities. It also received a ‘Quality we supported the Bermondsey Community Award’ from the National House Building Kitchen, the Salter Statues campaign to Council for the second year running and replace a memorial to home-grown hero Indirect was accredited ‘Built for Life’. Dr Alfred Salter, a local harvest festival and the Bermondsey Business Improvement District’s Christmas event.

Grosvenor Britain & Ireland – Board of Directors as at 26 March 2015

Graham Pimlott CBE Peter Vernon FRICS Chairman and Executive Director Non-Executive Chief Executive 4 Director 5 4 Leadership programme Roger Blundell ACA We are developing a set of specific Michael Gradon Executive Director leadership characteristics to act Non-Executive Finance Director as a core element of a re-designed Director leadership development programme Craig McWilliam FRICS aimed at strengthening capability Heather Rabbatts Executive Director Non-Executive Executive Director of across the business to deliver our Director the London estate strategic plan. 5 Trumpington Meadows Mark Preston FRICS Richard Powell Our masterplan for this new mixed-use Non-Executive Executive Director Director Executive Director community on a 140-hectare site in Group Chief Executive of Grosvenor Cambridge aims to create a place Developments 6 to live that is appealing, distinctive Nicholas Scarles and that enhances the surrounding FCA ATTORNEY AT LAW Ulrike Schwarz-Runer conservation areas and countryside. Non-Executive DOCTOR OF LAWS Funds Director Executive Director 6 Bermondsey Group Finance Director General Counsel Grosvenor is taking an active role in supporting the local Business Improvement District in Bermondsey, London. We are supporting a Community Kitchen, and most recently sponsored its inaugural Read biographies online at: Christmas event. www.grosvenor.com/britain-ireland-board Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 34 Annual Review 2014 Annual Review 2014 35 Grosvenor Americas Overview

Delivering our developments 1645 Pacific Avenue, San Francisco, California Inspired by the pre-war design aesthetic of Pacific Heights, this boutique building with 39 residences, sweeping rooftop views, three retail spaces and unique commissioned art installations was delivered in 2014 and demonstrates that a building’s design Direct can have ambition, yet still blend into its surroundings. Indirect Funds Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 36 Annual Review 2014 Annual Review 2014 37 Grosvenor Americas (continued) Overview Consistent performance Smart developments Construction of 15 West – an 18-storey Since launching the pre-sales programme Grosvenor Americas In last year’s Annual Review, I suggested We programme our development activity condominium tower with 120 modern in March 2014, Smith is now 50% sold and that 2014 would be much like 2013 in line with the market cycle to maximise homes – completed in June. All 120 homes construction started on-site in November sold and residents will enjoy the vibrant 2014. Smith follows from the success Business objective for Grosvenor Americas. And it was. returns. At the beginning of the economic 2014 saw a continued focus on project recovery in North America, we assembled a setting of Central Lonsdale in the heart of Drake, our first residential tower in Our aim is to become a market leader in select geographical areas and sectors in delivery, making strategic acquisitions number of development sites in each of our of North Vancouver. Just 20 minutes from Calgary, which is located further down Canada and the USA through focused, strategic expansion. We use our knowledge and disposals, adding value to our existing primary markets. This continued through downtown Vancouver, the building features the street. of the cities we work in and our property skills to develop projects that contribute green roofs and a water-efficient irrigation properties, increasing our structured 2012 and 2013, as we sought planning In Washington, DC we are helping to the vibrancy of those communities. system and has been submitted for LEED development finance activity, engaging approval for these sites, expanding our to transform the Capitol Riverfront Silver certification. We designed five of the with our local communities, and delivering pipeline of projects at different stages neighbourhood with Ball Park Square homes for wheelchair access and gifted robust results across our six active North of development. 2014 was a year of (see caption 2 below): a full block, Key achievements them to the Vancouver Resource Society, American markets: Calgary, Los Angeles, execution: we completed construction of mixed-use development, across from the a non-profit organisation that provides a Increased revenue profit from C$38.3m in 2013 to C$62.1m in 2014. San Francisco, Seattle, Vancouver and two residential mixed-use projects and Nationals Park baseball stadium, which accessible housing with support services Washington, DC. This year, we also now have 10 projects in various stages of will commence construction in 2015. a Sold all homes at 1645 Pacific Avenue in San Francisco in eight weeks. to people with disabilities. implemented a new senior management development in North America. The development, located at First and a Completed 15 West in North Vancouver with development partner Citimark, structure, appointing Ryan Beechinor 1645 Pacific Avenue (see cover and pages Our commitment to developing M Streets, will offer 325 rental apartments, and completed Millennium VI at Annacis Island, Delta, . as Chief Operating Officer, James Patillo 2 34-35), marks a successful introduction to high-quality residential projects in a 170-room hotel, over 2,300m of retail a Acquired three development sites, commenced construction of two residential as Chief Development Officer and James our residential development programme in Calgary’s urban core continued in 2014. space and an exterior, rooftop amenity developments and sold three apartment buildings. Delmotte as Chief Co-Investment Officer. the San Francisco Bay Area. Our six-storey In July, we began construction on the first space with a unique view of the field phase of Avenue (see caption 1 below), a at Nationals Park. Residents will have Direct a Expanded the multi-family apartment portfolio to Washington, DC. Revenue profit was up at C$62.1m 39-unit LEED Silver certified condominium (2013: C$38.3m) due to strategic disposals located at the nexus of three historic two-tower condominium complex located a easy access to numerous parks and a Originated structured development loans in key markets: C$10.2m in the USA block from Calgary’s waterfront with views entertainment venues, new restaurants and C$23.0m in Canada. and total return was down to 9.7% San Francisco neighbourhoods – Pacific (2013: 10.5%) due to property acquisitions Heights, Nob Hill and Russian Hill – across the Bow River (towards Kensington) and Metrorail. Ball Park Square is less than for future development in Vancouver and launched in June and all homes were sold and of the downtown city skyline. Sales a mile from Capitol Hill. began in August 2013 and are progressing, Revenue profit Total return Assets under San Francisco. Assets under management in eight weeks. 8415 Fenton Street in downtown management increased to C$3.0bn (2013: C$2.6bn) due with over 65% of homes sold to date. The first phase of the pre-sales campaign Silver Spring, Maryland, is located steps to some key acquisitions. Occupancy rates is ready to begin at Grosvenor Ambleside Smith (see caption 1 on page 27), located from the Metro Station, which provides remained consistently high at 94.6% C$62.1m 9.7% C$3.0bn (see caption 6 on page 2 and caption just off trendy 17th Avenue in Calgary, a 15-minute commute to downtown (2013: C$38.3m) (2013: 10.5%) (2013: C$2.6bn) (2013: 94.6%). 2 2 on page 13), in West Vancouver’s offers a mix of studio, one-bedroom Washington, DC. Our 21,740m mixed-use most charming seaside village. and two-bedroom condominium homes development will offer 244 residential 2 Grosvenor’s share of property assets Two terraced buildings will house 98 luxury with sophisticated interiors designed to rental units above 1,720m of retail space, 5 2 appeal to the growing number of young and will complement and enhance the 1 Retail C$582.1m 36.6% condominiums, 3,250m of ground-floor 1 professionals in the city. With efficient surrounding neighbourhood through 4 retail space and a 650m2 glazed public 2 Residential C$545.8m 34.3% galleria with a walking route from Marine unit layouts and services such as a innovative design, residential amenities Sector 3 Office C$270.1m 17.0% concierge and a bike share programme, and an eclectic retail offering. 3 Drive to Bellevue Avenue and open views Smith promotes sustainable urban living 4 Industrial C$174.2m 11.0% to the ocean. We have commissioned 2 along the vibrant Beltline. 5 Hotel C$17.0m 1.1% sculptural pieces by Douglas Coupland and paintings by Gordon Smith – who are Indirect 1 1 USA C$1,118.5m 70.4% both West Vancouver residents and Order 2 Canada C$470.7m 29.6% of Canada recipients – for all to enjoy. Region Grosvenor Ambleside will infuse new life 2 into a 100-year old neighbourhood.

