Living cities www.grosvenor.com

Annual Review 2015 Our history Evolving and growing

At Grosvenor, we understand cities and the way they evolve. We have been actively managing our estate since 1677 through numerous economic cycles, conflicts, the industrial revolution, technological change and globalisation. As a business too, we have continued to adapt to a changing world: since the 1950s we have expanded internationally 60 1,550 cities we are active in properties currently in our to 60 cities, with offices in 17 of them. across the Americas, Europe and direct investment portfolio Asia Pacific. managed to minimise our environmental impact. 567 31 people worldwide projects in our expressing the same development pipeline set of values. as we look to the next property cycle.

Today 1677 1720s 1820s 1950s 2000 Tomorrow…

The family and the land , London , London International expansion Corporate structure ‘Living cities’ The Grosvenor family history Mayfair, the northern part of this Belgravia, which lies south-west of During the second half of the 20th and ownership Grosvenor remains privately owned, stretches back almost 1,000 years, land, took its name from the fair Mayfair, was originally part of the ‘Five century, Grosvenor began to apply its and we continue to be concerned Grosvenor’s corporate governance to the time of William the Conqueror. held there each May until well into Fields’ – open land between Hyde Park estate management skills of investment, about what we can do to make has evolved with the maturing of the the 19th century. In 1720, the family and the River Thames. The end of the development and asset management a lasting contribution to the However, the origins of the property Group. In April 2000, when we moved began developing the land into a Napoleonic Wars and the conversion of elsewhere in the world. communities and the environments business lie in the land in London into new London offices, we adopted fashionable residential area, centred on nearby Buckingham House into a palace in which we are active. that came into the family in 1677 Our business expanded, successively, a corporate structure as a Group of Grosvenor Square. for George IV prompted the Grosvenors with the marriage of Mary Davies and into the Americas with our first regional businesses and published our Our ‘Living cities’ philosophy supports to develop it. Sir Thomas Grosvenor: 500 acres of The area’s character continued to evolve international project, a development first full Annual Report and Accounts. our strategy, guiding us to create, swamp, pasture and orchards to the through subsequent redevelopment. In the 1820s, Thomas Cundy, the at Annacis Island, (from In 2005, our international fund invest in and manage properties and west of the City, of which 300 acres In the 19th century, shops and, later, family’s surveyor, created a masterplan the 1950s), (from the management business was formalised places that contribute to the enduring remain with the family today embassies and diplomatic residences for what was to become Belgravia. 1960s), Asia Pacific (from the early as a discrete entity. In 2011, we success of cities. as Grosvenor’s London estate. moved in. Social housing was Together with master builder Thomas 1990s) and Continental Europe (later brought all our indirect investments in More on our ‘Living cities’ philosophy introduced around Brown Hart Gardens. Cubitt, Cundy (and his successors as that decade). Many projects were property together, creating the present See page 2 During the 20th century, it saw the Estate Surveyor), oversaw the creation undertaken in partnership with other structure of direct investment activities; westerly migration of office users from of an elegant estate in the classic investors, leading us gradually into indirect investment activities; and the war-damaged City of London. Regency style of squares overlooking fund management. fund management. private gardens, streets and crescents. More information on ownership See pages 6 and 56 Limited Annual Review 2015 1

Welcome to Grosvenor

In this year’s review Three centuries of stewardship of property as a private company gives us a sense We highlight examples of our ‘Living cities’ philosophy in of perspective and enables us to make practice, report on our strategic objectives and review progress from the perspective of the Group and its informed long-term decisions. constituent businesses. The decisions we make today will affect people and communities in the future and it Our history Inside front cover Direct investment Frequently asked questions 56

Welcome to Grosvenor 1 Grosvenor Britain & Ireland 28 List of offices Inside back cover is this long-term impact of what we do that ‘Living cities’ 2 Glossary Inside back cover drives us at Grosvenor. Our business 6 Overview Chairman’s statement 14 Our ‘Living cities’ philosophy, which supports Looking to Grosvenor Americas 34 our strategy, guides us to create, invest in the long term and manage properties and places that

Executive Trustee’s reflections 16 Grosvenor Asia Pacific 40 contribute to the enduring success of cities. Chief Executive’s review 18 Consistent On the following pages, you can find out strategy, more about the work we are doing to make new projects Indirect Investment 44 For more information: www.grosvenor.com/performance a lasting contribution though our projects, Finance Director’s report 22 Funding investments and other initiatives. development You will also see how we are exploring ways through the Grosvenor Fund Management 50 cycle to quantify this, working closely with local

Market overview 26 communities, businesses and civic authorities, and with our partners, consultants and other developers.

Annual Financial Annual Non-financial Data You will find information Statements 2015 Report 2015 about Grosvenor’s history under this flap. Our full financial statements for the 2015 The details behind our 2015 socio-economic financial year are available at: and environmental metrics are available at: www.grosvenor.com/ www.grosvenor.com/ financialstatements2015 nonfinancialdata2015 Grosvenor Group Limited Grosvenor Group Limited 2 Annual Review 2015 Annual Review 2015 3 ‘Living cities’ Our ‘Living cities’ Grosvenor Hill The internationally-renowned Gagosian Gallery opened its philosophy in action new space in Grosvenor Hill, Mayfair, London in October, with an exhibition of a series of paintings, sculptures and works Put simply, we strive to create, invest in and by artist Cy Twombly. Our vision for this growing part of the manage properties and places that contribute West End is founded on our wish to see vastly improved public to the enduring success of cities. areas, leading architectural design and some of the best cultural and retail operators in the world.

District-wide improvement As part of our continuing transformation of North Mayfair, World-class design nearby Mount Street has attracted The gallery’s exterior is designed by some of the world’s leading fashion award-winning architects TateHindle. houses and designers. They include 2 The 2,000m interior, incorporating Oscar de la Renta and Roksanda, double height, daylight-lit spaces, is as well as up and coming British designed by Caruso St John (designers designers such as Christopher Kane of the Gagosian galleries in Rome and Nicholas Kirkwood. and Paris). Our philosophy 2,000 Grosvenor, one of the world’s largest private property groups, works in some of the most dynamic cities around Overview the globe. Urbanisation is recognised as one of the defining forces of the modern world. With 300 years’ experience as steward of our London estate, we believe we can help cities grow and evolve in ways that are socially, economically and environmentally sustainable. We aim to make a long-term contribution to the future success of the cities in which we work by using creative design, high-quality building materials and innovative environmental solutions in our development projects, and through intelligent management of our property assets. In doing so, we strive to create places in which people will want to live, work and enjoy their free time. By taking a long-term approach, we are able to combine our global expertise with local knowledge and cultural understanding. We want our projects to reflect the spirit of the individual city Cultural quarter The gallery draws on Mayfair’s art “We looked for many years to open a Better spaces and improved access and to foster thriving communities. and design heritage and joins recent flagship store in London, a city which is The upgraded public realm around We work closely with local communities, additions to the area including ‘Silence’, Grosvenor Hill, funded by Grosvenor, a water feature by Japanese architect for me the most important metropole in businesses and civic authorities, and was designed by international Tadao Ando on Mount Street, and public the world. This cultural quarter around architectural practice BDP. with our partners, consultants and art created by Neal French in nearby Bourdon Street is changing and we New streetscapes include striped other developers to achieve this. Bourdon Place. wanted to be here, contributing to the granite paving, street furniture, trees start of this evolution.” and lighting, and greater priority to pedestrians. An improved thoroughfare Hussein Chalayan, MBE at Grosvenor Hill strengthens the Fashion Designer and Owner, Chalayan connection between Bond Street, Berkeley Square and Mount Street. Grosvenor Group Limited Grosvenor Group Limited 4 Annual Review 2015 Annual Review 2015 5

‘Living cities’ (continued)

Grosvenor Ambleside The Westminster Roppongi

We launched the pre-sales campaign for Grosvenor Ambleside The Westminster Roppongi is a 99-unit apartment building in Vancouver in March 2015 to an excellent response within located next to Roppongi Hills in . Rather than demolish the local market. Our mixed-use development will infuse new and redevelop the existing building following its acquisition, life into the waterfront community and the village shopping we undertook extensive refurbishment of the property district of West Vancouver. with architects PDP London, using the highest-quality materials. By doing this, we created high-end apartments in a more

CGI CGI sustainable way. We sold the last units in 2015.

Improving the land The development’s contaminated “Grosvenor’s commitment to design and quality brownfield site, once home to a was evident throughout our partnership on petrol station, has undergone an The Westminster Roppongi, and its success West Coast modernism environmental cleanup for the building Grosvenor Ambleside’s two terraced of Grosvenor Ambleside. Our goal is to in the market demonstrates the benefits that buildings have been designed to meet divert 75% of construction waste from New connections Well connected 2 such an approach can bring.” LEED Gold standard. Residences will landfill to recycling facilities. A 650m glazed galleria will cover the The Westminster Roppongi lies at the contain state-of-the-art technology and new pedestrian route from Marine Drive Kenneth Koo centre of one of Tokyo’s most connected will sit above street-level specialty shops, to Bellevue Avenue, opening up views Group Chairman and Chief Executive Officer districts, within walking distance of cafés and restaurants. Locally sourced and providing covered access to the TCC Group Tokyo Midtown and both Azabu Juban materials will be used in its construction. beach, seawall and waterfront. and Roppongi train stations. 75%

CGI Overview

Listening to the community Part of the neighbourhood Hundreds of West Vancouver residents “Commissioned artworks by renowned ‘Smart’ city living The project incorporated an artist-in- helped us develop and refine the We have supplied electric Smart cars residence programme to complement residents and Order of recipients – distinctive design. Ideas fairs, public to residents of the property to rent Roppongi’s numerous existing art meetings and co-design sessions with Douglas Coupland and Gordon Smith – seven days a week, providing them with galleries and museums, hosting four Stanley King have guided the process. will celebrate West Vancouver’s remarkable a convenient and low-carbon way of artists in its first year. environment from mountains to shore.” travelling within the city. Alison Keller Fine Art Consultant

5Public art pieces Five public art pieces will be situated 4 Industry recognition in and around the property. The Westminster Roppongi project won the MIPIM Asia Gold Award for ‘Best Refurbished Building’ in 2015. Grosvenor Group Limited Grosvenor Group Limited 6 Annual Review 2015 Annual Review 2015 7 Our business How we work

We run the Group through a devolved structure, enabling decisions to be taken locally wherever possible.

Trustee Strategy to fulfil Implementation requirements the requirements of our strategy

The Grosvenor Estate Grosvenor Group Limited Our businesses We allocate our capital across three areas of business: Benefits of our The Grosvenor Estate represents all the Our strategy is to grow a private, diversified We believe that decisions about property Group structure: business activities of the Grosvenor family, property group, active internationally in are best made on the ground, by local Direct Indirect Fund headed by the . several sectors, with a long-term view of Group-wide people who know their markets. There are three key elements to it: markets and our commitments. We create strategic objectives investment investment management To help meet our Group strategic value by developing and managing property, Grosvenor Group Limited Shared brand, objectives, we have adopted a devolved and investing in property-related businesses, values and heritage An international property company that creates, structure. Each of our businesses is invests in and manages properties and places that in cities around the world. The Group benefits Strategic capital responsible for developing its own Overview contribute to the enduring success of cities. from a shared set of values and a consistent allocation operational strategy, drawing on its overall strategic business approach and risk Wheatsheaf Investments Limited assessment of opportunities and its market appetite, while our devolved businesses use Economies Operates and invests in companies that contribute of scale skills, local experience of what makes for towards the long-term challenges of securing their local expertise to develop and execute Our regional Our Indirect Investment Our international fund success in urban environments, and the sustainable food and energy supplies. local strategies, and benefit from a number Attracting, retaining and Operating Companies business invests in management business creativity and know‑how of specialists of key common services. This approach developing people are wholly-owned real estate through operates mainly Family Investment Office around the Group. Manages other interests, including rural estates in positions us to operate efficiently across International companies through co‑investments in across Europe and the UK and Spain, a charitable foundation, fine art international markets, while remaining lender and partner which Grosvenor makes Grosvenor‑managed manages investments collection and historic archive. focused on strategies which suit local relationships Benefits of our devolved structure: direct investments in funds and investments on behalf of 48 investors, real estate. Together with other non- including Grosvenor. The Shareholders are the Trustees of the conditions and skills. Global research Deep understanding of local capability challenges and opportunities they invest 81% of Grosvenor managed Grosvenor Estate, who hold the shares The Group has three strategic objectives: Grosvenor Grosvenor’s capital. specialist companies. Fund Management in Grosvenor Group Limited and other Common pool of resources Responsible, responsive decision-making It invests 19% of See page 50 assets for the benefit of current and To deliver attractive and expertise Grosvenor Britain Empowered people Grosvenor’s capital in future members of the Grosvenor family. 1 long-term returns & Ireland Shared support Specialist approach for our See page 28 Asia, Australia, Brazil, There are six Trustees: the Chairman (the services See page 8 local communities, customers Europe and the USA. 6th Duke of Westminster), the Executive and partners Grosvenor Americas To develop and co-ordinate See page 34 Trustee and four other Trustees. Tailored research and strategies Indirect Investment 2 an internationally diversified Grosvenor Asia Pacific See page 44 The Trustees require the Group to fulfil property group See page 40 defined business and financial objectives, See page 10 including the delivery of long-term To uphold Grosvenor’s reputation returns, subject to appropriate levels 3 for quality, integrity and ‘Living cities’ of operational risk. They also require social responsibility See page 12 At Grosvenor, we hope to make a lasting ‘Living cities’ is the philosophy which that a defined approach to conducting contribution to the communities in which supports our strategy, guiding us to Benefits of our ‘Living cities’ philosophy: business be applied, which includes we are active, and to the environment, create, invest in and manage properties social, environmental and reputational A consistent, holistic approach taking advantage of the property skills and and places that contribute to the enduring behaviours, and which has led to the The ‘Living cities’ the long-term perspective that we have success of cities. A long-term partner, development of the values that we share developed over many generations as a contributing to the success of cities across the Group – loyalty, integrity, philosophy which More on our ‘Living cities’ philosophy private company. expertise and long-termism. supports our strategy See page 2 To help us put our ‘Living cities’ philosophy into practice, we have Climate resilient Economically resilient Healthy environment Strong community identified eight attributes that, in our opinion, help cities thrive Connected Good governance High-quality place Sustainable resources in the long term. They are: Grosvenor Group Limited Grosvenor Group Limited 8 Annual Review 2015 Annual Review 2015 9

Our business (continued)

Strategic objective 1 To deliver attractive long-term returns

Our strategy Highlights for 2015 We strive to grow revenue profit and to deliver total returns above our weighted 9.0% £4.4bn 27.1% average cost of capital and market Total return Shareholders’ funds Economic gearing (2014: 13.1%) (2014: £4.0bn) (2014: 23.0%) benchmarks. We control risk by means of conservative gearing and management £83.3m £526.6m £0.9bn of liquidity at the corporate level, and by Revenue profit Profit before tax Financial capacity rigorous management of projects at the (2014: £80.1m) (2014: £681.8m) (2014: £1.1bn) property level.