1 1 Investment C$1,379.8m 86.8% 2 2 2 Development C$209.4m 13.2% 1 Avenue 2 Ball Park Square Activity In July 2014, we broke ground on Residents of this development in phase one of Avenue, located in Washington, DC will have access the West End of downtown Calgary. to an exterior rooftop amenity Over 125 homes have sold to date. space that will offer a pool, cooking stations and an outdoor theatre with stadium seating and a view Number of assets by city of the field at Nationals Park. 1 Canada: USA: Calgary 6 Chicago 1 Vancouver 7 Los Angeles 1 Victoria 1 San Francisco 11

San Jose 2 Funds Seattle 8 Andrew Bibby Washington, DC 144 Chief Executive, Grosvenor Americas

Like-for-like energy consumption MWh Like-for-like water consumption m3

2013 34,506 2013 329,638 -6% 2014 32,602 -7% 2014 307,039 Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 38 Annual Review 2014 Annual Review 2014 39 Grosvenor Americas (continued) Overview Strategic opportunities We acquired 1380-1382 Hornby Street 3 We also initiated the sponsorship of a Since acquiring the office building at “ The funds provided by the Grosvenor 2 Before acquiring property, we consider in downtown Vancouver, a rare 1,400m Chair at the Sauder School of Business 1701 Pennsylvania Avenue (see image professorship made it possible for community vibrancy and neighbourhood development site where a 125-year old at the University of British Columbia. 9 on page 56), located close to the White three undergraduate students to help appeal. In 2014, we identified some unique heritage home will be preserved. Dean Robert Helsley, who holds the title House in Washington, DC in 1986, we have fund their education by conducting of Grosvenor Professor of Cities, Business spent US$19.2m modernising its building research on the growth of the high opportunities to expand our business Community involvement in the high-growth centres where we Economics and Public Policy (see quote systems. In August, we commenced the technology sector in Vancouver.” are active. We acquired three assets for We begin the development process by to the right), has been researching what first stage of what will be a US$7.5m redevelopment and one existing property listening carefully to the community, makes cities economically sustainable whole-building heating, ventilating and in 2014. encouraging one-on-one meetings through and successful – most recently publishing air-conditioning upgrade, and have all stages of design and construction. a paper on ‘Coagglomeration, Clusters, attracted two new tenants. Dean Following on the established platform and the Scale and Composition of Cities’, Robert Helsley of boutique mixed-use development in Our 0.8-hectare full-block assembly in the Journal of Political Economy. Providing flexibility Grosvenor Professor located in Edgemont Village (see caption of Cities, San Francisco, we acquired two sites with structured finance Business Economics 4 below) is one of North Vancouver’s most in prominent parts of the city: Jackson Active management In 2014, we expanded our structured and Public Policy popular village centres. We met hundreds University of Square and Nob Hill. In May, we purchased We actively manage our assets and of residents and, with their input and development finance programme (see British Columbia 240 Pacific Avenue, located in a historic 3 Michael Ward renovate as required to improve caption 6 below) to all six of our active collaboration, have proposed a mixed-use Michael Ward, Senior Vice President, neighbourhood known for its high-end our existing properties and to meet North American markets. Teams have development for Edgemont Village: new Development and General Manager “ The integrity of the team, industry art and antique retailers, award-winning of Grosvenor’s Vancouver office, was our occupiers’ needs. In 2014, our been established in Washington, DC, condominiums will provide much-needed relationships and knowledge of restaurants and unique specialty named one of the Urban Land Institute’s refurbishment programme exceeded San Francisco and Vancouver, and they shops. In September, we purchased housing for the neighbourhood, and an ‘40 under 40’ top global land use real estate development are key C$300.0m – encompassing residential, are actively pursuing lending opportunities. Direct expanded grocery store has been designed professionals and one of Business in reasons we continue to partner 875 California Street, located near the Vancouver’s ‘40 under 40’ in 2014. He is retail and office buildings. The programme offers developers a to retain a village scale and local feel. with Grosvenor.” top of Nob Hill, one of the most iconic currently overseeing the development flexible alternative to traditional financing. neighbourhoods in San Francisco. New merchants will enhance the village of Grosvenor Ambleside (see caption In September, Broadmead Village shopping experience and complement the 6 on page 2 and caption 2 on page 13), received a 2014 Maple Leaf Silver A forward look We also acquired our first multi-family current retailers. one of our highest value developments Award at the Canadian Shopping Centre to date and an exemplar for sustainable property in the Washington, DC area. Awards in Toronto for outstanding Economic recovery in the USA hit its stride In April 2014, we donated C$1.0m to forge place-making. Wheelhouse at Fair Oaks is a 491-unit achievement in design and development. this year, especially in San Francisco. a 10-year partnership with the Kay Meek rental apartment community in Fairfax, Our sustainability-focused renovation We may now be closer to the end of Centre for the Performing Arts, located in Virginia. improved access and seating, encouraging the cycle than the beginning, so we will West Vancouver. Our sponsorship will allow visitors to stay longer at this sophisticated, continue to focus on the cities where we We marketed and sold three residential the main theatre – the renamed Grosvenor open-air, grocery-anchored neighbourhood are established and be selective about our Dan Miller properties in the Puget Sound region Theatre (see caption 5 on page 4) – to investments to protect the progress we Vice President, Capital shopping centre on Vancouver Island. Intracorp USA in Washington: Borgata Apartments, establish an endowment to finance youth have made. Northshore Townhomes and BluWater. initiatives and to support programming Andrew Bibby Grosvenor bought Annacis Island on the that delivers artistic excellence, creativity Chief Executive, Grosvenor Americas Fraser River in Delta, British Columbia, and community engagement. 26 March 2015 over 60 years ago; it was our first major acquisition in North America. Today, Annacis Business Park is a preferred hub for local distribution. We completed Indirect construction of a new 15,000m2 Tier-1 distribution centre called Millennium VI (see caption 5 below) at 1005 Derwent Way in October.

4 Edgemont Village 5 Millennium VI 5 6 Grosvenor Americas – Board of Directors as at 26 March 2015 We hosted a series of community events This new Tier-1 distribution centre is

and listened to hundreds of residents located in Annacis Business Park in the Brandt C. Louie OBC LLD FCA Nicholas Scarles throughout 2014. Our proposed geographic centre of Metro Vancouver. Chairman and FCA ATTORNEY AT LAW development in Vancouver has been Non-Executive Non-Executive designed to preserve the village’s Director Director charm while meeting future needs. Group Finance Director James E Hyman 4 Non-Executive Andrew Bibby Director Executive Director Chief Executive John T Roberts Non-Executive Rekha Patel CPA Director Executive Director 6 Finance Director Mark Preston FRICS Non-Executive Funds Director Group Chief Executive

6 Structured development finance We originated over C$30.0m in structured development loans in key Read biographies online at: www.grosvenor.com/americas-board markets during 2014. Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 40 Annual Review 2014 Annual Review 2014 41 Grosvenor Asia PacificPacific Overview

Property and partnership 20th Anniversary Event, Shaw Studios, Hong Kong Grosvenor has now been active in the Asia Pacific regiongy for 20 years. ToTo marmarkk ththisis annanniversaryiversary anandd ttoo recognrecogniseise ththee manymany inindividualsdividuals and comcompaniespanies we havehave ppartneredartnered wwithith overover thethe yyears,ears, wewe hosted hosted

an eveneveninging iinn NovemNovemberber atat SShawhaw StuStudiosdios iinn HonHongg KonKong.g. Direct TheThe cchoicehoice ooff venuevenue,, aa movmovieie sstudiotudio owneownedd bbyy tthehe S Shawhaw f amfamily,ily, was fittingfitting:: the ShawsShaws werewere ourour firstfirst jointjoint ventureventure partnerspartners in in Asia Asia.. Indirect Funds Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 42 Annual Review 2014 Annual Review 2014 43 Grosvenor Asia PacificPacific (continued)(continued) Overview Solid returns 1 That acquisition, made in 2011, reflected People and progress our positive view of the market cycle, and We delivered solid results in 2014. Our We have established strong teams in Hong Grosvenor Asia Pacific we are now seeing strong investor demand trading income was up this year, reflecting Kong, Shanghai and Tokyo with a breadth for exposure to the Tokyo property market. strong sales at The Westminster Roppongi and depth of skills. Since 2008, we have Business objective The new partnership focuses primarily on in Tokyo. Revenue profit increased from worked with the Strategic Thinking Group to luxury residential value-add/development We are positioning ourselves for the long term in Asia, with three distinct aims. HK$54.8m in 2013 to HK$83.1m and total develop our leadership skills and attributes – as well as some exposure to Grade B First, we are building a luxury residential brand under the Grosvenor banner, return was also up at 9.1% (2013: 5.4%). to create a constructive and cohesive culture office value-add – in the central Tokyo area. differentiated by the quality of design and exceptional finishes; secondly, Assets under management decreased across the region. In December 2014, the partnership committed we are growing a diversified portfolio of core investments in the residential to HK$8.3bn (2013: HK$8.9bn) due to its first investment – the acquisition of I am pleased that we have made two new and office sectors; and thirdly, looking further ahead, we are seeking to develop to some strategic project disposals. Forest Nanpeidai in the Shibuya district of senior management appointments. First, best-in-class buildings in the central business districts of Shanghai and Hong Kong Occupancy rates were down from last Tokyo. The 52-unit high-end residence will be Benjamin Cha (see caption 2 and quote on as high-quality long-term investments through co-investment partnerships. year (2014: 90.8%; 2013: 96.6%) due to the latest property to sit within our Grosvenor- page 14), who joined Grosvenor Asia Pacific as renovation-led vacancies. branded luxury residential portfolio. Managing Director in September 2014 from A milestone UBS and previously HKR International, and will Key achievements The Westminster Roppongi has achieved succeed me as Chief Executive in the region in prices beyond comparable new-builds, a a Marked the 20th Anniversary of Grosvenor Group in Asia. 2014 marked the 20th anniversary of the April 2015. I wish Ben every success in taking Grosvenor Group in Asia (see pages 40-41 first for a refurbishment project in Tokyo. Grosvenor forward to expand the business a Secured Benjamin Cha as successor to Chief Executive Nicholas Loup. and back cover), having opened offices 2 There has been significant interest from over the coming years. a Recorded significant value growth at the Opus Arisugawa Terrace and Residence in Hong Kong in 1994, Tokyo in 2001 and overseas, with around 40% of units being

in Tokyo. Shanghai in 2004. We have completed a sold to foreign buyers, mostly from Hong Second, Ian Mair joined us as Finance Direct number of award-winning residential projects, Kong or Taiwan. In September 2014, we Director in June from Grosvenor Britain a Achieved record sales prices for a residential refurbishment project in Tokyo with establishing ‘The Grosvenor’ residential launched a new show flat in collaboration & Ireland’s London office, also joining the The Westminster Roppongi. brand name across each of our markets, ‘The with Atelier Ikebuchi, our interior designer for Board. William Lo, Chief Operating Officer a Established our latest development partnership in Tokyo and secured Westminster’ name in Hong Kong and Tokyo, a previous development, The Westminster and Board member, left us to pursue his the first investment. and ‘The Belgravia’ in Shanghai and Tokyo. Terrace, in Hong Kong. Elsewhere in Tokyo, next opportunity. William was responsible Today, with well-established local teams in Opus Arisugawa Terrace and Residence, for driving performance and operational Revenue profit Total return Assets under each city, we continue to position ourselves acquired in December 2013, led strong value efficiencies across Grosvenor Asia Pacific and management for the long term as the region’s economic growth for our assets in Japan. was previously Finance Director. I would like influence, led by China, continues to grow. 1 1303 to thank William for his significant contribution In Tokyo, 1303 – The Westminster Renovation works were undertaken at to our Board and executive team. HK$83.1m 9.1% HK$8.3bn Roppongi’s newest show flat – features both The Belgravia Azabu in Tokyo (2013: HK$54.8m) (2013: 5.4%) (2013: HK$8.9bn) Strong relationships bespoke furniture and art pieces. (see caption 3 on page 14) andChina A forward look Working closely with strong local partners in 2 Benjamin Cha Merchants Tower in Beijing, with the latter We are now well placed to grow our activities Grosvenor’s share of property assets the markets in which we operate has been an Benjamin Cha joined Grosvenor in having lift and lobby spaces upgraded. important factor in our growth. September 2014 as Managing Director through Grosvenor-branded residential 1 of Grosvenor Asia Pacific and succeeds 3 1 Office HK$4,274.5m 66.4% Foundation work commenced at the site of developments and commercial developments In April 2014, we formed our newest Nicholas Loup as Chief Executive on Monterey Court in Hong Kong in November for medium or long-term ownership for years 2 Residential HK$1,885.7m 29.2% 1 April 2015 (see quote on page 14). development partnership vehicle in Asia 2014, and should be completed by the end of to come. Sector 3 Retail HK$286.9m 4.4% with a Malaysia-based investment group 2015. The new development will also sit within 2 Nicholas Loup and a Hong Kong property company our branded portfolio under ‘The Grosvenor’

Chief Executive, Grosvenor Asia Pacific Indirect that has previously invested with us name, our highest mark. in The Westminster Roppongi, Tokyo (see 1 1 Hong Kong HK$3,345.3m 51.9% caption 1 to the right and caption 1 on page 2).

3 2 Japan HK$1,846.8m 28.6% Grosvenor Asia Pacific – Board of Directors as at 26 March 2015 Region 3 China HK$1,255.0m 19.5% 3 2

1 2 1 Investment HK$6,064.9m 94.1%

2 Development HK$382.2m 5.9% Activity

Number of assets by city

China: Japan: 3 Tokyo: the next London Beijing 1 Osaka 1 This research paper, released in 2014, Keith Kerr Norman Lyle OBE Nicholas Loup Ian Mair examines the drivers that could see Hong Kong 2 Tokyo 4 Chairman and Non-Executive Director Executive Director Executive Director Tokyo rivalling London as a global

Non-Executive Director Chief Executive Regional Finance Director Funds Shanghai 1 property investment hub as it works Mark Preston FRICS Nicholas Loup towards the 2020 Olympic Games. Kensuke Hotta Non-Executive Director Benjamin Cha Yu Yang Chief Executive, Non-Executive Director Group Chief Executive Executive Director Executive Director Managing Director, Grosvenor Asia Pacific Michael Lee Nicholas Scarles Managing Director MWh m3 Investment (Greater Like-for-like energy consumption Like-for-like water consumption Non-Executive Director FCA ATTORNEY AT LAW Koshiro Hiroi Non-Executive Director Executive Director China) 2013 4,508 2013 14,476 Group Finance Director Managing Director, -1% 2014 4,477 -7% 2014 13,462 Development (Asia Pacific); Read biographies online at: Chief Representative Japan www.grosvenor.com/asia-pacific-board Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 44 Annual Review 2014 Annual Review 2014 45 Indirect Overview