Revenue profit Revenue profit Financial statements (£m) Revenue profit is the measure by which we identify our underlying performance, as it excludes market movements. (2014: £80.1m) £83.3m Income statement — proportional* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Revenue profit of £83.3m in 2015 continued the upward trend 153.3 that we have seen since 2010. As a result of our increasing focus Net rental income 138.3 144.3 172.6 201.1 184.4 195.8 195.6 172.2 175.3 186.7

83.3 Overview on development activity, we anticipate revenue profit being 68.3 80.1 52.3 63.6 65.2 markedly lower in 2016. 50.5 Fees and other income and expenses 70.1 68.4 58.7 63.6 75.7 60.5 58.5 63.1 63.9 58.7 Total return (59.7) Net gains/(losses) on We measure total return to show how our property portfolio (111.6) trading properties (175.2) 2.7 (100.8) (2.8) (3.6) 2.5 4.7 115.2 30.7 27.5 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 has performed, including both income and capital returns. Administrative expenses (105.4) (114.4) (124.0) (125.7) (123.8) (120.5) (118.8) (128.6) (127.3) (133.9) 2015’s total return of 9.0% reflects another strong performance Direct investment by the Group. Net financing costs (39.4) (32.6) (66.3) (83.9) (82.2) (74.7) (74.9) (68.6) (62.5) (55.7) Grosvenor Britain & Ireland £31.4m 31.4 Group revenue profit/(loss) (111.6) 68.3 (59.7) 52.3 50.5 63.6 65.2 153.3 80.1 83.3 Shareholders’ funds Grosvenor Americas £26.9m 41.2 As a result of this good return, Shareholders’ funds grew Grosvenor Asia Pacific £10.3m 26.9 Net gains/(losses) on revaluation and sale for the sixth consecutive year to £4.4bn. Indirect Investment £41.2m of investment properties 640.7 475.6 (491.7) (266.1) 386.6 329.5 320.1 380.9 638.0 478.9 10.3 (7.9) Compound annual growth rate Grosvenor Fund Management (£7.9m) Other 4.8 5.5 (47.2) (23.6) (16.4) (67.4) (11.9) (20.9) (15.8) (18.5) Over the past 10 years, revenue profit (adjusted for exceptional items) has increased at a compound annual growth rate of 5.0% Tax and non-controlling interests in and Shareholders’ funds at 7.6%. joint ventures (25.3) (25.4) 4.7 1.3 (25.9) (10.7) (5.6) (6.4) (20.5) (17.1) Profit/(loss) before tax 508.7 524.0 (593.9) (235.8) 394.8 315.0 367.8 506.9 681.8 526.6

Total return Shareholders’ funds

9.0% (2014: 13.1%) £4.4bn (2014: £4.0bn) Balance sheet — proportional* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 15.5 4.4 14.4 Total property assets including share 13.1 4.0 3.5 10.9 3.2 of joint ventures 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 6,674.6 9.0 9.7 9.0 2.9 2.9 7.2 2.7 2.6 2.4 2.4 Net debt (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) (1,298.6)

(2.8) Deferred tax (659.0) (765.2) (585.9) (473.2) (382.1) (593.5) (491.1) (665.0) (739.3) (764.0) (4.1) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Other assets and liabilities (519.3) (700.0) (195.0) (220.6) (305.2) (195.9) (217.0) (144.9) (175.6) (150.7)

Direct investment Direct investment Net assets 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 4,461.4 10.7 Grosvenor Britain & Ireland 10.7% 10.0 Grosvenor Britain & Ireland £2,755.8m Minority interests 148.9 175.1 186.2 156.5 126.6 107.8 86.4 85.8 88.3 87.2 Grosvenor Americas 8.4% 8.4 Grosvenor Americas £649.7m 6.6 Shareholders’ funds 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 4,374.2 Grosvenor Asia Pacific 6.6% Grosvenor Asia Pacific £389.4m Indirect Investment 10.0% Indirect Investment £550.9m * Non-statutory basis. Incorporates both Grosvenor-controlled activities and share of joint ventures and associates. Grosvenor Fund Management £0.2m Grosvenor Group Limited Grosvenor Group Limited 10 Annual Review 2015 Annual Review 2015 11

Our business (continued)

Strategic objective 2 To develop and co-ordinate an internationally diversified property group

Our strategy Highlights for 2015 We diversify by geography, sector, currency, property activity and £6.7bn 95% 10 management team. Our structure Property assets Occupancy currencies in which (2014: £6.0bn) (2014: 95%) we operate provides three routes to achieving this: direct investment activities, £13.1bn 60 12 indirect investment activities, and Assets under management cities we are active in countries from which fund management. (2014: £11.4bn) we operate

Diversified portfolio Indirect and fund management portfolios We achieve a diversified portfolio through Diversification of our property portfolio During 2015, Grosvenor’s share of Our Indirect Investment team invests in real estate through co‑investments Our Europe-focused fund management our three regional Operating Companies is achieved by investing in property, property assets grew 11.3% to £6.7bn in Grosvenor‑managed funds and investments with other specialist companies. business manages investments on behalf (Grosvenor Britain & Ireland, Grosvenor both directly and indirectly, and across and assets under management grew We currently have investments in Asia, Australia, Brazil, Europe and the USA and, of 48 investors, including Grosvenor itself.

Americas and Grosvenor Asia Pacific); various currencies, geographical locations, 14.3% to £13.1bn, reflecting the valuation from 2016, in Africa. Overview via indirect property investments, sectors, activities and management teams. increases and investments made in backing managers with specialist skills Our exposure is measured in terms of our both our direct and indirect investment Indirect Investment – Property assets Grosvenor Fund Management – and investing in new markets (Indirect share of property assets held on the balance businesses, together with increased Assets under management

Investment team); and through our sheet and assets under management (which assets under management in Grosvenor 1 4 1 3 1 property fund management business includes property assets that we manage on Fund Management. 3 3 (Grosvenor Fund Management). behalf of third parties). Property 2 Property Assets under assets – assets – 2 management – by category by sector by sector Property assets 2 5 5 4 1 4 1 2 1 £6.7bn (2014: £6.0bn) 1 Sonae Sierra £779m 60.5% 1 Retail £996m 77.4% 1 Retail £2,637m 75.1% 6.7 3 By Operating 2 Managed by Grosvenor Fund £364m 28.4% 2 Industrial £122m 9.5% 2 Office £707m 20.2% By sector By activity Management 6.0 Company 3 Office £118m 9.2% 3 Other £164m 4.7% 5.4 5.4 5.5 3 3 Managed by third parties £143m 11.1% 4 Other £50m 3.9% 2 2

1 Britain & Ireland £3,806m 57.0% 1 Retail £2,444m 36.6% 1 Investment £6,252m 93.7% Economic property interests by location 2 Indirect Investment £1,284m 19.2% 2 Residential £1,927m 28.9% 2 Development £423m 6.3% 3 Americas £982m 14.7% 3 Office £1,917m 28.7% 5 4 Asia Pacific £601m 9.1% 4 Other £263m 3.9% 1 United Kingdom 2014 2015 Australia/Asia Pacific 2014 2015 Continental Europe 2014 2015 2011 2012 2013 2014 2015 5 Fund Management £2m 0% 5 Hotel £124m 1.9% 4 West End, London 52.6% 53.9% 4.8% 4.5% Lisbon 1.6% 1.6% 3 2.9% 1.5% Tokyo 2.2% 3.1% Germany 1.4% 1.1% By region Assets under management Other London 3.3% 3.3% 1.5% 1.5% Porto 1.2% 1.1% 5 5 1 4 1 2 1 2 Other UK 2.8% 3.2% Australia 0.6% 1.3% Spain 1.1% 1.0% 4 £13.1bn (2014: £11.4bn) 0.7% 0.4% 0.7% 0.7% 2014 2015 13.1 By Operating North America 2014 2015 Osaka 0.4% 0.0% Italy 0.9% 0.7% 12.0 By sector By activity 11.8 11.4 11.4 3 Company 3 1 United Kingdom 61.6% 61.9% Washington, DC 3.3% 3.9% Other Asia 0.1% 0.1% 0.3% 0.7% Vancouver 3.3% 2.8% Other Portugal 2.1% 1.7% 2 2 2 North America 15.9% 16.6% San Francisco 2.6% 2.8% Other Europe 0.7% 0.5% 1 Britain & Ireland £5,711m 43.7% 1 Retail £5,572m 42.7% 1 Investment £12,174m 93.2% 3 Australia/Asia Pacific 10.3% 10.9% Seattle 2.8% 2.2% 2 Fund Management £3,508m 26.8% 2 Residential £3,619m 27.7% 2 Development £894m 6.8% 1.1% 1.1% South America 2014 2015 3 Americas £2,218m 17.0% 3 Office £3,274m 25.0% 4 Continental Europe 10.0% 9.1% 4 Indirect Investment £922m 7.1% 4 Other £377m 2.9% Other USA 2.7% 3.7% São Paulo 1.4% 1.0% 2011 2012 2013 2014 2015 5 Asia Pacific £709m 5.4% 5 Hotel £226m 1.7% 5 South America 2.2% 1.5% Other Canada 0.1% 0.1% Other Brazil 0.8% 0.5% Grosvenor Group Limited Grosvenor Group Limited 12 Annual Review 2015 Annual Review 2015 13

Our business (continued)

Strategic objective 3 To uphold Grosvenor’s reputation for quality, integrity and social responsibility

Our strategy Highlights for 2015 We recruit and develop people who For this third objective, we have We will continue to track all of these share the values of Grosvenor — loyalty, introduced new socio-economic metrics metrics, but we expect our approach to integrity, expertise and long‑term vision that reflect the activities that are material evolve as we continue to identify insightful — and have the skills and ambition to help to our business and that quantify our metrics that reflect our business activities us implement our strategy. We stick to our wider contribution beyond purely financial and aspirations. promises, build lasting relationships with measures. As quality, integrity and social

partners and work closely and responsibly responsibility underpin everything we For a more detailed methodology, with local communities. do, we found it most useful to group the see our Non-financial Data Report online at metrics into the three areas below. www.grosvenor.com/nonfinancialdata2015.

Investing in our portfolio Developing our expertise Working responsibly with local communities £13.8m £3.9m 25 19,590 charitable contributions in the year 360 Overview spent improving the public realm over and above students gained experience internationally by the Grosvenor Estate. volunteer days logged by our 567 people hours spent by apprentices and trainees planning requirements. £22.4m spent since 2010. through our paid internships. across the Group and a new two-day developing their careers at our properties Paid to charitable volunteering allowance introduced in through our repairs and maintenance causes by the Westminster Foundation the UK. pilot scheme with contractors on the £13.4m Donation to the London estate. Westminster Foundation hectares of green space under management in our global portfolio, 5 of our people seconded or relocated from Grosvenor Group £2.6m equivalent to the size of 4,458 tennis courts. Other charitable 116 internationally to develop talent and share contributions by the £0.4m best practice across the Group. We also Grosvenor Group 144 introduced an International Graduate community events supported, Programme in 2015. 14,650 including 77 that we organised. hours of in-house training delivered; an average of 26 hours per person. 1,407 , 1 Office-based training 1 10 91 1 495 housing units let below the market industry awards received energy-efficient retrofits buildings with a heritage 2 Training accessed online 3 rate on our London estate, with 111 this year, including a ‘Built completed, bringing the listing conserved on our 3 Training at a Swiss 2 business school (IMD) ‘fair rent’ units and 1,296 units let via for Life’ award for our large total since our recent 120-hectare London housing associations. mixed-use development investment programme estate, including at Trumpington Meadows, began in 2013 to some historical and Cambridge. 207 properties. architectural landmarks. 43 of our people supported in gaining 40% a professional qualification. of new homes in Grosvenor Britain & 4% Ireland’s current development projects reduction in our energy consumption, are affordable. Three out of four are equivalent to saving the typical use by built, or will be built, on our sites. 261 homes. 1% increase in our water consumption compared to 2014. 70 Energy Water of our people taking an 2 5 active role across more properties in conservation areas 3,350m than 100 industry boards achieving ‘EnerPhit Passivhaus’ standard, of retail and office space provided 757ML 752ML 127GWh and committees, to support £76.3m 122GWh including the first ‘market-let’ properties to more than 30 charities in of tax paid. market-wide progress. to achieve this energy-efficiency level the UK at 50% or less than the For a breakdown of tax paid by type and by location 2014 2015 2014 2015 in London. market rent. See page 25 Grosvenor Group Limited Grosvenor Group Limited 14 Annual Review 2015 Annual Review 2015 15 Chairman’s statement

Grosvenor Group Limited – Board of Directors Looking to the as at 17 March 2016 The Group Board is responsible for long term setting and monitoring strategy, ensuring adequate funding, formulating policy on key issues, reviewing performance and reporting to the Shareholders. It meets We continue to perform well as we prepare five times a year. for leadership transition. From left to right:

Jeremy Newsum FRICS Mark Preston FRICS Lesley Knox Nicholas Scarles Domenico Siniscalco Michael McLintock Non-Executive Director Executive Director Chairman and FCA ATTORNEY AT LAW PHD Non-Executive Director Executive Trustee, Group Chief Executive; Non-Executive Director Executive Director Non-Executive Director Trustee, Grosvenor Grosvenor Estate Non-Executive Director, Trustee, Grosvenor Group Finance Director Vice Chairman, Country Estate; Chief Executive, Estate; Non-Executive Head of Italy and M&G Group Jeffrey Weingarten Sir Philip Dilley Head of Government Director, Centrica plc Non-Executive Director Non-Executive Director and Thomas Cook Coverage EMEA, Christopher Pratt Non-Executive Director, Trustee, Arup Morgan Stanley Non-Executive Director Aviva Investors Non-Executive Director, Johnson Electric Ltd

Continuity… As a result of Mark’s additional Having commissioned and completed The Group continued to perform strongly responsibilities, there will be some further an international market research study and in line with the expectations set in senior management changes within the in 2015, we were reassured to see how 2014, with total returns in 2015 of 9.0%. Grosvenor Group which are covered in the positively we are perceived by our Though below the results for the previous Chief Executive’s review. stakeholders around the world. But areas

for improvement were also revealed – Overview two years, we have returned to the In customary Grosvenor fashion, there is notably in telling our story ever more smoother upward trend of the years prior ample time for this change and for Mark clearly and comprehensively. to 2013, as we predicted. to become familiar with his new broader This demonstrates the value of a long-term, portfolio – to which he will bring his Our straightforward approach to the international approach. We have again characteristic vigour and application. way we communicate is embodied in this Annual Review and will continue. benefited from recovery in Continental When reflecting on these changes, it Europe and market strength in the UK. is particularly pleasing that all these Looking to the future appointments are from our existing people. …and change That is a sign of the depth and breadth We are long term in our outlook. We are At the beginning of January this year, we of talent we have at Grosvenor and our constantly thinking about what lies far announced important changes to the continuing commitment to investing in ahead. We carried out our own research overall management of the Grosvenor our people for the long term. It is also a study last year into the ‘megatrends’ Estate (of which Grosvenor Group forms reflection of the importance of continuity that will shape the property world over one of three parts, alongside Wheatsheaf and consistency of approach at Grosvenor. the coming decades. Particular findings Investments Limited and the Family related to the digital revolution and global Investment Office). Jeremy Newsum will Our role in society demographics. While climate change and terrorism dominated the headlines last retire as Executive Trustee and from the Looking more broadly, Grosvenor has year, further ahead, mass urbanisation and Grosvenor Group Board on 1 January 2017 always had an explicit objective to make a huge population growth pose a continuing and Mark Preston will succeed him as positive contribution to the communities challenge to the property sector. Issues of Executive Trustee, while retaining his role within which we operate. We do this city resilience and economic conflict are as Grosvenor Group Chief Executive. directly through our work (examples becoming more and more pressing. of which can be found throughout this In summary Jeremy has played a critical role in the Grosvenor has a modest, but important, year’s Annual Review) as well as indirectly success of the Grosvenor Estate over 32 part to play in addressing many of these Good performance Social responsibility through our charitable activity (see the years, as Chief Executive of Grosvenor challenges and I look forward to us Results in line with expectations, Widespread activity and progress. Westminster Foundation website at Group from 1989 to 2008 and as Executive doing so. returning to trend. Trustee from 1993 to today. We all offer www.westminsterfoundation.org.uk). Megatrends Lesley Knox Succession planning Grosvenor will play its part in tackling him heartfelt thanks for his immense Group Chairman Mark Preston to take on the role global issues, related especially to contribution over that period. 17 March 2016 of Executive Trustee. demographics and the digital economy. Grosvenor Group Limited Grosvenor Group Limited 16 Annual Review 2015 Annual Review 2015 17 Executive Trustee’s reflections A forty-year perspective

Jeremy Newsum, Executive Trustee of the Grosvenor Estate, talks to Mark Preston, who succeeds him on 1 January 2017.