Expanding our knowledge Melbourne Market relocation, Melbourne, Australia In July 2014, the Propertylink Australian Investment Partnership, our first indirect investment in Australia, agreed to forward fund the development of the warehouse facilities surrounding the new

Melbourne Market. The wholesale fruit, vegetable and flower market Direct is being relocated from central Melbourne to a new, more sustainable site to the north of the city, and will open in 2016. Indirect Funds Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 46 Annual Review 2014 Annual Review 2014 47 Indirect (continued) Overview Strong total return In 2014, we also committed Grosvenor’s 2014 was a good year for Sonae Sierra. Both transactions enabled the release Indirect At the close of 2014, our Indirect investment in the Liverpool Fund (see Grosvenor’s share of revenue profit of capital for new developments and Investment portfolio of £1.3bn represented caption 1 below) to a new long-term (excluding development provisions) was acquisitions in the context of improving 21.0% of the Group’s capital (2013: 25%); investment vehicle; we sold down £55.0m £27.5m, down from £31.4m in 2013 due to market conditions. Business objective of a £95.0m share in the London Office asset sales and a weaker Euro; on a like-for- our revenue profit decreased to £23.4m Construction continued on the The role of the Indirect Investment business is to enable the Group to diversify Fund (retaining £40.0m for the longer like basis revenue profit improved. At the (2013: £39.1m). The reduction in capital development of ParkLake Plaza (see further its property investment portfolio and achieve strong risk-adjusted returns term) to release capital for further same time, revaluation gains of £36.0m and profits is primarily a result of the caption 2 below) in Romania, which is by exposure to sectors, countries and specialist managers which its direct investment diversification; we closed contributed to a share of profit before tax sale of a fund investment together with due to be completed in 2016 and already property activities do not provide. We achieve this by investing in Grosvenor Fund a €20.0m co-investment in Grosvenor of £54.3m compared with £8.5m in 2013. asset sales and development provisions has 70.0% of the gross lettable area Management investment vehicles, and increasingly by investing with specialist Fund Management’s new European Like-for-like tenant sales increased by 3% in Sonae Sierra. Total return increased committed. In May, Sonae Sierra confirmed third-party managers with specific geographic or sector expertise. retail investment vehicle, Urban Retail across Sonae Sierra’s European portfolio, to 8.7% (2013: 3.6%), reflecting strong its first development in Morocco: Zenata Fund V, with a large North American and by 7.8% in Brazil; meanwhile, average capital growth, particularly in the UK and Shopping Centre (see caption 3 on investor; and, in January 2015, we occupancy for the overall portfolio reached Sonae Sierra. page 48). This is a €100.0m joint venture committed to a SEK190.0m investment 95.5%. Sonae Sierra outperformed the Key achievements in which Sonae Sierra is a minority in Skärholmen Centrum shopping retail sales index in most of its markets, a Doubled our total equity commitment to Propertylink’s Australian industrial The Grosvenor investor partner, providing development, leasing centre in Sweden alongside an Asian indicating that these results not only reflect investment programme to AUS$60.0m. supporting Grosvenor and property management services. and a European investor. improving macro-economic conditions, but Fund Management This investment demonstrates how a Completed the first phase of our £30.0m UK industrial investment programme with ‘IO’. also the quality of Sonae Sierra’s assets and In our role as ‘the Grosvenor investor’, Sonae Sierra’s strategy of expanding into a Sonae Sierra confirmed its first development in Morocco and announced a joint Backing specialist third parties its management approach. the Indirect Investment team continues emerging markets via its professional

venture to develop a designer outlet in Southern Spain. When we research third parties to invest Direct to co-invest in the majority of the vehicles Sonae Sierra continued its strategy to services business has borne fruit. a with, we target organisations that offer us Closed a €20.0m co-investment in Grosvenor Fund Management’s new investment managed by Grosvenor Fund Management, extract maximum value from its existing vehicle: Urban Retail Fund V. something we cannot achieve through our Other significant achievements include an under supervision of the Grosvenor Group assets. Significant expansion and proprietary activities: be it a new sector, agreement with McArthurGlen to create a a Invested SEK190.0m in Skärholmen Centrum shopping centre in Sweden: Board. This helps the Group achieve its refurbishment projects were progressed a new geography or a particular skill set. designer outlet, adjacent to Plaza Mayor in an acquisition by Grosvenor Fund Management. objectives of diversification of investment at two of the Brazilian shopping centres, We look for deep specialist expertise Málaga, Spain. Delivering specialist retail returns, while aligning us well with capitalising on tenant demand for prime with a culture and management style services to third parties in new markets Grosvenor Fund Management’s third-party assets in prime locations. In addition, as that not only aligns with our values and enables Sonae Sierra to share its market investors. The return on our investments part of its efforts to re-energise shopping Revenue profit Total return Equity invested business principles, but is uniquely well knowledge, access and contacts across a in vehicles managed by Grosvenor Fund centres and enhance their tenant mix, positioned to identify and exploit local much broader geographic base, enhancing Management in 2014 increased to 11.7% refurbishment works were underway at £23.4m 8.7% £527.7m market opportunities. Finding this robust its specialism further. (2013 restated: £39.1m) (2013: 3.6%) (2013: £532.1m) (2013: 6.7%), with the performance of the four shopping centres in Portugal, Spain combination in the third parties we seek UK funds particularly strong, driven by and Germany. Sonae Sierra’s services business continued to back is a constant challenge. to grow in 2014 with over 41 new contracts Portfolio analysis increased valuations in the UK office and The sale of La Farga in Spain is consistent in established markets in Turkey and North retail investments. Through our investment in Sonae Sierra with Sonae Sierra’s objective to sell down 3 4 1 1 Retail £1,084.4m 85.6% we have exposure to 36 shopping centres Africa, and the entry into strategically 2 In February 2014, we committed £15.0m ownership of its non-core assets. In Italy, in Continental Europe and a further 10 in important new markets including China. 2 Office £89.1m 7.0% to a global logistics mandate with the Le Terrazze was performing ahead of Sector Brazil. As well as managing its own assets, 3 Industrial £60.9m 4.8% specialist securities team within Grosvenor expectations and the strengthening Sonae Sierra has a growing services Fund Management. This investment investor sentiment presented an 4 Other £33.5m 2.6% business providing retail leasing, property delivered a return of 12.0% in 2014. opportunity to sell a majority stake while Indirect management and development services to maintaining a smaller interest in the third parties. property as well as responsibility for 67 1 1 Continental Europe £727.7m 57.5% its property management. 4 5 2 UK £258.9m 20.4% 3 Region 3 Brazil £163.9m 12.9%

4 USA £51.6m 4.1% 2 5 Australia £37.0m 2.9% 1 Liverpool ONE 2 ParkLake Plaza 2 6 China £23.1m 1.8% In the Grosvenor Liverpool Fund, This shopping centre in Bucharest, Liverpool ONE increased its Romania – a joint venture 7 Other Asia £5.7m 0.4% footfall in 2014 by 5.0% over 2013 between Sonae Sierra and Caelum by continuing to meet the needs Development – represents a of its visitors. Brands like Browns €180.0m investment, and will Brasserie and Byron Burger offer around 200 shop units within 1 were introduced. 70,000m2 of gross lettable area 2 1 Investment £1,194.3m 94.2% to a primary catchment area of 2 Development £73.5m 5.8% 500,000 people. (CGI) Activity

1 Funds

Number of investments by country Chris Taite is Group Investment Australia 1 UK 3 Director, managing Brazil* 1 USA 3 the Indirect Investment China 1 International 2 portfolio and team. Continental Europe 6 * Exposure to Brazil is through the investment in Sonae Sierra which is also categorised here within Continental Europe. Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 48 Annual Review 2014 Annual Review 2014 49 Indirect (continued) Overview Sonae Sierra further improved the Understanding and meeting these needs Propertylink provides an excellent “ The combination of our sector- A forward look Sonae Sierra will continue to focus operational and environmental efficiency is rewarded with growing occupancy and combination of specialist market knowledge specific experience and our regional It remains challenging to find good on improving occupancy rates, rental of its shopping centres in 2014, making successful unit sales. To date, IO’s unit sales with a depth of experience and expertise, network of agents and industrial opportunities for indirect investment income and tenant sales, and it will good progress towards its long-term programme has achieved an average profit which has proven very well suited to property owners ensures that the in an increasingly competitive market, progress its programme of expansion environmental performance goals, on cost of 32.0% and it has completed 26 the challenges of exploiting the market IO team is well placed to source but through both our Grosvenor Fund and refurbishment works to enhance contributing to a reduction in service new lettings inside two years with a team opportunity within the Australian industrial and execute transactions iinn a Management co-investment programme the value of the existing portfolio. charges by 2.3% and saving utility costs of only four people. and logistics sector. We succeeded in competitive marketplace.”rketplace.” and our growing investment with Sonae Sierra will also continue to look of around €18.7m. The quality of Sonae our strategy to re-invest in Australia For more information, see third-party specialists, we are positioning for opportunities to recycle capital Sierra’s sustainable business practices www.ioam.co.uk by completing the investment with ourselves well to achieve this. and reinforce its development pipeline, was acknowledged again in 2014 through Propertylink in February 2014. Since then, while focusing on growing market its high Global Real Estate Sustainability Our industrial and logistics fund investment Propertylink has assembled a portfolio with As we are only four people in the Indirect share for its services business. In Brazil, Benchmark ranking: it maintained its with High Street Equity, a private equity a gross asset value of close to AUS$500.0m James Allen Investment team, we rely heavily on Sonae Sierra’s strategy is to take an ‘Green Star’ designation, was ranked third real estate investment management in 26 assets yielding just under 9.0% Partner shared services across the Group. opportunistic approach to developments place in the European retail sector and was company in the USA, focuses exclusively per annum. The pace and success of its IO Asset Managementt LLLPLP In particular, we rely on Grosvenor’s and acquisitions in prime locations to in the top 3.0% of participants worldwide. on institutional quality industrial assets acquisitions programme (in joint venture in-house legal, finance and tax specialists strengthen the portfolio, and to focus in major markets in the USA. To date, the with Goldman Sachs) led us to double “ An extensive network of relationships (see caption 4 below) to support the For more information, see on the redevelopment of key assets with www.sonaesierra.com investment programme is progressing our original equity commitment from with investment sales and leasing growth of the Indirect Investment business value creation potential, focusing on in line with strategy, having acquired 43 AUS$30.0m to AUS$60.0m in September brokers, and a strong reputation as – balancing innovation with compliance. first tier cities such as São Paulo and Rio Our investment programme with IO Asset assets in four regional markets across 2014. Propertylink’s development a reliable buyer gives High Street a Management LLP, the UK industrial the Eastern USA with a total gross asset In 2015, our co-investment with third de Janeiro where Sonae Sierra wants to

of warehouse facilities for the new significant advantage in competing Direct parties in Grosvenor Fund Management- increase its exposure. real estate partnership that we have value of US$240.0m. With a senior team Melbourne Market (see pages 44-45) for acquisition opportunities for backed since 2012, remains in line with consisting of career industrial specialists, led vehicles will be predominantly is expected to drive huge efficiencies our investors.” European retail and office led investments. In our backing of new third parties, we our original business plan with projected High Street Equity’s ability to identify and and environmental benefits. Its location will maintain our focus on the industrial net returns in excess of 15% per annum. exploit mispricing opportunities across its With specialist third parties, we will close to Tullamarine airport and arterial continue the focus on our largest single and logistics sector, but we will also be IO was not only attractive to us because core markets is what sets it apart. As well roads allows for more efficient transport seeking to back existing and new areas of its deep industrial expertise, but also as the short-term ability to buy well, the third-party specialist – Sonae Sierra of produce and the design of the facility – as well as supporting IO Investments, of real estate expertise – both sector and because of its approach: IO views each investment in this sector will benefit from reduces the environmental impact of the Andrew Zgutowicz geographical (including, potentially, our Chief Investment Officer High Street and Propertylink with the self-contained industrial unit within an longer-term market changes: not only site and delivers higher standards of health first investment in Sub-Saharan Africa) High Street Equity delivery of their business plans. estate as an individual property in its own through the growing demand for logistics and safety. – which are not currently accessible in right to be valued and marketed as such. (as the move to online retail continues), For more information, see We are optimistic about Sonae Grosvenor Group’s direct businesses. This approach brings with it an almost but also from the widening of the Panama www.propertylink.com.au “ Like Grosvenor, we pride ourselves Sierra’s prospects for the year ahead. This includes opportunities in real estate forensic attention to individual tenants’ Canal, which is expected to fuel demand for on our ethical and trustworthy Following some yield compression in companies and associated services that needs – both existing and prospective. East Coast industrial property. approach and strong relationships. Portugal and Spain we expect values to help improve environmental performance. For more information, see Our track record in executing on continue to improve as more investors Through these activities, we aim to www.hsequity.com deals gives vendors the comfort to return to the market, especially for more deepen our growing expertise as well as

deal exclusivelyy with PrPropertylink.”opertylink. prime assets. provide an increasing contribution to the Grosvenor Group. Chris Taite

Group Investment Director Indirect 26 March 2015 Peter McDonald Executive Director, Head of Property Propertylink

3 3 Zenata Shopping Centre 4 Specialist in-house support 5 Hovefields Court Adjacent to highway A3 that Grosvenor’s in-house legal, IO Asset Management LLP’s connects Rabat to Casablanca tax and finance specialists support refurbishment of this 5,390m2 in Morocco, this 90,000m2 our Indirect Investment team as estate in the well established 4 shopping centre will offer 250 it works to diversify the Group’s industrial area of Basildon, UK, shops to a catchment area of property investment portfolio. helped the facility achieve full 5.9 million people. The shopping Pictured is Rachel Heslehurst, occupancy within three months. centre is planned to open in 2017, Legal Counsel. creating 4,500 jobs for the local community. (CGI)

5 Funds Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 50 Annual Review 2014 Annual Review 2014 51 Grosvenor Fund ManagementManagement Overview

Focusing on what we do best Skärholmen Centrum Shopping Centre, Stockholm, Sweden We acquired Skärholmen CentrumCentrum justjust afterafter thethe yearyear-end end onon behalfbehalf of our Retail CentresCentres VV (Sweden)(Sweden) ffund,und, brinbringingging thethe totaltotal number number ooff SSwedishwedish sshoppinghopping cencentrestres wewe manamanagege ttoo ssix.ix. SitSituateduated inin one one o off