Jeremy, you started your career We often talk about ‘placemaking’ How do you feel about the way Add to this there being no greater business with Grosvenor in 1976 as a at Grosvenor. What are the most Grosvenor Group’s thinking challenge than to manage globally, and graduate. What advice would you important factors that contribute on ‘Living cities’ has evolved? you can see why staying in one country has become a requirement for listed property give to our new graduates about to the making of a place? First, I remind myself that ‘Living cities’ is companies. In our case, our Shareholders how they and Grosvenor should How can our international essentially a strapline – but it is a great one think long term and want diversification – Overview for us. It is like a panoramic window from face up to such a changing world? experience inform us better? not just the geographic dispersion of assets which we can see back to our heritage We all have to find a way to embrace Places can be defined physically, but they but the diversity of cultural influences and our deep understanding of places, change because it is constant, inside and are made by the way people relate to them. and multiplicity of decision-making points accumulated over hundreds of years; and outside the Grosvenor Estate. My approach We assess them instinctively by the degree around the world. We are not a single can see forward to the way people want to is never to feel satisfied with the status to which they inspire. Think of the Grand global business, we are an internationally live in cities and how we must help to shape quo, to think carefully about the future and Mosque in Abu Dhabi, Lan Kwai Fong in diversified group of businesses. their future. More than this, as cities must to try to make continuous improvements. Hong Kong and Hyde Park in London – all By devolving all decision-making to local tread more lightly on our planet if they are For me, this works as career advice as very different and, of course, all part of companies, I think we have found a way to to remain living for future generations, much as how to manage my relationship larger places. The trap that developers can combine short- and long-term thinking into we can observe how we must improve with a customer or make better investment fall into is thinking about places with hard our model. decisions. I confess, I really like change. boundaries. Few of us operate on such a building materials, design to promote I find it thrilling to think about how many scale that complete places are involved. health, use all resources more efficiently What is long-termism and why stables there were on the London estate This means we must absorb and engage and so on. Those looking in through the is it so important to Grosvenor? in 1890 and how our predecessors had to with outside influences. A wonderful place window must see our commitment, must be able to trust us that these are not Long-termism is simply placing the long grapple with the vast ramifications of the can be where people live or work or just term ahead of the short term. It doesn’t motor vehicle; when I started work here, it pass through and it might even be ‘ugly’. merely words. Stamping ‘Living cities’ on everything we do is very demanding on us. mean no interest in the short term but was unthinkable that I had to type anything The inspiration can be stimulated by people all decisions are easier when considered myself – and not all the typewriters were alone but, more often, I think spaces and We have to earn others’ trust and not just cloak ourselves in fine words. I have always against the long-term objective. I think electric; £12 per square foot was the best shapes are the catalyst and this means that abstract notions like ‘long-termism’ can rent you could expect for office space design is important. We British have an believed that if we can satisfy our own high standards, we will have a good story to tell. be dangerous and timescales should and that was a lot more valuable than embarrassing tendency to think we know always be articulated. Ultimately, we are residential. The next 25 years will be about the answers and can be a bit dismissive Why has it remained so unusual all stewards and our responsibilities are intelligent machines as more and more of ‘foreign’ influences and cultures. This is to the future, not to ourselves. This is the professional tasks are handed over to so wrong. Grosvenor gains enormously for property companies to attempt our international reach? Grosvenor family philosophy and it is our ‘robots’. If this gives a sense of the dramatic from working in so many successful business philosophy. Of all the things I changes centred on technology, the places around the world, in cities that are For me, the biggest underlying influence could get evangelical about, this is the changes in society will not be much less. regularly cited as among the best; cities like is the short-term outlook of investors main one because I believe our places, our Vancouver, and San Francisco. (and, by the way, I would never say they I do have advice for senior management: politics and our society would be better were wrong from their perspective). listen and learn from our younger people. with more genuine respect paid to the long The need for shorter-term certainty They may yet lack some of the slick ways term. It’s a great advantage for us to stick encourages specialisation. we find to engage easily in the business to our long-term view. planning process but they have all the ideas we need.

From left to right: Mark Preston and Jeremy Newsum Grosvenor Group Limited Grosvenor Group Limited 18 Annual Review 2015 Annual Review 2015 19 Chief Executive’s review Consistent strategy, CGI new projects

We have made progress against each of our strategic Delivering our developments objectives. This year, we also began measuring our In September 2015, we started construction on Central, a 21,500m2 contribution to the community. Investing in Sub-Saharan Africa mixed-use development site in Silver In early 2016, our Indirect Investment Spring, Maryland, USA, that will offer team committed to invest in RMB 243 residential rental units with Westport’s Real Estate Development generous communal amenity space Fund II, targeting Sub-Saharan Africa. above 1,500m2 of retail space.

Returns In December, joint venture partners the Meanwhile, we are committed to a series Our first strategic objective is to deliver Grosvenor Trusts and The Hongkong and of development projects in both the UK attractive long-term returns. In my Shanghai Hotels, Limited – with Grosvenor and North America which will deliver in the statement last year, I said that we expected Britain & Ireland as development manager next cycle. to produce total returns of around 8.0% – received planning consent for a new 190-

Diversification Overview per annum over the next several years. room hotel, to be known as The Peninsula The return in 2015 of 9.0% is behind London, at 1-5 Grosvenor Place, Hyde Park The benefits of our commitment to the result in 2014, but in line with that Corner, Belgravia. developing and co-ordinating an expectation, reinforcing the fact that our In Asia, Benjamin Cha has quickly internationally diversified property out-performance in 2014 was exceptional, established his authority as Chief Executive group – the second of our strategic due in large part to recovery in Continental of Grosvenor Asia Pacific – getting to know objectives – were evident in 2015. Europe and strong valuation growth in the team, rejuvenating relationships with Unlike the period during the global Grosvenor Britain & Ireland. our partners and introducing new energy, financial crisis, when markets were broadly contacts and ideas. correlated, 2015 was a year of divergence The other primary metric we use is revenue with a struggling Brazil, affected profit, which measures our underlying In December, Grosvenor Fund Management by structural reforms, a relatively strong performance, excluding market movements. completed the refinancing of the USA and UK, and a recovery in Continental At £83.3m, this result continued the upward Grosvenor Liverpool Fund, which owns the Europe. We do now face, however, the trend we have seen since 2010. 250,000m2 Liverpool ONE shopping centre. prospect of a second global downturn in Shareholders’ funds grew to £4.4bn. Once again, this would not have been the near future. achieved without the strong support of In the UK, the top end of the residential 2015 was a year in which the strength our lending partners. of our various partnerships bore fruit. market in London has passed its peak, Partnerships lie at the heart of our Indirect Looking ahead, we expect lower returns due in part to the recent changes to stamp Investment business and it was a very busy in 2016 and probably for some time. duty, along with the strength of Sterling and productive year for this part of the Deflationary pressures have been building during 2015. This, I suggest, vindicates Group. We extended our relationship with of late and not only due to cheap oil and our decision to sell a part of our London In summary Propertylink and Goldman Sachs to acquire other constraints. China’s slowdown and residential portfolio in 2013 to provide a combined office and industrial portfolio in the persistently over-indebted public funds for other developments. sector threaten the fragile stability we Managing expectations Being accountable Australia valued at over AUS$300m. In Continental Europe, we are seeing have experienced since the global financial Good returns and revenue profit Transparency extends to new metrics the benefits of the continuing recovery. In Grosvenor Americas, we formed a crisis. In the midst of all this lies the reflect our predictions. and testing public opinion. We are in no doubt that the decision to partnership with Kingswood Capital and continuing transformation represented refocus Grosvenor Fund Management’s Global markets Leadership changes Nicola Crosby Wealth Management to invest in by the digital revolution. At Grosvenor, activities towards Europe was right given We benefit from divergence We bring on the next generation in Grosvenor Americas’ Structured Development we have launched an in-depth strategy its strength and length of track record, between our markets. our largest Operating Company. Finance Programme, which provides flexible to understand what opportunities we can and the opportunities now being unearthed debt financing to residential and mixed- pursue in this revolution for our customers, there, including the two high street assets use developers across our markets in the our properties and our cities. region. The formation of this partnership has we acquired in 2015 on Via Torino – Milan’s enabled Grosvenor Americas to quadruple premier retail street – on behalf of our its mezzanine lending and expand its reach Urban Retail V Partnership. across our key North American markets. Grosvenor Group Limited Grosvenor Group Limited 20 Annual Review 2015 Annual Review 2015 21

Chief Executive’s review (continued)

Camilla Faith In October 2015, Camilla Faith was appointed as Human Resources The Grosvenor Liaison Group Director for the Grosvenor Estate, which Our internal, international network represents all the business activities responsible for sharing knowledge of the Grosvenor family (including and innovation across the organisation Grosvenor Group), with a remit to build (Grosvenor Liaison Group), welcomed and deliver an estate-wide people Steve O’Connell, Managing Director strategy that supports sustainable of Investment for Grosvenor Americas long-term business growth. Helping to build a sustainable future (pictured far right), as its new Chair International Graduate Programme We sponsored the 2015 ‘Ashden in mid-2015. In 2015, eight new graduates from Award for International Sustainable across our London, San Francisco, Buildings’, which was won by The Shanghai and Vancouver offices EcoCasa Programme, a Mexican joined the new three-year Grosvenor initiative that helps unlock financing International Graduate Programme, for housebuilders to build low-carbon during which they will rotate across two social housing. of our Operating Companies.

In Asia, while Tokyo remains reasonably Our evolving approach sees us introducing Investors can often work to unrealistically (Grosvenor Britain & Ireland, Grosvenor strong, the China outlook is affecting socio-economic metrics, in the belief that short-term investment horizons, Americas and Grosvenor Asia Pacific) and global growth prospects, but we expect monitoring our activity here will improve implementing inappropriate financing, taking for the Group’s Research and Sustainability to find opportunities still. However, North our performance just as it has with our excessive specific risks and making letting functions. Peter is uniquely well qualified America is showing no sign of slowdown, environmental impact. This is the sixth decisions that are value-destructive long for the role, which comes at a convenient

which is reflected in the pace of Grosvenor consecutive year in which we have reduced term, even if they are income-enhancing time for him also to pursue complementary Overview Americas’ development activity in 2015, our energy consumption; it is the first year in the short term. Grosvenor has made a non-executive activities. with five mixed-use residential projects since 2009 in which we have increased long-term approach our ‘natural’ state as a I am delighted that he will be succeeded currently under construction. our water consumption, albeit only by Group, which gives us an advantage when as Chief Executive of Grosvenor Britain & 1%, and we plan to remedy this. In all considering investment and development Finally, our Indirect Investment business Ireland by Craig McWilliam, who is currently cases, the detail behind the highlights opportunities. Investing in public realm provides us with the opportunity to achieve Executive Director, London estate, and is available online. projects on our London estate is just one sectoral and geographical diversification by is ideally suited both by virtue of his example; patient land assembly at Ambleside working with specialist third parties which We believe we owe this transparency to experience in that role and by reason of in Vancouver is another. Although the short- have expertise in sectors or countries the community at large; to occupiers of our his strong leadership of one of our largest term financial benefits of such projects are otherwise inaccessible to the Group’s properties, to our banking and financial teams. Craig will be a worthy successor, not immediately evident and are certainly Operating Companies, such as our second partners, to our suppliers and public sector and both Peter and I look forward to harder to quantify, the longer-term financial, partnership with Propertylink and Goldman relationships and to our people and Trustees. working with him in his new role. environmental and social benefits are clear. Sachs through which we acquired 320 Pitt In 2015, we commissioned WorldThinks, a The Executive Trustee is not the only role Street in Sydney, Australia in July 2015. leading research company, to undertake a People which ‘straddles’ the property company global research project to investigate how the and other Grosvenor Estate businesses Reputation Grosvenor Group is perceived amongst a wide The Chairman’s statement mentions my (Wheatsheaf Investments Limited and Implementing our strategy variety of audiences, including the general appointment as Executive Trustee of the Our third strategic objective – upholding the Family Investment Office). Kate Brown public. The findings were both fascinating Grosvenor Estate from 1 January 2017. Grosvenor’s reputation for quality, integrity (Sustainability), Camilla Faith (Human and instructive. Overall, we were encouraged It is a great privilege to be taking on this and social responsibility – is in many ways Resources) and Jeremy Moore (Tax) all Grosvenor Group Limited – Executive Committee by the generally positive view of Grosvenor role and I look forward to it enormously, the most important. Chief executives are have responsibilities which cover all or as at 17 March 2016 amongst all of the groups interviewed, the particularly working more closely with the often asked what concerns them most parts of the rest of the Grosvenor Estate, The Group Executive Committee is responsible for the implementation of Group majority of whom regarded our private Grosvenor family and the other teams within and might keep them awake at night: the ensuring consistency and synergies where strategy. It meets three times a year. ownership and values as important and very the Grosvenor Estate. I am, however, in a fear of loss of reputation is often at the appropriate. As Wheatsheaf, in particular, real differentiators. However, the research reflective mood at the prospect of Jeremy top of the list. Rightly so, and certainly so develops, there are a growing number of also revealed the extent to which public Newsum’s retirement. He is the architect of for Grosvenor. From left to right: synergies to be exploited. distrust of business still prevails. Clearly, we much that I will inherit. My respect for Jeremy Andrew Bibby Mark Preston FRICS James Raynor At Grosvenor, we are clear that we alone cannot change that, but we will continue and admiration for what he has achieved adds As always, capturing such opportunities are stewards of and answerable to Chief Executive, Chairman, Executive Committee Chief Executive, an emotional edge to the changes. Grosvenor Americas Group Chief Executive Grosvenor Fund Management to demonstrate why we believe that our long- relies on the dedication, ability, loyalty the communities in which we operate. term approach is of benefit to all. To allow me to continue to undertake the role and personality of 567 people around the We chose, many years ago, to report Benjamin Cha Nicholas Scarles FCA ATTORNEY AT LAW Peter Vernon FRICS Chief Executive, Group Finance Director Chief Executive, of Group Chief Executive of Grosvenor Group, Group and I thank them for another year in a transparent and open fashion, Property as an asset class should Grosvenor Asia Pacific Grosvenor Britain & Ireland we have appointed Peter Vernon, currently of exhibiting all those characteristics. adopting those parts of the UK Corporate inherently lend itself to long-term Chief Executive of Grosvenor Britain & Ireland, Governance Code that are relevant in the investment thinking. If not permanent, Mark Preston to the new role of Group Executive Director, Group Chief Executive publication of our annual results. it is far from temporary, leaving its mark with responsibility to our Board for oversight 17 March 2016 for many years on its community. of the three regional Operating Companies Grosvenor Group Limited Grosvenor Group Limited 22 Annual Review 2015 Annual Review 2015 23 Finance Director’s report