SSweden’sweden’s ggrowingrowing reregions,gions, it iiss ranrankedked iinn ththee ttopop ffourour sshoppinghopping cen centrestres Direct iinn the countrcountryy bbyy footfallfootfall,, withwith 1414 millionmillion visitorsvisitors aa y year.ear. Its Its exce exceptionalptional ccommunityommunity ffacilitiesacilities sesett itit aapartpart asas aa socsocialial hhubub fforor th thee l ocalocall ca catchmenttchment area ooff moremore thanthan 600600,000,000 peoplepeople.. Indirect Funds Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 52 Annual Review 2014 Annual Review 2014 53 Grosvenor Fund Management (continued) Overview Continued focus For our other key European strategy, In 2014, we also made a number of sales This year, Väsby Centrum (see caption Grosvenor Fund Management The activities and transactions we retail shopping centres, we acquired for our investors, with our Grosvenor Retail 5 on page 54), in Northern Stockholm, undertook in 2014 were very much in line La Visitation, a shopping centre European Properties Fund disposing of underwent a vibrant programme of in Rennes, for a new French client the Verano portfolio at significantly above renovation and rebranding. The central Business objective with our refreshed strategy. We focus our investments on what we do best: retail-led (see caption 3 on page 54) and just after valuation. The same result was achieved square, malls and entrances were all We aim to create value for investors, Shareholders and staff by creating compelling properties in European urban environments the year-end (as detailed in caption 4 on with the sales of the last two assets for the upgraded in a modern and customer- investment strategies that are expertly implemented. Building on our recognised skills as well as offices in London. This allows us to page 14 and pages 50-51), we acquired IGIPT Fund – shopping centres in Barcelona friendly style. Unveiled in late October, the and track record, we focus on urban property, often mixed-use and with a retail focus, best use our property skills to grow income Skärholmen Centrum shopping centre in and California. We also completed the improvements led to an increase in footfall in cities and locations whose vibrancy will endure. We select high-quality assets and and value, which drives performance for Sweden on behalf of our Retail Centres V sales of the assets for the Grosvenor Office this December of 7.6% compared to 2013 manage them vigorously. We treat our tenants, as well as our investors, as partners, (Sweden) Fund, backed by two major new & Retail Fund in Japan, delivering above and an increase in hits on social media building close and mutually beneficial relationships that draw on Grosvenor’s long our investors. We continue to develop our strategy in the USA, which will follow a investors and Grosvenor. This transaction target prices to our investors. of 31.7%. experience in real estate. We work best with clients who, like Grosvenor, have a long- represents the sixth shopping centre that similar theme. We pride ourselves on a very active term view of investment while being alert to the potential of short-term opportunities we have acquired in Sweden and means Investment performance approach to property and asset to enhance returns. This focus has generated excellent returns that we are now well established in the management and aim to improve all of the The performance of our investment across our partnerships. Several significant Scandinavian market. properties under our stewardship for the vehicles in 2014 was strong, reflecting the acquisitions have been made and a very benefit of concentrating our resources on Key achievements healthy pipeline of investments is in place. The Grosvenor London Office Fund, which benefit of our investors, our tenants and invests in Central London offices, raised the environments in which they sit. those funds which meet the criteria of our a Fee revenue for management services The acquisition of the fourth largest shopping centre in Sweden. £95.0m of new capital from existing third- more focused strategy and addressing the amounted to £15.3m (2013: £17.7m). During 2014, there were nearly 400 leasing weaker performers. The overall weighted a The acquisition of 10 Grosvenor Street in London. party investors, purchased the other 50%

events across the portfolio, allowing us Direct Assets under management at the end of 10 Grosvenor Street (see caption 4 on return was 15.0% (2013: 7.3%). a Investments with three new investors. to introduce new tenants, accommodate of 2014 were £3.0bn (2013: £3.2bn). page 54) at below valuation and refinanced the growing needs of existing tenants The performance of our absolute return a The creation of our fifth European urban retail platform with a major North Total acquisitions were £0.1bn, but its debt at extremely attractive rates. and generally continue to improve fund, which invests in real estate equities, American investor. including the Skärholmen Centrum continues to be excellent. In 2014, shopping centre transaction which In the USA, we are working side by side our buildings. a Outperformance of INREV benchmarks. with our colleagues in Grosvenor Americas net returns of 16.0% were achieved completed in February 2015, were £0.4bn. We are particularly pleased to have to develop strategies that will bring to with less than half of market volatility. Our revenue was in line with our forecast. provided rental units to leading brands the fore the best expertise that exists The Fund was nominated for a EuroHedge Assets under Fee Disposals Acquisitions such as Michael Kors (see caption 1 within the Group and allow us to provide Award in 2014. management income made made Our strategy in action below) in Liverpool ONE, Nike in Heron urban investment opportunities in the Europe remains the dominant part of our Park in Lille, Swarovski in Lyon and the cities that we focus on, in this strong and business and there is strong momentum LEGOLAND® Discovery Center (see £3.0bn £15.3m £0.5bn £0.1bn growing market. “ At Parkside Plaza in Shanghai, our (2013: £3.2bn) (2013: £17.7m) (2013: £1.1bn) (2013: £0.2bn) in all of our chosen investment strategies. caption 2 below) at Parkside Plaza in active asset management focusing on In Asia, our focus is to continue to Shanghai and to have provided more For European Urban Retail, we created key leading indicators has seen footfall improve and consolidate the Parkside space to existing tenants H&M and Zara. Portfolio analysis our fifth platform – this one with a major increase by 13.2% and sales turnover Plaza shopping centre in Shanghai. North American investor and Grosvenor The refurbishment of our malls in Sweden for tenants increase by 13.4%; this 3 1 1 Retail £2,229.7m 74.1% Under Brenda Chung, Director, Asset – and obtained exclusive positions on two and France advances well and is providing is now flowing into higher rents on Management (see quote to the right), there 2 Office £652.1m 21.7% city-centre retail properties, one in London an enhanced consumer experience to new lettings.” 2 Sector has been excellent progress in improving 3 Other £126.2m 4.2% and one in Milan, both of which were our customers. both occupancy and tenant quality. subsequently completed after year end. Indirect

1 1 Funds £2,008.8m 66.8% 3 Brenda Chung Director, 2 Separate accounts £594.2m 19.8% Type of Asset Management Investment 3 Clubs £405.0m 13.4% Grosvenor 2 Fund Management

1 1 Liverpool

2 London Top 5 cities 3 Lyon 2 4 Shanghai

5 Stockholm

Number of assets by region Asia 1 Europe 99 Funds USA 12 James Raynor 1 Michael Kors 2 LEGOLAND® Discovery Center In October 2014, Michael Kors The first LEGOLAND® Discovery Like-for-like energy consumption MWh Like-for-like water consumption m3 Chief Executive, Grosvenor Fund Management opened a Michael Kors lifestyle Center in China will be at Parkside store, which carries a mix of Plaza in Shanghai, part of the 2013 67,937 2013 325,299 accessories, at Liverpool ONE repositioning of the centre as -9% 20142014 61,665 -2% 2014 318,402 – the first of its kind in North a leading family shopping and West England. entertainment destination. (CGI) Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 Annual Review 2014 54 Annual Review 2014 Annual Review 2014 55 Grosvenor Fund Management (continued) Overview 3 Finance We also support wholeheartedly INREV’s “ We are delighted to have made our Research The competitive landscape We manage £1.2bn of debt on behalf of our recommendations on best practice in our first acquisition alongside Grosvenor. During the year, Graham Parry took over as The opportunity for Grosvenor Fund clients. One quarter of this was put in place industry. The fund management industry They are an aligned, long-term Group Research Director. Graham and his Management is considerable. An increasing during 2014. This runs across 20 separate is changing and we want to help lead partner with a strong retail expertise team have a fundamental role in helping number of private and institutional loans. Our average loan to value is low at that change. that we hope will drive the value of shape our investor strategy, ensuring that investors are seeking to invest in property. our investment.” 41.0%, in line with our prudent approach to Living cities we are equipped with the best insights and Although competition is strong, these financial planning. forecasts so we can underwrite accordingly requirements, combined with investors’ We recognise the increasingly vital role and rapidly. demand for well-financed, prudent and We are grateful to our 20 relationship that cities have in the world and how long-term managers, play well to our banks for their support. Graham will continue the work on 3 La Visitation Shopping Centre long-term economic growth and strengths. We believe that we have in place upgrading our research outputs that In February 2014 we acquired urbanisation are intertwined. an infrastructure capable of delivering a La Visitation, a shopping centre gallery Managing key relationships Ilkka Tomperi began this year with the quarterly Sustainable and well-conceived urban Investment Director high level of service and performance to with 17 tenants in Rennes, France, on We work with 59 investors with interests environments and infrastructures have publication of our ‘house view’. behalf of a French institutional investor. Varma Mutual Pension a wider group of investors. I am looking Insurance Company in 21 investment vehicles. The quality of a huge impact on a city’s development. forward to continuing to grow the business the relationships we forge with our clients Having an intimate knowledge of the cities in line with our strategy and serving all is fundamental to our business, hence the our stakeholders. formal and informal channels through in which we operate, and how assets fit into “ INREV’s objective to further which we conduct these relationships. those cities, is fundamental to our business. transparency of non-listed real James Raynor It is crucial that global cities and the Chief Executive, Grosvenor Fund Management estate vehicles will only be achieved 26 March 2015 We have established a good reputation properties within those cities operate by having a set of relevant global Direct for a prudent and long-term approach in a more sustainable way. standards developed with the input to investment and our ability to add value We aim to use our knowledge and skills and support of our members for the In Europe we manage: to the properties we own and manage, entire industry.”” particularly in the London market. to invest in and develop buildings that are integrated into the cities where they are 1% Italy Recently, we have become better known located, will contribute positively to the for our specialist focus elsewhere in Europe environments in which they sit and and we aim to demonstrate, through will generate strong long-term returns. our actions and our communication, We improved the energy efficiency of Matthias Thomas 13% our credentials as a leading specialist Sweden management partner. our held portfolio by 9.0% in 2014 due CEO, INREV to working closely with our property Supporting the industry managers to reduce energy usage “ We manage our portfolios to and bills. We also, once again, achieved £2.5bn We seek to punch above our weight in terms protect and grow the streams of of property ‘Green Star’ status in the Global Real of our contribution to the wider industry. income that the assets produce. Estate Sustainability Benchmark. We play an active role in INREV (see middle Through attentive and creative quote opposite), the association responsible asset and property management, 54% we ensure the best value for our 32% UK for European non-listed real estate vehicles, France particularly in relation to its commitment to investors by clearlyearly aandnd consistentlyconsistently

training and education. communicatingg our Indirect objectives withh alalll our stakeholders.”ers.” 63 1,427 £136m 670,000m2 properties tenancies of rental income of floorspace Nick Preston Managing Director, PoPortfoliortfolio Grosvenor Fund Managementnagement Grosvenor Fund Management – Board of Directors 4 10 Grosvenor Street 4 5 In September 2014, we acquired the as at 26 March 2015 final 50.0% of 10 Grosvenor Street Mark Preston FRICS Bruce Ambler on behalf of our London Office Fund, Chairman and Executive Director following our strategy to invest in Non-Executive Regional Director, large, high-quality office buildings in Director; Americas central London. Group Chief Executive Alexia Gottschalch 5 Väsby Centrum Nicholas Scarles Executive Director In 2014, Väsby Centrum, in Northern FCA ATTORNEY AT LAW Global Head of Stockholm, Sweden, underwent a Non-Executive Capital Markets Director vibrant programme of renovation and Group Finance Director Matthew Norris rebranding, upgrading the central Executive Director square, malls and entrances. James Raynor Real Estate Securities Executive Director

Portfolio Director Funds Chief Executive Giles Wintle Robert Davis Executive Director Executive Director Regional Director, Chief Operating Officer Europe

Read biographies online at: www.grosvenor.com/ fund-management-board Grosvenor Group Limited Grosvenor Group Limited Annual Review 2014 56 Annual Review 2014 Our history Overview Grosvenor Asia Pacific celebrated its 20th Anniversary Continuing in November 2014 with an event at Shaw Studios in Hong Kong. The entertainment during the evening was inspired stewardship by Grosvenor’s presence in our key Asian cities: Hong Kong, Shanghai and Tokyo. Pictured on the back cover is one of the ‘shadow dancers’ from Shanghai. The family and the land Belgravia, London Corporate structure Image on back cover 1677 1820s 2000 © Lusher Photography The Grosvenor family history stretches back almost Belgravia, which lies south west of Mayfair, was Grosvenor’s corporate governance has evolved with 1,000 years, to the time of William the Conqueror. originally part of the ‘Five Fields’ — open land between the maturing of the Group. In April 2000, when we Hyde Park and the Thames. The end of the Napoleonic moved into new London offices (see image 8 below), However, the origins of the property business lie in Wars and the conversion of nearby Buckingham House we adopted a corporate structure as a Group of the land in London that came into the family in 1677 into a palace for George IV prompted the Grosvenors regional businesses and published our first full Annual with the marriage of Mary Davies (see image 1 below) to develop it. In the 1820s, the family’s surveyor, Report and Accounts. In 2005, our international fund and Sir Thomas Grosvenor (see image 2 below) — together with master builder Thomas Cubitt, oversaw management business was formalised as a discrete 500 acres of swamp, pasture and orchards to the the creation of an elegant estate in the classic Regency entity. In 2011, we brought all our indirect investments west of the City, of which 300 acres remain with the style of squares, including (see image in property together, creating the present structure family today as Grosvenor’s London estate. 5 below), streets and crescents overlooking private of direct proprietary activities; indirect proprietary gardens. The vast majority of Cubitt’s work survives activities; and fund management. and almost the whole of Belgravia is included in a Direct Mayfair, London statutory Conservation Area, now encompassing Read more online about Grosvenor at: housing, commercial and institutional headquarters, www.grosvenor.com 1720s retail (see image 6 below) and, on the periphery, Mayfair, the northern part of this land, took its name modern offices. Today, we have 17 offices in 11 countries and assets from the fair held there in May until well into the in 16 countries (see 1701 Pennsylvania Avenue NW 19th century. In 1720, the family began developing in Washington, DC in image 9 below). the land into a fashionable residential area, centred on International expansion Grosvenor Square (see images 3 and 4 below). 1950s The area’s character continued to evolve through Ownership subsequent redevelopment. In the 19th century, During the second half of the 20th century, shops and, later, embassies and diplomatic residences Grosvenor began to apply its estate management 2015… moved in. During the 20th century, it saw the westerly skills of investment, development and asset Grosvenor remains privately owned. Our Shareholders migration of office users from the war-damaged management elsewhere in the world. — the Trustees of the Grosvenor Estate — hold the City of London. Today, almost the whole of Mayfair, Our business expanded, successively, into the Americas shares and other assets for the benefit of current and which now contains a cosmopolitan mix of commercial (from the 1950s with a development at Annacis Island, future members of the Grosvenor family. The family and residential property, is included in a statutory Vancouver, our first international project — see image is headed by the 6th Duke of Westminster, who is Conservation Area. 7 below), Australia (from the 1960s), Asia Pacific Chairman of the Trustees. (from the early 1990s) and Continental Europe (later that decade). Many projects were undertaken in Read more online about the Grosvenor Estate at: partnership with other investors, leading us gradually www.grosvenorestate.com into fund management. Indirect

1 2 3

4 5 6

You will find a list of offices and a glossary under this flap. The flap unfolds so you can refer to the 7 8 9 glossary as you read through the document. Funds

The financial information set out on page 23 does not constitute the Group’s statutory financial statements for the year ended 31 December 2014 and 2013, but is derived from those accounts. Statutory financial statements for 2013 and 2014 have been delivered to the Registrar of Companies. The auditors have reported on those accounts: their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under section 498 (2) or (3) of the Companies Act 2006. Overview Direct Indirect Funds d associates an ird party. of this calculation.