Development risk

As markets heat up and the likelihood of a market The value of capital represented by the project Aggregate forward projection of profit Funding our correction grows, taking a forward view of risk is of portfolio is higher this year than last, largely due at risk and invested capital increasing importance. One tool that we use is our to Grosvenor Americas’ commitment to major development risk dashboard, which shows a near- development projects – Grosvenor Ambleside, Central 200 500 term forward view of development risk as measured and F1RST. Consequently, both upside and downside 400 development programme by the Profit at Risk (PaR) metric. This allows us to risks are also higher and, while the overall decay of 150 analyse upside and downside development risk for risk over time shows the same pattern as last year, 300 the immediate future across four key drivers, namely the drop off is slower as a result of the size and longer 100 potential changes in capitalisation rates, rental duration of the projects. 200 through the cycle income, development costs and project timelines. 50 In the short term, invested capital rises as 100 The dashboard includes data for all committed development costs are incurred in advance Invested PaR capital projects and for those which are expected to be of receipts, before falling again as the projects £m £m committed within six months. This results in a progress, focusing our attention on the importance -50 -100 We continue to expect a slowdown, but plan to pattern of risk which falls away over time, as risks of continued good risk management over the coming

either crystallise or are eliminated, and is combined year to maintain the current acceptable risk profile. -100 -200 continue our development programme while carefully with an indication of the level of invested capital (development cost net of receipts from associated managing risk, cementing our lender relationships -150 -300 sales) projected for each time period. Current 6 months 1 year 18 months 2 years

and exploiting digital technology. -200 -400

Capitalisation rate Development costs Invested capital Rental income Delay

Good global performance Grosvenor Asia Pacific had another good There is a risk that sustained low oil 2015 was yet another good year. year, with revenue profit up to £10.3m prices could lead to sovereign wealth After very strong revaluation gains (2014: £6.5m), reflecting high levels of funds reducing investment in high-end in 2014, total return, which includes both occupancy and profits on disposal of commercial and residential property income and capital returns, was back to residential properties, with total return in London and elsewhere. Other major its long-run average at 9.0% (2014: 13.1%) at 6.6% (2014: 9.1%), due to lower market- international property markets could Overview while revenue profit was up slightly at driven property value growth than in the be similarly affected. previous year. £83.3m (2014: £80.1m). Profit before All of this points to a correction in the tax was £527m (2014: £682m), roughly Grosvenor Britain & Ireland experienced near future. Of course, it is not possible where it was in the last peak year – 2007. softening, but still positive, London to predict with certainty when a Shareholders’ funds increased to £4.4bn revaluations, helping it achieve strong correction will occur, but the inevitability (2014: £4.0bn). results. Its revenue profit was £31.4m of the property cycle’s booms and busts These figures reflect continued good (2014: £45.9m) and total return was means that it is only a matter of time. performance across the Group, once again a healthy 10.7% (2014: 17.3%). In anticipation, we have continued to securely position our business by showing the benefit of our international Grosvenor Fund Management maintained progressing sales of income-producing diversification strategy. its improving trend in a market which assets and investing in development has been challenging for several years. Indirect Investment contributed particularly opportunities which are expected to It reduced its loss to £7.9m, compared to well, with £41.2m (2014: £23.4m) in revenue mature during the next cycle. profit and 10.0% (2014: 8.7%) total return. £10.9m the previous year, reflecting new This was due to solid performance by mandates and reduced costs following Our robust position Sonae Sierra, co-investments in Grosvenor greater focus on Europe and increasing product specialisation. Our willingness to invest at this time in the Fund Management funds and our ‘new’ cycle reflects our long-term outlook and indirect investments in third-party Caution in the shorter term focus on our risk management even when opportunities, carefully selected and risks seem less likely, as they inevitably We are, as ever, long term in our outlook managed by our specialist team. do at this point in the cycle. Our economic and we continue to expect and plan for gearing has increased to 27% (2014: 23%), Grosvenor Americas’ revenue profit a slowdown, particularly in high-end In summary which compares well to the 52% at the end dipped to £26.9m (2014: £34.2m), arising commercial and residential property. Diversification benefits A responsible approach from a more normal level of trading profit of 2007. Market values are generally above long- A good year. Indirect Investment Our approach is always to look compared to an exceptional 2014. Its total Our wholly-owned available cash position term trend, in some cases by a large contributed particularly well. to the long term, asking what might return was 8.4% (2014: 9.7%). has reduced to £238m (2014: £478m). margin, and indicators of risk are rising. threaten our solvency and doing what is Combined with our substantial committed Downturn planning In London, according to the Bank of necessary to avoid this. back-up borrowing facilities of £700m We are ready to take advantage England’s Financial Stability Report of (2014: £674m), our financial capacity is of a market correction, having progressed Financial stability December 2015, commercial West End £0.9bn (2014: £1.1bn) which will support sales of income-producing assets and We continue to work with the industry property is ‘overvalued’ by up to 30%. our planned development programme invested in development opportunities for and the Bank of England, focusing on through the next phase of the market cycle the next cycle. creating a database of commercial real and enable us to take opportunities this estate (CRE) loans, measuring CRE lending may present. risk and developing a lender qualification. Grosvenor Group Limited Grosvenor Group Limited 24 Annual Review 2015 Annual Review 2015 25

Finance Director’s report (continued)

Financial capacity and liquidity Development pipeline Tax contribution 5 We manage our financial capacity and liquidity with At 31 December 2015, financial capacity was once Grosvenor’s commitment to delivering returns Our tax policy is built around several core principles: 6 1 1 4 the dual aim of ensuring liquidity during periods of again strong at £0.9bn (see first chart below). over the long term is partly demonstrated through aaWe do not enter into contrived or artificial 5 global economic stress and ensuring that we are While there is a cost in maintaining such capacity, our development pipeline, much of which involves transactions to gain a tax advantage. 3 positioned to take advantage of opportunities at the benefit far outweighs that cost, ensuring that many years of planning and pre-construction aaWe comply in full with all relevant jurisdictions’ 4 times when others are unable to access finance. we are well positioned as we increase our exposure activity. The chart below shows the expected gross This is achieved by maintaining sufficient financial to development activity. The second chart below development value of our development pipeline regulations and legislation. capacity – i.e. the amount of available cash and illustrates the spread of maturities of our wholly- (£5.6bn), together with expected completion dates. aaWe co-operate with tax authorities in the spirit of 3 undrawn, committed, general use facilities which owned debt facilities, split between those which are mutual trust, openness and transparency. 2 2 are immediately available. drawn and undrawn. The weighted average life of aaWe apply our knowledge and expertise and ensure these facilities is 6.8 years. all internal stakeholders are informed of relevant Taxes borne by type Taxes borne by location tax developments. 1 Corporate income tax paid £35.0m 46% 1 United Kingdom £37.0m 48% Financial capacity £m Maturity profile of wholly-owned facilities £m Development pipeline £bn a aWe engage appropriately with authorities or bodies in the year 2 North America £24.4m 32% Years until maturity 1.38 to share our understanding and experience of the 2 Property transaction taxes £12.7m 17% 1,123 274 3 Continental Europe £7.6m 10% 1,077 Drawn facilities property industry. paid in the year 964 Undrawn facilities 1.08 4 Australia/Asia Pacific £6.0m 8% 876 829 855 865 3 Annual property taxes £10.5m 14% 405 We pay taxes on realised economic income, gains and 5 South America £1.3m 2% 173 0.77 4 Employer taxes and social £7.8m 10% 607 347 profits in accordance with applicable laws. 140 523 0.62 security costs 0.54 0.53 The accompanying charts show the breakdown of 50 180 169 5 Irrecoverable VAT (UK only) £7.6m 10% 64 140 0.27 taxes paid by type and by country. 0.08 6 Withholding taxes £2.7m 3% 0 3 60 0.10 0.13 0.10 2007 2008 2009 2010 2011 2012 2013 2014 2015 <1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10+ 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026+

When it comes to managing financial risk, Of course, we would act in such Taxation Considered innovation Graham Drexel, who been with Grosvenor These are strong endorsements of our our approach is to ask what would threaten circumstances, and each of our Operating Our approach to taxation is in full Looking further ahead, the impact of digital for 12 years, including a recent six-month work and these recommendations in the Group’s solvency and then consider Companies as well as the Group have accord with our approach to social technologies is likely to be one of the secondment to the , particular have the potential to protect how this could be avoided. refreshed their downturn action plans in responsibility. We have a long-standing defining long-term economic trends of the succeeds Rekha on 1 May 2016. financial stability and support economic the year, focusing not just on managing growth when it is most needed – in the For creditors and investors, understanding tax policy, which prescribes not only an next 25 years. Grosvenor needs to adapt

a downturn, but also on how we might Post balance sheet event aftermath of a crash. Overview what might threaten an organisation open and transparent relationship with and innovate and take advantage of the take advantage of it, to support the and hence the recoverability of their tax authorities, but also that we should opportunities this will offer, and we have In February 2016, our Indirect Investment business needs well into the next cycle. The year ahead loans/investments, is an important contribute to improving the taxation been making good progress. Our digital business acquired a further stake in Sonae Sierra SGPS SA, bringing the two While we have seen performance above consideration. The best way of facilitating Relationship banking regimes under which we operate. strategy project team has carried out extensive research and turned this into a shareholders’ (Sonae SGPS and Grosvenor) the cycle average in each of the years since this is for organisations to disclose what An example of the latter is Jeremy Moore’s Our long-term outlook both remembers digital approach. interests into alignment. the financial crisis, we anticipate the next circumstances they consider might (our Group Tax Director) chairmanship threaten their solvency. the past and contemplates the future. few years will bring a more challenging Our relationship banking approach of the British Property Federation’s We have started what will be a multi-year The Vision for Real Estate Finance environment, particularly when interest For Grosvenor’s wholly-owned business, is well established and its value was Tax Committee. journey. Initial steps are to look at ‘digital The ideas to protect financial stability rates start to rise. our assessment shows that a fall in demonstrated (as such relationships usually placemaking’ – how the customer and In the case of real estate, the underlying against the next commercial real estate As always, our response from a property property values of 73% across the whole are) through the level of mutual support visitor experience can be digitised through premise is simple – property should (CRE) crash, developed by the Real Estate perspective is to build a pipeline of property portfolio would place the and loyalty during the last financial crisis. technologies like apps and social media – be taxed in the jurisdiction in which it Finance Group – which I chaired – gained opportunities to which we can apply our (undrawn) Holding Company committed We are therefore pleased to have been able and how our London estate connectivity is located. We continue to work hard broader consensus during 2015. property expertise to deliver returns, backup lines at risk. to increase the number of our carefully can be improved. to adjust to new tax rules arising from while keeping our overall financial selected core relationships, broadening Following the publication of our ‘Vision We also consider the length of time the Base Erosion and Profit Shifting In 2015, we laid the groundwork for two risks monitored and maintained within their geographical spread to Asia. for Real Estate Finance in the UK’ report our spare cash and backup facilities recommendations from the OECD. significant system implementations in 2014, we were delighted that the conservative limits well within the bounds which will commence in 2016: a new could provide liquidity for the wholly- Refinancing The 2015 tax charge on profits equates to Bank of England announced in October of our liquidity and balance sheet capacity. owned business under conditions Grosvenor Estate-wide human resources 2015 its desire to progress two of our During the year, we financed or refinanced an effective rate of 24.1% (2014: 21.3%) Nicholas Scarles of extreme stress. system and a new Group-wide treasury core recommendations. The first is the Group Finance Director £1.1bn, comprising 19 loans, of Grosvenor- after adjusting for the artificial distortion management system. These will bring both creation of a database of CRE loans, run 17 March 2016 If we assume (a) a 40% fall in the value managed debt. A particular highlight was caused by a reduction in the future operational and financial benefits over the for the public good and which respects of all assets; (b) markets in which virtually the refinancing of the Grosvenor Liverpool corporation tax rates upon the notional coming years. commercial confidentiality. The second no sales, financings or refinancings are Fund, which owns Liverpool ONE. Our team tax (deferred tax) which is required to is the use of a long-term value metric available; (c) no distributions are received successfully negotiated, on behalf of be accounted for purely for financial People from joint ventures and funds; (d) voids and statement purposes. The actual cash tax to assess CRE lending risk consistently Grosvenor and other investors, a £410m Rekha Patel has announced her desire to rent reductions akin to those experienced that Grosvenor pays is unaffected by this throughout the property cycle. facility on a seven-year term with a club retire after 13 years at Grosvenor, most in the early 1990s in the UK; and (e) no accounting adjustment. of five leading banks (including a number as Chief Financial Officer of Grosvenor Industry has responded, with the management action, then we could still of our relationship banks) on highly In 2015, Grosvenor made tax payments Americas. I am grateful to Rekha for her Property Industry Alliance Debt Group finance our wholly-owned commitments competitive terms. totalling £76.3m. See the chart on page 25 loyal contribution to Grosvenor as well now overseeing a broad engagement for a period in excess of our two-year for a breakdown by type and location. as the support she has given to develop process to take forward both of these self-imposed minimum using existing spare her successor. recommendations, as well as a third – that cash and committed facilities. CRE lenders should have a CRE lender qualification. We anticipate the various working groups will make good progress in 2016. Grosvenor Group Limited Grosvenor Group Limited 26 Annual Review 2015 Annual Review 2015 27 Market overview

Digital disruption will reshape Climate change will impact on The global property occupier needs long-term real estate returns The application of new digital technologies is likely to be one The impact of climate change will continue to intensify over the cycle and long-term of the defining long-term economic trends of the next 30 coming decades, with significant implications for sustainable years. The increasing ability to automate almost any task has long-term real estate investment. Without a sharp reduction the potential to disrupt the prevailing economic paradigm, in carbon emissions, experts expect to see a continued rise investment challenges with significant implications for the sustainable growth in in average global temperatures and an increasing severity of living standards. These new technologies will reshape the climate hazards such as storm surges, hurricanes and severe future of work and have far-reaching consequences on space flooding. As environmental risks intensify, the resilience of cities Real estate investors face challenging times, with a number requirements across all real estate sectors. will be a decisive factor for their long-term success. of risks clouding both the short- and long-term outlook.

Graham Parry Group Research Director Demographic change will create The growing importance headwinds to growth of emerging markets Where are we in the Nonetheless, the risks remain firmly tilted Throughout 2015, Grosvenor’s research property cycle? to the downside and we are probably now team spent significant time examining The world is on the cusp of several major demographic Despite their current difficulties, the long-run potential for moving to the late stage of the global cycle. the major themes (‘megatrends’) that are In the short term, the dominant concern changes. First, while the world’s population is still rising, the emerging markets remains promising. Over the next 30 years, In the current environment, the danger shaping the long-term outlook. See the for investors remains uncertainty over the rate of growth is slowing rapidly. Second, the world is rapidly the economic centre of gravity is likely to continue moving is that markets could turn sooner rather opposite page for a brief overview of these. length of the current global cycle. The sell- ageing; a rising proportion of retirees to new workers will add steadily east. Many emerging markets still have young and

than later. The biggest immediate trigger Overview off in global equity markets in early 2016 Our research suggests that we are entering to government pension and healthcare costs, at a time when growing populations and virtually all future global population for global downturn remains China, where was a potent reminder that asset markets a key period of large-scale change across the tax base is shrinking. Third, the number of ‘prime savers’ growth will take place in these countries. By 2045, Asia will policy-makers seek to steer the economy are subject to large, periodic swings in a range of fronts. Specifically, three major (those aged 30-65 and saving for retirement) has now peaked. account for around 60% of world GDP and be home to an through a difficult transition towards performance, often closely tied to the forces will fundamentally reshape the world This could have a sustained adverse impact on a range of asset additional two billion middle-class consumers. This will unlock slower, more sustainable growth. underlying economic cycle. over the next 30 years: (1) the application prices, including residential real estate. a host of real estate opportunities. But provided China remains stable, the of new digital technologies; (2) the negative Markets have been prone to frequent bouts more enduring challenge facing global impacts from climate change; and (3) large- of pessimism in recent years, reflecting real estate markets is the outlook for scale demographic change. While each the underwhelming pace of the global long term interest rates. While sustained factor is significant in itself, the fact that all recovery and the fact that there is still low interest rates have been crucial to three shifts are occurring simultaneously an uncomfortably large list of potential the recovery, there are concerns that is unprecedented. These forces are already downside risks that could trigger a renewed they are starting to distort global asset shaping several major realignments in the downturn, most notably: a sharp slowdown markets. Nowhere is this clearer than in global landscape, including: the continued in China; higher interest rates in the USA real estate; global property has enjoyed shift in economic power towards Asia; triggering a deepening financial crisis in a number of strong years, boosted by a the continued rise in the importance of emerging markets; rising tensions in the steady compression in property yields. cities; and increased job insecurity and The continued attraction Inequality remains Middle East; the looming UK vote on EU But with limited scope for yields to fall income inequality. membership; and the presidential race in of cities a major challenge further, total returns are expected to slow the USA. and markets are increasingly susceptible to Concluding thoughts Over half the world’s population now live in cities and this Income and wealth disparity have continued to rise in recent Despite the gloomy sentiment, most even small shifts in sentiment. While 2016 Clearly, the pace and scale of these long- is forecast to rise to two-thirds by 2045. As urban densities decades as the nature of work has shifted in an increasingly economic forecasts still suggest that should be another positive year for global term changes is daunting; we are moving increase, a number of challenges (e.g. air pollution, congestion, knowledge-based economy. This is reflected in more polarised 2016 will be another mediocre year for real estate returns, they are probably rapidly towards a digitally-disrupted, social cohesion) will be exacerbated. Successful cities will need labour markets, where wage growth now occurs almost growth – with the annual rate of growth past their peak for the current cycle. post-carbon world, with extraordinary to compete to attract skilled labour to remain leading centres exclusively in higher-skilled work. There are a growing number in world output averaging around 3%. Investors should be wary of chasing yields demographic changes. But these tectonic for global innovation and investors will need to develop a more of low paid workers, often in part-time employment, with less Lower oil prices, which largely reflect lower in 2016, as these may end up being changes in the global economy will bring sophisticated way of looking at cities when evaluating real job security, limited legal protection and at risk of being stuck increased global supply rather than weak the deals most regretted when the market new opportunities as well as risks. Long- estate opportunities and risks. in poverty traps in increasingly unaffordable cities. demand, will provide a continued stimulus eventually turns. term success will require investors to adapt to growth – reducing the cost of living, to new markets and new sectors, adopt boosting household incomes and stoking Long-term drivers of global new business models and explore new consumer spending. Interest rates are also real estate returns ways of thinking about real estate. expected to remain low to support the Beyond these short-term cyclical concerns, recovery. This should generate continued real estate investors are also grappling jobs growth and a further fall in global with a number of forces that are starting unemployment rates. to cloud the long-term investment outlook. Grosvenor Group Limited Grosvenor Group Limited 28 Annual Review 2015 Annual Review 2015 29 Grosvenor Britain & Ireland Defining places

Joint venture partners the Grosvenor Trusts and The Hongkong and Shanghai Hotels, Limited, with Grosvenor Britain & Ireland acting as development manager, received resolution to grant planning in December 2015 for a new 190-room hotel, to be known as The Peninsula London, at 1-5 Grosvenor Place, Belgravia in central London. The timeless design by UK-based Hopkins Architects is intended to mark an important gateway to both Belgravia and the West End. It embodies the long- term thinking and high-quality design we believe can enhance London’s status as a leading world city.

£60m 1,700 New jobs The scheme is forecast to support Better public spaces around 1,700 jobs and add up to £60m Plans for Grosvenor Place, Halkin CGI a year to London’s economy. Street and Grosvenor Crescent include improved public realm with easier road CGI crossings, wider footpaths and new trees planted along Halkin Street and Grosvenor Crescent.

Amenity Following the Peninsula tradition, the hotel lobby is expected to become an important new public destination. In addition to guestrooms and a leisure/spa facility, the hotel design incorporates shops, bars, restaurants and a ballroom. Direct

CGI “London is one of the world’s most dynamic capital cities and we are excited to move another step closer to introducing the Peninsula brand to London together with our partner, Grosvenor.” New homes Clement Kwok The proposed building includes Managing Director and 24-28 residential apartments. Chief Executive Officer Affordable apartments will be built Making an entrance The Hongkong and nearby, adding to housing supply A grand pedestrian entrance on Shanghai Hotels, Limited and the diversity of the area. Grosvenor Place is planned to be accessed via a colonnade linking through the Peninsula’s open lobby to an internal ‘Palazzo-style’ public courtyard, approximately 900m2. Grosvenor Group Limited Grosvenor Group Limited 30 Annual Review 2015 Annual Review 2015 31

Grosvenor Britain & Ireland (continued)

Grosvenor Britain & Ireland

Business objective Our mission is to create and recreate inspiring places and neighbourhoods, delivering value for customers, Shareholders and co-investors with our CGI placemaking expertise.

Key achievements aaTotal return of 10.7% – the sixth successive year of returns above 10.0%.

aaGrowth in net rental income of £10.3m to £71.3m (from £61.0m in 2014 and £48.3m in 2013) driven by development, asset management and operational efficiency. 40% aa£39m of value-add in 2015 (2014: £83m; 2013: £53m) from development activity on the London estate. Destination retail and leisure Breaking ground in Oxford We let the Grade II Listed Pantechnicon Our development partnership with aaNet customer satisfaction up to 65% from 58% in 2014. building in Belgravia, London, to Barry Oxford City Council started work on Hirst and Stefan Turnbull, who will aim site this year. Barton Park will provide aaAssets under management of £5.7bn, up from £5.2bn in 2014. to create a world-class food and retail 885 much needed new homes for emporium over six floors. Oxford, 40% of which will be affordable. aaA leadership programme for over 70 senior managers to strengthen capability to deliver our 10-year plan. Peter Vernon Chief Executive Grosvenor Britain & Ireland Revenue profit Total return Assets under management Our placemaking purpose And we let the Grade II listed landmark In Edinburgh, we gained planning consent Our objective is to generate long-term and Pantechnicon building in Motcomb for the next phase of development at our £31.4m 10.7% £5.7bn growing income from recurring sources. Street, Belgravia, to Barry Hirst and site in Fountainbridge. In addition to up to (2014: £45.9m) (2014: 17.3%) (2014: £5.2bn) We do so by creating and managing Stefan Turnbull of Cubitt House, who will 400 new homes, the application proposes sustainable, urban neighbourhoods across transform the building into a contemporary a new public square and commercial and the UK that are great places to live, work fashion emporium, alongside a café, a retail space. Grosvenor’s share of property assets restaurant and a bar. and visit. We focus on the importance And in Cambridge, our growing 24-hectare 4 1 2 1 2 1 of places, rather than just the individual Elsewhere in London, we opened neighbourhood at Trumpington Meadows buildings, to the people who use them. our community consultation on the bordering a 61-hectare country park – Sector Region Activity Our placemaking activity has been design and delivery of a growing urban which when fully realised will host 1,200 3 “Our London estate is dynamic and neighbourhood in Bermondsey, South new homes – reached the next stage of 2 extensive both on and off our adaptable and has thrived across London estate. London. Our ambition for this five- development with 77 new homes completed the centuries for being so. It should hectare development is to create homes last year, taking the total to over 400 Sector 1 Residential £1,340.0m 35.2% Across Mayfair and Belgravia, we gained continue to be a hard-working part for sale and private rent, affordable delivered to date. 2 2 Office £1,263.4m 33.2% planning consent for 60,700m of of the city, supporting economic housing, a new school, high-quality open 3 Retail £1,101.4m 28.9% redevelopment to grow future income. expansion alongside a growing spaces and improved pedestrian and Our strength through the Our rolling estate-wide development quality of life.” Direct 4 Hotel £101.4m 2.7% cycle connections. economic cycle programme added income at an average Craig McWilliam Region 1 London £3,504.7m 92.1% Across the rest of the UK, in Oxford, We are long-term investors and maintain a yield on cost of 6.9%. We continued to Executive Director rigorous focus on managing our business 2 Outside London £301.5m 7.9% regenerate these adaptable, changing and of the London estate through our joint venture with the City Grosvenor Britain & Ireland to operate sustainably across sectoral Activity 1 Investment £3,631.0m 95.4% dynamic neighbourhoods, providing a high Council, we started work to deliver Barton Park, a 21st century garden suburb across and economic cycles. In 2015, we focused 2 Development £175.2m 4.6% quality of life. 36 hectares in one of the country’s most principally on completing and letting We continued our transformation of North constrained cities. With planning approval developments begun earlier in the cycle, Number of assets by city Mayfair by completing the redevelopment for up to 885 new homes, a new primary limiting our acquisitions and recycling of 20 Grosvenor Hill and its surrounding school, community hub and park, we mature assets where appropriate. Britain: 2014 2015 London 1,521 1,478 public realm to host the globally renowned “Planning consent for a significant began installing infrastructure and selected We moved forward our development Bournemouth 1 0 Oxford 1 1 Gagosian Gallery, helping to re-establish a new mixed development at our first housebuilder, Hill Residential, to opportunities. We think this is the right time Cambridge 4 3 Southampton 1 1 retail and arts quarter in the heart of the 1-5 Grosvenor Place, incorporating develop the first tranche of new homes. to invest in our development pipeline to Edinburgh 11 1 Ireland: West End. a new Peninsula hotel, was a critical In Southampton, with a placemaking be ready to deliver in the next cycle while milestone in our programme. Liverpool 1 0 Dublin 2 2 We strengthened our retail destinations project that epitomises our approach, we at the same time creating capacity to take The oversite development at with new lettings to, amongst others, completed a mixed-use scheme comprising advantage of a downturn. Gearing at the Crossrail’s Bond Street West station internationally-acclaimed fashion designer residential units, retail units with cafés and end of the year was 16.1%. Like-for-like energy Like-for-like water will be similarly exciting and neared Hussein Chalayan in Bourdon Street with restaurants totalling 1,860m2. The project consumption MWh consumption m3 final design stages.” Total return at 10.7% presented another his first UK store. In joint venture with Stow completes in 2016 with a 5,850m2 new good year – the sixth successive year of 2 Capital Partners, we pre-let 4,000m of Simon Harding-Roots Arts Complex forming the centrepiece of returns above 10.0%. retail space to adidas for its new flagship Executive Director, 18,622 +1% 67,158 +3% Major Projects Southampton’s Cultural Quarter. (2014: 18,391) (2014: 65,142) store on Oxford Street. Grosvenor Britain & Ireland Grosvenor Group Limited Grosvenor Group Limited 32 Annual Review 2015 Annual Review 2015 33

Grosvenor Britain & Ireland (continued)

Recognising service Regenerating the London estate Leading-edge retrofit Nigel Hughes, Estate Surveyor of With leadership from Anna Farnes We aim to reduce the energy usage of the London estate, was appointed a (pictured above), Director of our directly-managed portfolio across Member of the Order of the British Development, John Reid, Director of our 120-hectare estate by half by 2023; Empire (MBE) in the New Year Project Management and Jamie Whitty- by 2015 we had achieved a 15% cut in Honours List. Lewis, Head of Finance, our £1bn rolling carbon emissions from that portfolio, development programme continues to regenerate our London estate. Community consultation Our engagement with Bermondsey’s communities continued in 2015. We have spent over two years understanding their needs and aspirations.

We achieved an overall growth in net In parallel, we deepened our engagement This included our hosting of the Old Vic Will Bax will be promoted to the Board, rental income – £71.3m from £61.0m in with the communities at the heart of the theatre’s award-winning community becoming Executive Director, London Grosvenor Britain & Ireland – Board of Directors 2014 – driven largely by our London Estate neighbourhoods in which we operate. engagement, talent development and Estate Investment and Development. as at 17 March 2016 Development Programme. Occupancy rates creative learning programme on-site and We are delighted to be able to Our rolling ‘Grosvenor in the Community’ remained high, at 97% (2014: 97%). support for the Bermondsey Community promote from within – a vindication programme involved 77,000 people with 37 Kitchen, a local social enterprise enabling of our investment in our people and As expected, revenue profit of £31.4m initiatives that brought together residents, local unemployed 16-24 year olds to gain their commitment to growing their was lower than 2014 (£40.7m), because businesses and stakeholders on and off our professional cookery qualifications. leadership skills. of a further reduction in trading profits London estate. We ran events, including following the sale of a number of high-end the Grosvenor Film Festival, the Elizabeth Our team’s effectiveness Despite external uncertainties, we remain residential trading sites in 2013. Street and Motcomb Street Summer cautiously positive about the UK market Parties and the Duke Street Christmas As we continue to invest in our people, and believe London remains the biggest Revenue profit before trading was £20.5m lights. We also disbursed the second phase we completed the planned launch investment market for property in Europe. (2014: £22.6m), resulting from an increase of our Living Communities Fund with grants of a comprehensive new leadership Although the economic and labour market in overheads needed to support the to 10 grassroots community projects programme, giving our people the chance fundamentals are strong, the city continues development programme, largely offset which will create pathways to employment to develop the leadership characteristics to face strong competition for talent by growing rental income. and stronger communities in the City of and behaviours we believe are central to and investment. Assets under management grew to £5.7bn Westminster. The Fund endowment has the long-term success of our business. Direct The West End in London, which (2014: £5.2bn), reflecting the growing value grown to £819,000. Shortly after the year end, we realigned generates 3% of the country’s economic of our commercial portfolio. As chair of the Mayfair Neighbourhood our team structure to reflect the focus of output, is seeing renewed investment our business, bringing all major projects Forum, we consulted with the community ahead of Crossrail’s opening in 2018. Graham Pimlott CBE Mark Preston FRICS Roger Blundell ACA Richard Powell Our focus on the customer Chairman and Non-Executive Executive Director Executive Director and agreed the Forum’s objectives which into one unit under Executive Director There is growing consensus that the We remained on track to deliver our wide- Simon Harding-Roots. Non-Executive Director Finance Director Executive Director of will be reflected in the neighbourhood plan. district is uniquely diverse and resilient and Director Group Chief Executive Grosvenor ranging customer service improvement As steering group member of the Belgravia Our Board saw the arrival of Stephen helps drive the city’s success. We are well Simon Harding-Roots Developments programme across the London estate. Stephen Lovegrove Nicholas Scarles Executive Director Neighbourhood Forum, we helped identify Lovegrove who joined as a Non- positioned to take advantage of this. Non-Executive FCA ATTORNEY AT LAW Executive Director Ulrike Schwarz-Runer Overall, net customer satisfaction rose DOCTOR OF LAWS the Forum’s immediate priorities. As chair Executive Director in March 2016. Director Non-Executive Major Projects by 7% on 2014 to 65%. Net customer Our long-term focus and values will remain Director Executive Director of the Victoria Business Improvement Stephen is Permanent Secretary at the UK’s Group Finance Director General Counsel satisfaction when contacting Grosvenor on constant through economic and sectoral Heather Rabbatts DBE Craig McWilliam FRICS District, we helped gain consensus for a Department of Energy & Climate Change. Non-Executive Executive Director repairs and maintenance almost doubled changes. We will continue to seek long- FRICS new five-year business plan, following a Michael Gradon stepped down from our Director Peter Vernon Executive Director of term relationships built on loyalty and Executive Director compared with the previous year. member ballot. And as Deputy Chair of the London estate Board in October 2015 after eight years as trust, alongside innovative partnerships Chief Executive the newly formed West End Partnership Our annual MORI customer satisfaction a Non-Executive Director. I would like to with public and private sector players alike. (a public-private partnership tasked with survey found most of our locations registered express my deep thanks to Michael for his We will focus on opportunities to deploy improving the West End for all who work, strong net satisfaction with Grosvenor people very significant contribution. our wide-ranging expertise in the cities we live and visit in the West End area), we on-site, with an estate-wide average of 77% understand best. We will continue to invest helped create a new 20-year vision for A forward look in 2015, compared with 74% in 2014. in our people as we help them unlock their growth and supported the first steps in As mentioned in the Chairman’s statement own full potential and the potential of those The survey also suggested customers were its implementation. happier with the frequency and clarity of and Chief Executive’s review, on 1 January they lead. our communication. Advocacy levels grew Away from our London estate, in Bermondsey, 2017, I move to a new role as Group Executive Director and Craig McWilliam Peter Vernon and we were viewed as having a positive we delivered on a wide-ranging set of Chief Executive impact on the local community. community partnerships and projects. succeeds me as Chief Executive of Grosvenor Britain & Ireland Grosvenor Britain & Ireland. 17 March 2016 Grosvenor Group Limited Grosvenor Group Limited 34 Annual Review 2015 Annual Review 2015 35 Grosvenor Americas A ‘first’ for residents

In April 2015, we broke ground on F1RST, our new 41,800m2 mixed-use project at Washington, DC’s Capitol CGI Riverfront, unlocking the potential of a development site we acquired in 2012. The vision for F1RST is to become a destination that will connect people to amenities within the building and in the evolving neighbourhood. The development will include 325 rental apartments, a 170-room Residence Inn by Marriott and shops such as Healthy lifestyle acclaimed local deli, Taylor Gourmet. Residents will have access to a gym, an outdoor rooftop pool and cooking stations.

Environmentally responsible Targeting LEED Silver standard – 87% of construction waste for the residential portion will be diverted from the local landfill to recycling facilities. 87%

Grand scale The Capitol Riverfront neighbourhood is one of the USA’s largest revitalisation projects.

Conveniently located F1RST is less than 0.5km from the waterfront, a block from the Metrorail station, 2km from Capitol Hill and minutes away from the Washington Navy Yard, a destination for tourists and workplace for thousands of federal employees. Direct

Part of the action An outdoor rooftop theatre with a view into Nationals Park baseball stadium will put residents close to the action and world-class entertainment.

“DC is continuing its great urban renaissance. The changing built environment and number of young working professionals evident at the Capitol Riverfront District “The development is the highest are prime examples.” and best use of federal land. Jon Carr It’s a win-win for the Vice President, Development Grosvenor Americas Federal Government and the District of Columbia.” 50Socially responsible Congresswoman Of the 325 homes at F1RST, 50 will be Eleanor Holmes Norton offered at below market rental rates. Grosvenor Group Limited Grosvenor Group Limited 36 Annual Review 2015 Annual Review 2015 37

Grosvenor Americas (continued)

Grosvenor Americas CGI

Business objective Our aim is to become a market leader in select geographical areas and sectors in Canada and the USA through focused, strategic expansion. We use our knowledge of the cities we work in and our property skills to develop projects that contribute to the vibrancy and attractiveness of those communities.