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valuation and sale of investment is re e completed development. in ch

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th Revenue profit Profit before tax, excluding profits on the sale of investment properties, gains or losses on other non–current movements,investments, revaluation major refurbishment costs and derivative fair value adjustments. Reversionary yield The anticipated yield to which running yield willrise (or fall) once the rent reaches ERV; calculated as ERV as a percentage of the value of Running yield Passing rent as a percentage of the value of Separateaccount A private real estate portfolio managed by Grosvenor Fund Management on behalfth of a funds Shareholders’ The balance sheet value of the Shareholders’ interest in the Group. Structured development finance Lending to property developers that (i.e. lending lending in Total return Total return on property assets is revenue profit before financial expenses but after major refurbishments, plus the net gain on are treated proportionally for the purposes properties and other investments and and exchange movements recognised in reserves, as a percentage of average property assets (before current year revaluations) and cash. Joint ventures Trading property Property held as a current asset in the balance sheet that is being developed with a view to subsequent resale. Value–add Above–market increase in value as Weighted average cost of capital The weighted average cost of debt and the notional cost of equity. Used as a benchmark for total performance. return

re mo operty assets. operty companies. pr pr

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an the ERV. blished results of Sonae r the relevant year. th pu ntracted rent is in line with timated rental value (ERV), e inside front cover. fo direct: see structure diagram ss

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le Proprietary assets are direct or on Rack-rented The term used to describe when the the implying a nil reversion. Resilience (in the context of gearing) The extent to which market values of property assets, on a proportional basis, can fall before Groupfinancial covenants are breached. Proportional The total of the Group’s wholly owned and its share of jointly owned property assets or net debt as accounted for on an IFRS basis. Proprietary Relating to Grosvenor’s share of investmentsin or Sierra, a joint venture. While there is no impact on Grosvenor’s primary profit statements,revenue financial (which is our chosen method of measuring underlying performance) and Grosvenor’s share of property assets, both of which incorporate the underlying accounting of our joint arrangements, are affected. In order to better reflect the underlying results of the Grosvenor Group, Sonae Sierra’s results have been incorporated on a management accounts basis rather than an IFRS basis, reflecting Sonae Sierra’s proportionate share of its underlying investments. All prior years have been restated accordingly. Shareholders’ funds and the Group’s profit before tax are unaffected by restatement. this Property assets Investments in property and property– related instruments: comprises properties,investment development properties, trading properties, mezzanine loans and equity investmentsin Occupancy rate The average occupancy by floor area Operating Companies Grosvenor’s regional investment and development businesses and Grosvenor Fund Management. Passing rent The annual rental income receivable, changes Presentational and restatements Changes to IFRS on accounting for joint arrangements, which have been implemented in have 2014, resulted in a significant change to the rcentage

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below its carrying amount. Indirectinvestment Proprietary investment managed by Grosvenor Fund Management or third Future development commitment The expected costs to complete the development programme to which we Gearing Total short– and long–term borrowings, including bank overdrafts, less cash and cash deposits, as of Grosvenor–managed A property or other investment that is Group Grosvenor Group Limited and its subsidiary undertakings. company Holding Grosvenor Group Limited. IFRS Reporting Financial International Standard(s). Impairment A reduction in the recoverable amount property Investment A property that is held for the purposes of earning rental income or Joint venture An entity in which the Group invests and which it other investors. LEED Leadership in Energy and Design. Environmental Like betweenknowledgeable, exchanged willing parties in an arm’s length properties,investment transaction. For it is determined by independent valuers.external MWh (Mega Watt hours) Equal to 1,000,000 watts of electricity used continuously for one hour. years or more, also ‘static’ portfolio. estate London Grosvenor’s portfolio of properties in the Mayfair and Belgravia areas of London’s West End. Market value Market value is the amount for which A portfolio of assets that has been in lti– mu nvestment property.nvestment an i nt being paid. nture or fund vehicles re sociation of owners. ve drawn committed facilities.

ority investors. as

the the storic interest. un int

an hi min jo

alongside third parties. Condominium A form of property where a specified part of real estate (usually a Economic property interest Grosvenor’s equity interest in properties (or debt) after deducting the share attributable to ERV (estimated rental value) The estimated market rental value of the total lettable space in a property, calculated by the Group’s valuers. This will usually be different from capacityFinancial Wholly owned unrestricted cash and Area All figures given are for the gross area. Assets under management The total investment in property assets managed by the Group, including the future costs of developments.committed CGI image. Computer-generated Co–investment Where Grosvenor invests equity in family property) is individually owned while use of and access to common facilities are controlled by Area Conservation An area considered worthy of preservationenhancement or because of its special architectural or Currency Financial information is presented in Sterling, with the exception of the Operating Company-specific sections on pages where 28-49, it is presented in the principal currency of the respective Operating Company. exposure Development Grosvenor’s share of development properties, including its share of the future development commitment, as a percentage of property assets including the future commitment.development pipeline Development The development programme, including proposed projects that are not yet committed but are likely to proceed. property Development A property that is being developed for future use as 15 15 13 13 Washington, DC Stockholm Tokyo Vancouver 3 3 3 17 14 15 16 1701 Pennsylvania1701 NW Avenue, Suite 1050 Washington, DC 20006 USA 202 293 1235 +1 Tel: 202 785 2632 Fax: +1 Smålandsgatan 4tr. 10, 111 46 Stockholm Sweden +46 8 4073170 Tel: Fax: +46 8 4073171 Floor24th ARK Mori Building Akasaka1–12–32 Minato–Ku 107–6024 Tokyo Japan 3 5575 5300 (0) +81 Tel: 3 5575 5301 (0) Fax: +81 2000 The Grosvenor Building 1040 West Georgia Street Vancouver BC 4HI V6E Canada 604 683 +1 1141 Tel: 604 684Fax: +1 5041 Paris Philadelphia San Francisco Shanghai 14 14 10 11 12 13 Unit 602-603 Platinum Road233 Taicang 200020 Shanghai China +86 21 2322Tel: 3666 Fax: +86 21 5382 3431 5th Floor Boulevard69 Haussmann 75008 Paris France 1 44 75 00 51 (0) +33 Tel: 1 44 75 01 51 (0) Fax: +33 Commerce SquareTwo 2001 Market Street, Suite 200 19103 Philadelphia PA USA 215 575 3700 +1 Tel: 215 575Fax: 6240 +1 One California Street Suite 2500 San Francisco CA 94111 USA 0175 434 415 +1 Tel: 2742 434 415 Fax: +1 9 9 6 7 7 6 10 2 5 5 10 2 4 4 8 8 Madrid Milan Luxembourg Lyon London List of offices 11 11 17 8 9 6 7 5 17 Plaza de Colon 2 2 Planta 7 Torre 28046 Madrid Spain 292 08 91 90 (0) +34 Tel: 292 08 91 91 (0) Fax: +34 Corso Garibaldi 86 20121 Milano Italy 912 517 0 2 43 +39 Tel: 912 531 0 2 43 Fax: +39 46a, John Avenue F Kennedy 1855 Luxembourg Luxembourg 00 26 52 13 +352 Tel: 00 26 58Fax: 03 +352 73 rue de République la 69002 Lyon France 4 72 40 44 (0) 67 +33 Tel: 70 Grosvenor70 Street London W1K 3JP England 0988 20 7408 +44 (0) Tel: 9115 20 7629 Fax: +44 (0) 1 1 12 16 16 12 Liverpool Hong Kong Hong Edinburgh Calgary 4 3 2 1 Management Suite Street5 Wall Liverpool L1 8JQ England 151 232 +44 3210 (0) Tel: 151 232Fax: +44 3217 (0) 3505 Jardine House 1 Connaught Place Central Kong Hong +852 2956 1989 Tel: Fax: +852 2956 1889 33 Castle Street Edinburgh EH2 3DN Scotland 131 225 +44 5775 (0) Tel: Grosvenor Americas Suncor Tower Suite 5050 150 6th Avenue SW Calgary, Alberta Canada T2P 3Y7 403 699 9822 +1 Tel: 403 699 9833 Fax: +1 www.grosvenor.com