Key achievements aaEstablished a new partnership to quadruple our mezzanine lending programme and expanded its reach to Washington, DC.

a 85% aReceived planning approval for Connaught, a mixed-use development in North Vancouver, BC, and adoption of the Specific Plan at The North 40 in Los Gatos, . Exceeding expectations Making progress Pre-sales revenue at Grosvenor With efficient unit layouts and services, aaStarted construction on three mixed-use developments, acquired three residential Ambleside exceeded projections as we such as concierge and a bike share investment properties and sold two investment properties. saw a significant response in the local programme, Smith promotes smart West Vancouver market, with over 85% urban living within Calgary’s vibrant aaExceeded pre-sales targets at Grosvenor Ambleside in Vancouver, BC, with over 83% of purchasers coming from within a Beltline district. Smith’s public plaza of homes sold, representing over C$155m in revenue. 10km radius of the development. will extend green space from the site towards 17th Avenue. aaPromoted two senior managers, James Patillo and Steve O’Connell, to Managing Andrew Bibby Director roles. Chief Executive Grosvenor Americas Revenue profit Total return Assets under management Strong in all our markets Breaking ground Central is being built on the former The North American markets in which “I think the outreach by Grosvenor We are benefiting today from decisions site of the First Baptist Church which 2 we are active share a number of has been proactive, responsive, made shortly after the global financial is being transformed into a 21,500m , C$52.4m 8.4% C$4.5bn and continuous. Their positive 243-apartment mixed-use community (2014: C$62.1m) (2014: 9.7%) (2014: C$3.0bn) characteristics that support their long- crisis to acquire development sites. 2 term sustainability. While each of our interactions with a variety of entities Our pipeline currently includes 14 projects with 1,500m of ground floor retail Grosvenor’s share of property assets markets is unique in its own right, common in our town including the school in various stages of development across space. Amenities will include an outdoor districts, elected and appointed pool, a bike workshop and a Wi-Fi café. 5 traits include city vibrancy, educated North America. 1 1 1 officials, and neighbourhood groups, ‘Wingspire’, a lit-glass structure designed 4 populations, desirable neighbourhoods 2 A significant portion of progress in our and solid economic drivers. In addition, our have contributed to the sense by William Cochran, will feature as public of openness and co-operation pipeline has been realised in 2015, with art in Central’s ‘paseo’. A new building and 3 Sector 2 Region Activity diversified development, investment and three of our major development projects co-investment portfolios helped make 2015 that I expect from a daycare centre will be constructed for the – Grosvenor Ambleside, F1RST and 2 a strong year. development firm.” First Baptist Church on an adjacent site. Central – all reaching major milestones. Maria Ristow 31 of the new homes are designated as All our business units were very active Sector 1 Residential C$740.1m 37.0% Chair Private showings at Grosvenor Ambleside affordable in the local market. in 2015. Our investment team has been Transportation and 2 Retail C$705.7m 35.3% commenced in October 2014, marking the identifying and acquiring well-situated Parking Commission In July 2015, we acquired 1405 Fourth 3 Office C$322.8m 16.1% for Los Gatos start of first-phase sales. This first phase Street, located along a main pedestrian

properties near strong employment Direct was a great success, with a significant 4 Industrial C$185.2m 9.3% centres. Our co-investment team’s and vehicular corridor in Calgary’s Beltline. response from the local West Vancouver Plans for the site contemplate a mixed-use 5 Hotel C$46.9m 2.3% mezzanine finance programme is fully market. Of the 57 homes available, subscribed and development projects are development with two residential towers, Region 1 USA C$1,460.6m 73.0% 47 were sold, representing C$155m in under construction in three markets. “We listened to over 2,400 members increasing our more than 250 homes either 2 Canada C$540.1m 27.0% sales revenue. We also secured retail of the community who shared their under construction or already delivered Activity 1 Investment C$1,703.1m 85.1% Results for 2015 have been strong across agreements with a local boutique grocer vision of what Edgemont Village in the region. Grosvenor’s Calgary our six active North American markets: and an upscale, casual, beachside 2 Development C$297.6m 14.9% needs in order to maintain its charm, developments under construction and Calgary, Los Angeles, San Francisco, restaurant. In July, we broke ground on this but still grow responsibly to fit completing towards the end of 2016 include Seattle, Vancouver and Washington, DC. mixed-use development that will infuse Number of assets by city best with the Smith, 127 homes in the Beltline (over 50% Revenue profit was C$52.4m new life into the waterfront community and community and sold), and Avenue, 193 homes in the city’s Canada: 2014 2015 USA: 2014 2015 (2014: C$62.1m) and total return was village shopping district. the environment.” Downtown West End (73% sold). Calgary 6 6 Chicago 1 1 8.4% (2014: 9.7%), reflecting lower trading In April, coinciding with the start of the new Development teams in all our markets Vancouver 7 6 Los Angeles 1 1 income more consistent with long-term Tanja Milosevic Community & Customer baseball season, we began construction on interacted with local communities and Victoria 1 1 San Francisco 11 9 profit trends. Assets under management Engagement Manager F1RST, our Capitol Riverfront development stakeholders in 2015. In San Francisco, increased to C$4.5bn (2014: C$3.0bn) Grosvenor Americas San Jose 2 4 in Washington, DC. largely due to the impact from the we hosted a number of events to engage Seattle 8 6 appreciating US Dollar, the expansion of In September, we held a groundbreaking neighbours in discussions around the Washington, DC 14 19 our mezzanine finance programme, the ceremony for Central, our mixed-use potential of our sites in Jackson Square, net acquisition of investment properties development at 8455 Fenton Street in resulting in the unanimous planning Like-for-like energy Like-for-like water and the start of construction projects Downtown Silver Spring, Maryland. approval of 240 Pacific Avenue. consumption MWh consumption m3 in Vancouver and Washington, DC. Occupancy rates have remained high 52,269 -5% 386,250 +3% at 92.6% (2014: 94.6%). (2014: 54,912) (2014: 376,699) Grosvenor Group Limited Grosvenor Group Limited 38 Annual Review 2015 Annual Review 2015 39

Grosvenor Americas (continued)

Flexible debt financing We provided structured development financing for Millennium Development’s 46-storey condominium tower near Burnaby’s SkyTrain.

Engaging with stakeholders Planning approval Achieving excellence In February 2015, senior development The North 40 Specific Plan was In October 2015, our Washington, DC, manager Marc Josephson (pictured approved by Los Gatos Town Council office was named ‘Firm of the Year’ at centre) spoke to neighbourhood and will see mixed-use development to commercial real estate development retailers at our Connaught public meet the town’s future needs. association NAIOP’s Annual Awards of information centre about the project Excellence in DC. and its economic impact.

We also worked with the renowned In North Vancouver’s Edgemont Village, Growing the business Supporting our growth In May 2015, we congratulated Rekha Grosvenor Americas – Robert Stern Architects to incorporate 832 people visited our public information Through our structured development Our business has grown. To accommodate Patel, our Chief Financial Officer, who neighbourhood feedback into the design centre. The centre was open for seven was named one of San Francisco’s Top Board of Directors financing programme, we are helping this growth, we invested in a Leadership as at 17 March 2016 of a 44-unit residential building at our months, providing the community with an to increase the supply of housing in Effectiveness programme to ensure that 50 Most Influential Women. After 13 property at 875 California Street, on opportunity to offer feedback and share constrained markets around North we are managing change at all levels, years at Grosvenor, almost all of them as the intersection of Powell and California ideas about our mixed-use development, America. In 2015, we financed eight in a manner consistent with our values. Chief Financial Officer, Rekha Patel has Streets, the site of San Francisco’s only Connaught. The community strongly residential developments that will see 770 This involves recognising and mitigating decided to retire at the end of April 2016. cable car crossing. supported our proposal and in December, new homes delivered in our key markets. the risks associated with business Graham Drexel will assume the role of Chief the District of North Vancouver Council growth, creating a more open dialogue Financial Officer upon Rekha’s departure. After many years of community In November, a new Mezzanine voted unanimously to grant approval. across our offices and reinforcing our consultation, Silicon Valley’s Los Gatos Investment Partnership, True North A forward look collective understanding of cities, property Town Council approved The North 40 Considered investment LP, was formed, committing C$165m investment and development. The North American economy remains Specific Plan in June 2015. The plan will towards the programme which provides guide development of the California town’s Our investment team oversees C$3.7bn stable. The USA’s increase in domestic of property assets in our key North flexible debt financing to both growing In December, Chief Operating Officer oil supply has helped to insulate their last large undeveloped parcel of land, for and well-established residential and Ryan Beechinor retired after 17 years which we are the primary developer. American markets. Acquisition, disposition economy from the wider, more volatile, and management of the properties falls mixed-use developers. We initiated our with Grosvenor Americas. Ryan’s valuable world oil market, allowing it to recover at a

In downtown Vancouver, we hosted an within their purview. Assets include 3,278 first Washington, DC, loan along the contributions to our business are numerous reasonable pace. Of course, Canada always Direct open house, receiving feedback from local residential units, 186,000m2 of office vibrant 14th Street Corridor, and placed and include playing a key role in the benefits in the long term from a healthy residents on preliminary concepts designed space, 159,000m2 of retail space and our second loan in this market at PN strategic growth of the development US economy, and international interest in by Montreal-based architectural firm, 101,000m2 of industrial space. In 2015, Hoffman’s condominium development team. As a result of his departure, we the Vancouver market continues to create ACDF* Architecture and local Vancouver we disposed of Peloton and Woodcreek near the Capitol Riverfront. We funded took the opportunity to reorganise senior excellent opportunities. Property assets are architectural firm, IBI/HB. Our site, which is Apartments while acquiring new assets two residential projects in San Francisco’s management around our two main likely to remain attractive to global capital. located along an arterial bike lane at 1380 in vibrant residential locations close to eclectic Dogpatch Neighbourhood and two business functions – investment A potential increase in consumer spending Hornby Street, includes the preservation transport links. townhome projects in Los Angeles. In the and development. James Patillo, reflects positively in light of the urban Brandt C. Louie OBC Nicholas Scarles of an 1890s historic house. Vancouver area, we are helping finance who has been with Grosvenor since LLD FCA FCA ATTORNEY AT LAW In California’s Silicon Valley, we acquired the construction of 48 townhomes in Pitt 2006 and has over 20 years of property environments where we develop, lend Chairman and Non-Executive On Vancouver’s west side, we acquired a Waterstone Apartments, a 432-unit and invest. A favourable exchange rate Non-Executive Director Meadows and a further 340 condominiums experience, now oversees 14 projects Director Group Finance Director townhome development site at 6250–6410 residential community located near near Burnaby’s Gilmore SkyTrain station. in various stages of development as adds to Canada’s appeal as an exporting James E Hyman Andrew Bibby Oak Street. Citimark, with whom we major employers such as Apple and Managing Director, Development. country and a stable US Dollar positions have worked previously (at 15 West and Non-Executive Executive Director Google. In Bellevue, part of Seattle’s Steve O’Connell, who joined Grosvenor in both countries as strong performers on the Director Chief Executive Avondale on the North Shore), will be our residential region, we acquired Somerset 2011 and has been in the property industry global stage. We will continue to identify joint venture partner on this development. John T Roberts Rekha Patel CPA Green, a series of 101 townhomes. In the since 1997, is now Managing Director, opportunities in our key markets, execute Non-Executive Executive Director Washington, DC, market, we acquired Investment. Steve oversees our investment on our developments and refine our Director Chief Financial Officer The Crossings at Washington Center, investment strategy. and co-investment functions and he also Mark Preston FRICS Non-Executive a 648-unit residential community in chairs the Grosvenor Liaison Group, which Andrew Bibby Director Gaithersburg, Maryland. Chief Executive is responsible for sharing knowledge across Group Chief Executive Grosvenor Americas the Group. He played a major role in the 17 March 2016 expansion of Grosvenor’s development programme in the San Francisco Bay Area. Grosvenor Group Limited Grosvenor Group Limited 40 Annual Review 2015 Annual Review 2015 41 Grosvenor Asia Pacific A renewed focus

In 2015, we refocused Grosvenor Asia Pacific’s 10-year strategy, underpinned by two key cornerstones. The first is that we will go deeper into our existing markets – Tokyo, Shanghai and Hong Kong. The second is that we will increase development exposure as a proportion of our total activity in the region. By doing these things, we plan to play a more influential role in the positive transformation “Shanghai offers a number of attractive of these cities, while also driving stronger total returns opportunities, especially in the mixed-use over the medium to long term. sector, which we are exploring as we look to deepen our presence here and build on our existing expertise and track record.” Brenda Chung Executive Director and Chief Representative, China Grosvenor Asia Pacific

Sector view We will explore the office sector across all three markets, as well as selected retail opportunities, though our continued focus will be on residential. Direct

Increased development capability Development is a natural evolution of our skill set in Asia which will enable us to deliver stronger returns over the long term, as well as drive our ‘Living cities’ agenda more meaningfully.

“Tokyo, Hong Kong and Shanghai continue to be dynamic cities in Asia with well- established and liquid real estate markets. There are fundamental, long-term drivers which make each of these highly compelling destinations.” Ian Mair Chief Operating Officer and Regional Finance Director £50m Grosvenor Asia Pacific Strategic capital allocation Our strategic recommendations were well received by the Grosvenor Group Board and resulted in an additional capital allocation of £50m. Grosvenor Group Limited Grosvenor Group Limited 42 Annual Review 2015 Annual Review 2015 43

Grosvenor Asia Pacific (continued)

“Bringing ambitious public arts Grosvenor Asia Pacific projects to Hong Kong requires 1,400 bold private sector backing, Business objective people attended six educational events during the launch week of and Grosvenor’s support – We are looking to go deeper into our chosen cities of Hong Kong, Shanghai and ‘Event Horizon’. far beyond just financial – Tokyo, while also increasing development exposure. This will enable us to drive has been invaluable.” stronger total returns over the medium to long term. Ultimately, we aim to play Robert Ness an influential role in the positive transformation of these cities as they continue Director to develop. British Council Hong Kong Building a brand In July, we began refurbishment works at The Westminster Nanpeidai, the Key achievements latest in our Westminster-branded portfolio of properties, and the first aaEstablished a refocused strategy and secured additional capital from the Grosvenor in collaboration with award-winning Group Board to implement it. UK designer Eric Parry Architects. Sales will start in March 2016. aaCompleted sales at The Westminster Roppongi, Tokyo, exceeding expectations. Supporting public art We were proud to be a sponsor of aa Completed three new deals in Tokyo under the Grosvenor Development Partnership. ‘Event Horizon’, a major internationally aaSponsored artist Sir Antony Gormley’s inaugural public art installation in Hong Kong, acclaimed public arts installation for Hong Kong, created by artist ‘Event Horizon’, marking a major ‘Living cities’ initiative in our region. Sir Antony Gormley. During its launch, aaStrengthened internal capabilities with new hires in key positions. Benjamin Cha joined him on a panel Benjamin Cha that explored the potential of public Chief Executive art to transform cities. Grosvenor Asia Pacific Revenue profit Total return Assets under management A platform for progress We concluded all sales at The Westminster We play our part in cultural and industry Grosvenor Asia Pacific – Board Despite a slowdown and transition across Roppongi, ahead of schedule and above events and bodies. In 2015, we were a HK$121.5m 6.6% HK$8.1bn market predictions. Additionally, we partner sponsor of ‘Event Horizon’, a of Directors as at 17 March 2016 (2014: HK$83.1m) (2014: 9.1%) (2014: HK$8.3bn) Asian markets in 2015, we had another solid year. Revenue profit increased acquired a further interest in Grosvenor significant public art installation presented considerably (46.2%) from HK$83.1m in Place Kamizono-cho, bringing Grosvenor’s by the British Council in Hong Kong. Grosvenor’s share of property assets total interest in the asset to 67.8%. 2014 to HK$121.5m, a result of rising gross People 1 1 1 rental income and trading profits coming 2 Increasing our The implementation of our strategy would 3 in both quicker and higher than predicted. development exposure Total return was 6.6% (2014: 9.1%), be impossible without the teams we Sector Region Activity reflecting lower market-driven property The second cornerstone of our strategy have on the ground across our markets. 2 value growth than in previous years. is that we will increase development During the year, we bid farewell to Yu Yang 2 Assets under management decreased to exposure as a proportion of our total after 11 years of dedicated service, and HK$8.1bn (2014: HK$8.3bn) due to some activity in the region. We will continue welcomed Brenda Chung as our new Chief Sector 1 Office HK$4,307.3m 62.8% strategic asset disposals. Occupancy rates to work with like-minded joint venture Representative, China from Grosvenor 2 Residential HK$2,556.8m 37.2% were up from last year (2015: 97.3%; partners, but we are looking to grow our Fund Management. 2014: 90.8%) due to full occupancy at both own development capability over time.

A forward look Direct Region 1 Hong Kong HK$3,494.9m 50.9% China Merchants Tower – which was being In 2015, we advanced this with the disposal 2 HK$2,277.5m 33.2% renovated in 2014 – and PCCW Tower. of commercial investments in Shui On In 2016, we expect to complete investments Plaza, Shanghai and Dotonbori, Osaka, made from our Grosvenor Development 3 China HK$1,091.7m 15.9% A renewed focus providing proceeds to be used for re- Partnership in Tokyo, deploy capital Activity 1 Investment HK$6,254.1m 91.1% On 1 April 2015, I succeeded Nicholas investment in future development activity. unlocked from asset sales and raise 2 Development HK$610.0m 8.9% third-party capital to invest alongside Loup as Chief Executive of Grosvenor The ‘Living cities’ philosophy Asia Pacific. Building on 20 years of being our recycled capital and new capital Number of assets by city a long-term investor and developer in The two cornerstones of our strategy are allocation. We will continue to integrate the the region, we reviewed and refocused supported by the Group’s ‘Living cities’ business across the region and commence China: 2014 2015 Japan: 2014 2015 philosophy. development activity. While we expect Keith Kerr Nicholas Scarles our strategy in mid-2015 around two key Chairman and Non- FCA ATTORNEY AT LAW Beijing 1 1 Osaka 1 0 all three of our markets to continue to Non-Executive business cornerstones. Our efforts to bring high-quality design Executive Director Hong Kong 2 2 Tokyo 4 8 undergo transitional periods, we see this Director Kensuke Hotta Group Finance Director to the market have resulted in award- as presenting a good investment window Shanghai 1 0 Deeper into existing markets winning properties, like The Westminster Non-Executive and therefore remain cautiously optimistic Director Benjamin Cha The first cornerstone is that we will be Executive Director Roppongi which won ‘Best Refurbished about our investment programme. pressing deeper into our existing markets Building’ at the MIPIM Asia Awards in Michael Lee Chief Executive Like-for-like energy Like-for-like water It should be noted that our expected move Non-Executive in Asia to make a more meaningful Koshiro Hiroi 3 December 2015. Director consumption MWh consumption m impact in three cities – Tokyo, Shanghai into development activity will impact on Executive Director and Hong Kong. In Tokyo, our residential We also continue to work with the our total return, however, this will position Norman Lyle OBE Managing Director, the business for much stronger returns Non-Executive Development portfolio continued to grow in 2015 with communities we are active in. In July 2015, Director (Asia Pacific); Chief 1,094 -1% 7,610 +5% people from our Hong Kong office joined over the medium to long term. Representative, Japan (2014: 1,102) (2014: 7,280) the refurbishments of The Westminster Mark Preston FRICS Nanpeidai and The Belgravia Azabu secondary school students for an Eco Benjamin Cha Non-Executive Ian Mair apartment buildings in Tokyo. Day Trip in the region’s New Territories. Chief Executive Director Executive Director This was with Project WeCan, a charity Grosvenor Asia Pacific Group Chief Executive Chief Operating Officer 17 March 2016 and Regional Finance which supports schools, communities and Director students of low income and opportunity. Grosvenor Group Limited Grosvenor Group Limited 44 Annual Review 2015 Annual Review 2015 45 Indirect Investment Interesting deals, strong partners, diverse geographies

Our specialist third-party managed investment programme made significant advances during 2015 with the addition of six new deals in four continents, committing in “Grosvenor’s investment in our second African fund is noteworthy; it is excess of £80m. the first such commitment from a significant UK institutional investor, and represents a pleasing shift in European 34 investors’ outlook on opportunities on Acquisition ability We completed a new investment the continent.” with iO Asset Management Simon Fifield alongside Quilvest; it is already Chief Executive Officer fully invested at £120m in 34 UK RMB Westport multi-let industrial estates.

Building on relationships With High Street Realty, the Boston-based industrial specialist, we leveraged our existing relationship to complete two deals in 2015. Indirect

Acting quickly We acquired 320 Pitt Street in Sydney, Australia, on attractive pricing through 65% our ability to move swiftly. The deal, Shared values with our Propertylink partnership, was We value partners who think about “Working with Grosvenor is an excellent closed within 25 working days of the their wider impact on the environment. opportunity being offered. Approximately 65% of High Street learning experience; the continuous two- Realty’s fund holdings have been way communication drives solid analyses upgraded to energy-efficient lighting, and creative ideas. Their approach which reduces the tenants’ electrical lighting expense by 40-50%. makes it possible to identify unusual opportunities with excellent upside.” Pelayo Primo de Rivera y Oriol Executive Partner Kefren Capital Real Estate Grosvenor Group Limited Grosvenor Group Limited 46 Annual Review 2015 Annual Review 2015 47

Indirect Investment (continued)

Propertylink office partnership In July, in a second partnership with Indirect Investment Propertylink and Goldman Sachs, Grosvenor acquired 320 Pitt Street in Sydney, Australia. The office building Business objective will either be refurbished to meet the demands of the growing volume of The role of the Indirect Investment business is to enable the Group to diversify office tenants or will be positioned for further its property investment portfolio and achieve strong risk-adjusted returns residential redevelopment, meeting by exposure to sectors, countries and specialist managers which its direct increasing demand for urban living in Australia’s largest city. property activities do not provide. We achieve this by investing in Grosvenor Fund Management investment vehicles, and by investing with specialist third-party Diversifying our portfolio managers with specific geographic or sector expertise. In the last year, the Indirect Investment team of four – Chris Taite, Andy Yates, Tim Budden and Zhongnan Huang (pictured left to right) – completed six Key achievements third-party deals on four continents that helped to diversify Grosvenor’s aa Expanded the portfolio of third-party managed investments, beyond Sonae Sierra, property portfolio further. to 11 vehicles with a combined equity commitment of £150m.

aaIncreased our effective interest in Sonae Sierra from 38.75% to 50% in February 2016.

aaCompleted the partial sale of the Grosvenor Liverpool Fund investment releasing capital for reinvestment.

aaLeveraged established relationships to launch four new investment vehicles with existing partners. Chris Taite Group Investment Director aaMade Grosvenor’s first investment commitment to Sub-Saharan African real estate. Diversification The increase also reflects the profits Our co-investment in Grosvenor Revenue profit Total return Equity invested through partnership “The Grosvenor team brings a realised from our first investment with Fund Management unique ability to work efficiently iO Asset Management at the end of 2015. 2015 was a very busy year. Including the In terms of our co-investment in existing in executing transactions. This has Total return was 10.0%, up from 8.7% in Sub-Saharan African deal signed shortly vehicles managed by Grosvenor Fund £41.2m 10.0% £573.0m been integral to Propertylink 2014. Total equity invested increased to (2014: £23.4m) (2014: 8.7%) (2014: £527.7m) after the year end, the Indirect Investment Management, there were three significant being able to secure investment £573.0m (2014: £527.7m). team completed £210m of deals in 10 developments in 2015. opportunities ahead of the transactions across four continents. Portfolio analysis pack, while simultaneously How we create value In February, we closed our SEK190m 67 Our portfolio has grown to 23 investments providing support to We invest in two ways. investment in Skärholmen Centrum 4 1 1 2 1 3 5 which are located in 15 countries across grow our business.” shopping centre in Sweden alongside an 4 First, we co-invest in the majority of the 2 five continents, managed by seven Steve Day Asian and a European investor. Situated in 3 funds, clubs and other investment vehicles Sector Region Activity specialist partners, including Sonae Managing Director one of Sweden’s growing regions and Sierra and Grosvenor Fund Management. Propertylink run by Grosvenor Fund Management. with a dominant position in south-west 2 Our new investments in 2015 included four This achieves investment returns and Stockholm, Skärholmen Centrum is ranked with existing partners, and three with new diversification for the Group. It also realises in the top four shopping centres in the Sector 1 Retail £995.4m 77.4% specialist managers. This demonstrated our commitment to invest Grosvenor’s country by footfall. 2 Office £118.3m 9.5% to us the importance of nurturing our capital alongside that of other investors. In March, we committed an additional 3 Industrial £122.3m 9.2% relationships not only to ensure the success “Grosvenor is an exceptional Second, we invest with specialist third- US$21m to Grosvenor Fund Management’s of investments we have already made, 4 Other £50.0m 3.9% partner. From deal sophistication party management teams with specific Global Real Estate Securities Fund as but to provide further opportunities for Region 1 Continental Europe £747.9m 58.2% and real estate knowledge to geographical or sector expertise. it started opening up to third-party the future. The largest of these is our investment in 2 UK £213.7m 16.6% thoughtful analytics and financial investment following a successful period strength, their partnership Sonae Sierra which began in 1996 and 3 Brazil £121.8m 9.5% Our partnerships are key to our success building its track record. and, while few in number, they are growing has enhanced our gives us exposure to shopping centres in 4 USA £93.8m 7.3% In December, following the long-term in strength and quality. investment platform Continental Europe and Brazil. As well as 5 Australia £81.6m 6.3% and performance.” managing its own assets, Sonae Sierra also restructuring of the Grosvenor Liverpool 6 China £23.1m 1.8% Our future growth will come from building has a growing services business providing Fund earlier in the year, we completed

7 Other Asia £4.1m 0.3% on these existing relationships and forging Robert Chagares retail leasing, property management and the sell-down of our investment in the Indirect new ones with partners who can provide Chief Executive Officer development services to third parties in fund to 10%. The sale released funds for Activity 1 Investment £1,238.0m 96.3% High Street Realty us with strong risk-adjusted returns in new Company, LLC other parts of the world, including Africa. reinvestment in other Grosvenor Fund 2 Development £48.0m 3.7% sectors or countries. Management vehicles. Our investment with third parties outside Number of investments by country Results of Sonae Sierra is not of the same Throughout the year, we fulfilled our role magnitude but is strategically significant as an active investor in the 11 existing funds Revenue profit increased to £41.2m 2014 2015 2014 2015 because it seeds new opportunities in in which we co-invest, representing the (2014: £23.4m) following a strong Australia 1 2 USA 3 4 untapped sectors and markets to access Grosvenor capital. underlying performance across all Brazil* 1 1 investment opportunities and diversify the International 2 2 investments and the expansion of the Group’s portfolio. China 1 1 *Exposure to Brazil is through the investment in third-party managed portfolio. Sonae Sierra which is also categorised here within Continental Europe 6 6 Continental Europe. UK 3 6 Grosvenor Group Limited Grosvenor Group Limited 48 Annual Review 2015 Annual Review 2015 49

Indirect Investment (continued)

Accessing Spanish logistics In December 2015, we formed a joint venture backing Kefren Capital Real Estate, alongside Brunswick Invest, to acquire high yielding industrial and logistics assets in Spain. The first acquisition, ‘Perretayana Kalea’, was completed in Vitoria, Northern Spain.

Into Africa Expanding in US industrial Early in 2016, we completed our first We acquired US$66m of industrial investment in Sub-Saharan Africa, assets in Tampa, Chicago and with a commitment to RMB Westport’s Philadelphia in a vehicle which we second development fund. This vehicle subsequently sold down to 50%. will develop high grade retail, office and The other half was acquired by industrial assets in key cities in Nigeria, High Street Realty’s Fund V, launched Adding value to assets Ghana, Angola and Ivory Coast, meeting during the year, to which we have In November 2015, the expanded the demands of the rapidly urbanising committed US$15m. Alameda Parque Dom Pedro, population in those countries. Sonae Sierra’s flagship shopping centre in Campinas, São Paulo, Brazil, opened. With an investment of €6.8m (R$24.8m), the expansion encompasses a dining area featuring a number of restaurants which are expected to attract new people to the centre and ultimately boost sales for all tenants.

Our partnerships New investments Sonae Sierra In Morocco, Sonae Sierra proceeded In February 2016, we increased our with third parties In July 2015, we completed a second deal 2015 was a good year for Sonae Sierra. with the preparation of Zenata shopping effective interest in Sonae Sierra from alongside Goldman Sachs in Australia, Grosvenor’s share of revenue profit was centre, a joint venture in which it has a 38.75% to 50.0%. Our third-party partnerships, both existing backing Propertylink, in the acquisition of £27.9m. At the same time, revaluation minority stake. and new, were extremely active in 2015. 320 Pitt Street, a 30-storey office tower in gains of £39.9m contributed to a share of A forward look In part, this reflects the strength of In Iberia, the focus was on developing Sydney, let to Telstra. profit before tax of £67.8m compared with opportunities available for Grosvenor’s expansions and refurbishment projects Our approach to working with our partners, £54.3m in 2014. Like-for-like tenant sales capital in the sectors and countries in which Also in July, we closed our second that add value to existing assets. In Spain, combined with our growing reputation for increased by 2.5% across Sonae Sierra’s we are operating. substantial deal with iO Asset Management. the business is making good progress with innovative deals, is gaining real traction European portfolio, and by 2.2% in Brazil Together with Quilvest, a leading private the licensing of the Plaza Mayor designer and improving the flow of deals. (in Reais). Sonae Sierra outperformed the Existing investments equity investor, we committed £55m to a outlet expansion in Malaga, a €115m retail index by two percentage points in We will continue to concentrate on In 2015, we, alongside Goldman Sachs, new investment vehicle to acquire high joint venture with McArthurGlen which is Portugal and two percentage points in strengthening the relationships with our became fully invested with Propertylink’s yielding, multi-let estates with strong rental scheduled to open its first phase in 2017. Spain. Average occupancy for the overall current partners. In March of 2015 and Australian Industrial Partnership, which growth potential. This vehicle is already The refurbishment of NorteShopping in portfolio reached 95.2%. These results not 2016, we held a ‘Partners Summit’, which provides us with specialist access to the fully invested. Portugal was also concluded during 2015, only reflect improving macro-economic provided useful opportunities to share industrial and logistics sector. Our portfolio and a significant expansion was launched In October, we completed a new deal in the conditions, but also confirm the validity expertise and experience. (in which Grosvenor is effectively an 18.75% in the same centre. Works also progressed USA with industrial specialist High Street of the property management strategy shareholder) produces an annual income of at five other shopping centres. We are always looking to develop new over AUS$50m from over 30 assets largely Realty. The US$66m 50:50 joint venture deployed during the economic crisis. partnerships which offer access to fresh comprises an industrial portfolio with five The disposal of Zubiarte shopping centre around Sydney and Melbourne. During 2015, Sonae Sierra concluded the sectoral and geographical investment assets in Tampa, Chicago and Philadelphia. in Spain at the end of 2015, contributed financing of ParkLake, a joint venture opportunities. While maintaining some Our investment programme with iO Asset to Sonae Sierra’s objective of reducing its In December, we formed a joint venture project in Romania. At the end of the focus on the industrial and logistics sector, Management LLP, the UK industrial real exposure to non-core assets. we are actively seeking new areas of real estate partnership that we have backed backing Kefren Capital Real Estate in Spain, year, 92% of the shopping centre’s gross alongside Brunswick Invest, the principal leasing area was already leased with 2015 saw Sonae Sierra’s professional estate expertise where we can achieve since 2012, is on target to deliver an strong risk-adjusted returns. internal rate of return on equity in excess investment arm of Brunswick Real Estate. important international and national advisory business gain increasing of 17% per annum over the three years The €120m vehicle, called Logic Spain brands. Now in the final stages of the momentum as it won new projects in its Our one constant is a commitment to the KCRE, is investing in high yielding Spanish project works, ParkLake is on schedule for existing markets and expanded the scope Grosvenor values, which are shared with since the investment was made. Indirect industrial and logistics assets. a promising inauguration in 2016. of operations in new geographies. 127 new all our partners. Collective commitment to Our 2012 investment in High Street Realty contracts worth €18.5m were signed. Early in 2016, we completed our first In Germany, Sonae Sierra completed those values is not just the right thing to Fund IV was through our partnership with do; it also provides us with a very real and investment in Sub-Saharan Africa. the acquisition of a 250,000m2 building Sonae Sierra continued to execute its the Boston-based industrial specialist sustainable competitive edge. High Street Realty. It gives us access to The US$30m investment in RMB Westport’s in Nuremberg, for a mixed-use scheme sustainability strategy alongside its fund will give us access to a growing with retail as a core component. It also business strategy. In 2015, it ranked Chris Taite 60 institutional-quality assets in major Group Investment Director markets across eastern USA. market in a region that lacks high-grade completed its first direct investment in second in the European retail sector 17 March 2016 office, retail and industrial space. Colombia with the acquisition of a plot for non-listed companies in the Global We are fully invested in our bespoke in the city of Cucuta, already licensed Real Estate Sustainability Benchmark Logistics Securities mandate, managed to develop a shopping centre of around (GRESB). Sonae Sierra also enhanced its by Grosvenor Fund Management, which 45,000m2 gross leasing area with local environmental performance, enabling it invests in global logistics securities. partner Central Control. to avoid costs of over €19.8m in 2015 as a result of energy, water and waste efficiency measures implemented over the last 13 years. Grosvenor Group Limited Grosvenor Group Limited 50 Annual Review 2015 Annual Review 2015 51 Grosvenor Fund Management Continuous improvement

In 2015, we completed the modernisation and refinancing of Improving occupiers’ performance 72% of our occupiers saw a year-on- the Grosvenor Liverpool Fund, which owns the Liverpool ONE year increase in sales in 2015, as total sales in Liverpool ONE increased shopping centre, reaffirming our commitment to this major by 8.5%. Footfall rose to over 28m asset and to Liverpool itself. The fund was noted by the UK’s people for the first time. “Our Cocoa Bar-Café in Liverpool ONE has been one of our best performing in the UK Association of Real Estate Funds and the IPD to have generated and customers are returning week after the best returns of all UK unlisted funds in 2015. Since opening week. As importantly, Grosvenor is as committed to our success as we are, which in 2008, Liverpool ONE has acted as a catalyst for the began with finding us the perfect position regeneration of Liverpool and has helped to transform the at the entrance to Peter’s Lane with its city’s economic prospects. premium offer.” Angus Thirlwell CEO and Co-founder Hotel Chocolat 72%

Improving customer/ retailer experience Over 95% of our customers say they are likely to return and recommend us to friends. 93% of our retailers would recommend Liverpool ONE to peers.

Improving sustainability In 2015, we installed 200,000kWh of solar panels to help mitigate the risk of energy price volatility for our occupiers and reduce our environmental impact.

Improving rental income Total rental income from Liverpool ONE increased by 2.6% in 2015. New lettings include Busaba Eathai, Hugo Boss, The White Company, Victoria’s Secret and Wahaca. Improving community engagement The Liverpool ONE Foundation donated

5,000 Funds £150,000 to charities across Merseyside in 2015 and we have committed to permanent jobs created supporting the Foundation, alongside by Liverpool ONE. the Westminster Foundation, for a further five years, to continue its positive impact on the city. Grosvenor Group Limited Grosvenor Group Limited 52 Annual Review 2015 Annual Review 2015 53

Grosvenor Fund Management (continued)

Grosvenor Fund Management “We are delighted to work together with Grosvenor on the unique Rue de la République portfolio. Business objective Our approach is to work with the We aim to create value for our partners, Shareholders and people by developing town hall and other stakeholders compelling investment strategies that are expertly implemented. Building on our to make it the location of choice for recognised skills and track record, we focus on urban property, often mixed-use retailers outside Paris.” Acquiring urban retail assets and with a retail focus, in select European cities and locations whose vibrancy will We acquired the freehold of Pascal Duhamel 42-60 Kensington High Street endure. We select high-quality assets and manage them vigorously. We treat our Head of European in February 2015; it was the first tenants, as well as our investors, as partners, building close and mutually beneficial Real Estate acquisition made on behalf of our relationships that draw on Grosvenor’s long experience in real estate. We work best Investments Urban Retail V Partnership. Abu Dhabi with clients who, like Grosvenor, have a long-term view of investment while being Investment alert to the potential of short-term opportunities to enhance returns. Authority

Sustainable assets One of the properties we acquired on Key achievements Via Torino in Milan in 2015 benefits from a geothermal energy production a aCompleted the modernisation and refinancing of the Grosvenor Liverpool Fund, system which helps tenants reduce which owns the Liverpool ONE shopping centre. energy consumption and carbon emissions by 20%. aaAcquired three assets for our Urban Retail V Partnership, including two on Via Torino in Milan. James Raynor aaOutperformed INREV benchmarks. Chief Executive Grosvenor Fund Management aaCrystallised, for the Grosvenor London Office Fund, significant profit through the contracted disposal of Almack House, a prime London office building. A consistent strategy and a focus We made three acquisitions for our Urban Key to the success of our retail investments During 2015, we launched initiatives in our aaReceived GRESB ‘Green Star’ rating for the third year in a row. on continuous improvement Retail V Partnership, our fifth high street is the ability to attract and retain current portfolio such as providing electric retail vehicle, which is a joint venture between customers by making our assets attractive car charging facilities, installing a sedum In 2015, we started to reap the the Grosvenor Group and a North American places to visit. In the rapidly evolving roof and grey roofing felt in two Swedish Assets under Fee Total contribution Portfolio financial benefits of our strategic investor, that has a total investment capacity world of physical and internet retailing, shopping centres, and sun protection management income to Grosvenor value uplift focus on retail-led properties in select of approximately €400m. The Partnership requirements are changing fast and our measures to minimise solar heat gain. European cities. This focus has delivered invests in assets in vibrant city centre commitment to continuous improvement Going forward, there is planned spend of strong performance for our investors £3.5bn £15.1m £23.5m £189m locations and, in February 2015, we acquired addresses an increasingly wide range €2.9m on sustainability initiatives in 2016. (2014: £3.0bn) (2014: £15.3m) (2014: £25.7m) (2014: £229m) and, as predicted, an improving the freehold of 42-60 Kensington High of issues. performance for our Shareholders. Street, London, comprising four prime retail Our role in the community This narrow geographical focus will remain Over the course of 2015, we improved the Portfolio analysis units that are currently let to Uniqlo, Zara, fundamental to our strategy. We believe quality and quantity of our leisure offerings. High street retailing brings with it different Topshop and Miss Sixty. The vehicle also challenges, but has an essential role 3 1 1 3 1 that, as we move through the cycle, The open-air mall at Bonneveine, France, 3 acquired two high street retail assets in Milan, this intimate knowledge of our primary was refurbished to enhance the dining to play in local communities. In Lyon, 2 both on Via Torino, one of Milan’s premier where we manage half of the retail units Sector Type of 2 Top 5 cities cities will enable us to continue to both areas and entrances. We also converted Investment shopping streets. 2 create and find value. This focus has also the lighting to LED fittings. At Haninge along the main retail thoroughfare – the enhanced our experience and deepened We also made a number of divestments Centrum, near Stockholm, we finalised a 1.1km Rue de la République – we have the expertise which we are able to share where we saw opportunities to crystallise project to convert 3,960m² of vacant and improved the customer experience by not only introducing new retailers such Sector 1 Retail £2,636.9m 75.1% 1 Liverpool across our portfolio. We are increasingly profits on our investments. Total disposals functionally obsolete offices into a 4,355m² as Kiko and Lipault, but also lighting the 2 Office £707.2m 20.2% 2 London recognised as urban retail specialists, were £0.1bn (2014: £0.5bn). In January leisure and food scheme, offering roller- which has enabled us to forge and 2016, our Grosvenor London Office Fund skating, ten-pin bowling, indoor sky-diving, street façades, improving aesthetics and 3 Other £164.1m 4.7% 3 Stockholm strengthen relationships with world-leading completed the sale of Almack House, a bars and restaurants and a wide range of enhancing security as well as working with Type of 1 Funds £2,466.4m 70.3% 4 Lyon the city authorities to renovate the public Investment institutional investors and retailers. building held since 1999. We substantially other activities. Similarly, at Skärholmen 2 Separate accounts £608.8m 17.4% 5 Shanghai refurbished the asset at the start of this Centrum, we launched a 2,340m² project realm and creating a brand identity for In 2015, annual fee revenue for the street. We aim to create a unique and 3 Clubs £433.0m 12.3% cycle and then sold at an opportune to reconfigure the food and grocery area, management services remained broadly moment in order to boost investor returns. improving visibility and customer flow vibrant destination. consistent at £15.1m and our assets under through the heart of the centre. This was management at the end of 2015 grew by In a similar vein, our work with local Number of assets by region Improving assets and done in conjunction with a 9,340m² 16.7% to £3.5bn. These results were in line communities is an essential element of 2014 2015 customer experience restructure of the fashion area, designed to with our forecast. enhancing customer experience and Asia 1 1 The performance of the assets under our welcome international anchor tenants and managing assets in a socially responsible Europe 65 50 Transaction activity management depends upon the extent to include a casual dining cluster. way. Over the course of 2015, we organised or supported over 250 community events USA 12 8 We continued to make targeted acquisitions which they meet the needs of our occupiers. A number of sustainable development in our assets, ranging from sponsored for our investment vehicles where we found In office buildings, we focus on the quality, goals are woven into our asset runs and swimming events at Skärholmen attractive opportunities. Total acquisitions efficiency and flexibility of the space and, improvement works and acquisitions. Centrum to first aid demonstrations at Like-for-like energy Like-for-like water reached £0.4bn (2014: £0.1bn), with key increasingly, its sustainability. In 2015, in We retained our GRESB Green Star rating 3 Vasby Centrum and ‘Adopt a pet’ day consumption MWh consumption m retail investments in Sweden, the UK, our Grosvenor London Office Fund, we and sustainability remains an integral at Parkside Plaza in Shanghai. We also France and Italy. The largest of these was completed the renovation of the entrance part of our approach to ownership

commissioned 15 art projects, including a Funds the acquisition of Skärholmen Centrum hall and common areas at Fleet Place and management. 50,390 -5% 296,234 -2% House (which was instrumental in delivering 5m-high lion sculpture in Lyon. (2014: 52,774) (2014: 302,699) in Stockholm, underlining our position as a 2 leading retail manager in the region. a new 2,870m letting) and commenced similar works at 10 Grosvenor Street. Grosvenor Group Limited Grosvenor Group Limited 54 Annual Review 2015 Annual Review 2015 55

Grosvenor Fund Management (continued)

In Europe we manage: “We aspire constantly to improve our performance and help our 54% 24% 21% 1% people achieve their maximum UK France Sweden Italy potential. We offer stretching £3bn opportunities, tailored career of property paths and international exposure where possible for those with high potential, strong performance and 50 1 ,666 who want to progress.” A first for China properties tenancies Ruth Barton In October, the Merlin Entertainments Human Resources and Grosvenor teams were joined by Business Partner local children at Parkside Plaza in 2 Grosvenor Fund Shanghai for a ceremonial ‘ground- £150m 729,000m Management breaking’ for China’s first Legoland of rental income of floorspace Discovery Centre, which is due to open by April 2016. Engaging the community At Skärholmen Centrum we are continuously organising events and activities that promote community life and support local associations, such as the popular event that sees over 2,000 children participate in a race around the shopping centre.

Improving assets for Finance Our alignment with these investors, driven This included support to achieve Grosvenor Fund Management – all stakeholders In 2015, we put in place or refinanced “Our relationship with Grosvenor by trust, mutually agreed goals and our professional qualifications and participation goes back over 300 years. We are position as a fellow investor and not just in the bespoke Grosvenor Group leadership Board of Directors The ultimate goal of all these measures is over £800m of debt. Working with our delighted to have taken a lead role a manager, makes for a strong foundation development programme at IMD business as at 17 March 2016 to improve rents, values and returns for our relationship banks, this debt was secured in the refinancing of the Grosvenor upon which we hope long and strong school. Our people also participated in investors, while creating and maintaining on very attractive terms that will improve Liverpool Fund in December 2015 relationships will be built. training programmes run by leading bodies long-term, sustainable relationships our investors’ returns. and to continue supporting the such as INREV and GRESB – organisations with occupiers and local stakeholders Of course, our primary role is to achieve The most significant was the refinancing of Liverpool ONE asset, for which that we seek to collaborate with on a in the locations in which we operate. an investment performance that meets the Grosvenor Liverpool Fund which owns we have provided financing since regular basis. We endeavour to ensure that these two or exceeds our targets. The performance Liverpool ONE. The seven-year £410m the outset.” goals go hand in hand. facility is with a club of banks comprising of our investment vehicles in 2015 was A forward look Paul Coates again strong, with an overall return of Our total rental income from the Liverpool BNP Paribas, Crédit Agricole CIB, The Royal Managing Director 15.6% (2014: 15.0%), also outperforming We continue to seek to extract as much ONE shopping centre increased by 2.6% Bank of Scotland plc, Société Générale and Real Estate the INREV All Funds Index over the last value as possible from our residual Asian in the year, with prime retail rental value Sumitomo Mitsui Banking Corporation. The Royal Bank of Scotland plc three years. Our absolute return fund, and American investments. Going forward, increasing by 4.5% as a result of proactive Terms represent a significant improvement The Global Real Estate Absolute Return all new activity will be concentrated on a tenant replacement and identification of on the previous 2010 facility, reducing the Fund, outperformed Global REITS and handful of the best European cities where new income streams. New lettings include interest costs for our investors in the Fund. hedge funds with a net return of over 4% we either are, or intend to be, city experts. Busaba Eathai, Hugo Boss, Living Ventures, We refinanced the RMB850m facility at (2014: 16%) with only slightly more than Roxy Ballroom, The White Company, True “We work closely with Grosvenor Each of our markets is quite different and Parkside Plaza in China, with ICBC, at an across Europe and, in 2015, we half of market volatility. they are all at different stages of their Reds BBQ, Turtle Bay, Ugg, Victoria’s Secret extremely competitive interest rate and and Wahaca. were very pleased to be part of growth and capital cycles. We remain quite with a structure that supports our business the club of banks which refinanced Our people confident that consumer-led growth will At Croix Dampierre in France, we plan. We also put in place new financing at Liverpool ONE and also to provide Our focus on European retail is reflected in continue to support solid income streams highly competitive rates for Skärholmen are creating considerable value by new debt finance to the High Street our people strategy. Our commitment to across our portfolio. Clearly, we are getting Mark Preston FRICS Bruce Ambler reconfiguring previously obsolete space and Centrum and three new assets in our Kensington asset in the Urban Retail the Nordics region has led to the expansion closer to the top of the capital cycle which Chairman and Executive Director are converting a 1,145m² former garage unit Urban Retail V Partnership. Non-Executive Regional Director, V Partnership.” of our Stockholm office, which opened in means that market-driven returns will Director Americas into three retail units. This achieves multiple Overall, the average loan-to-value across Jerome Gatipon-Bachette 2012, to eight people who work closely with be less easy to come by. We believe that Group Chief Executive goals: improving rent, increasing value, Matthew Norris our portfolio at year end in 2015 was Co-Global Head the rest of our team across Europe. continuous investment in our properties Nicholas Scarles Executive Director enhancing the retail offer of the scheme, Real Estate Structured Finance and our desire to improve them, for all FCA ATTORNEY AT LAW Real Estate Securities 39.6%, consistent with our prudent Giles Wintle became Chief Investment Non-Executive and removing an unsightly and potentially Société Générale stakeholders, will support both the future Portfolio Director approach to financial planning. Officer in October, taking responsibility for Director polluting unit at the entrance to the centre. tenant demand for space and also the Group Finance Director Giles Wintle the execution of our real estate strategies. The project is expected to show a 105% returns we expect to generate. Executive Director Investors and James Raynor Chief Investment profit on cost and a 65% uplift in rent. To support the achievement of our Executive Director investment performance We are confident that the strategy we have Officer ambitious business goals, we offer Chief Executive At Parkside Plaza in Shanghai, we have We have built strong relationships with developed, and are implementing, is the development opportunities for all our Robert Davis increased occupancy, replaced weaker major long-term institutional investors right one to meet the challenges which people and focus on career progression Executive Director tenants and achieved higher rents based on our approach and focus on lie ahead. Chief Financial Officer following the agreement to open China’s plans for those with high potential. applying our locally based management James Raynor In 2015, as well as informal mentoring and Funds first Legoland Discovery Centre in early skills to best drive performance. Chief Executive 2016. All of this has helped increase net on-the-job development, three-quarters Grosvenor Fund Management operating income by 33% compared of our people in Europe undertook 17 March 2016 with 2014. formal training. Grosvenor Group Limited 56 Annual Review 2015 Frequently asked questions

Rue de la République, Lyon, France Gagosian Gallery, Mayfair, London In 2015, Grosvenor Fund Management We welcomed the Gagosian Gallery to the oversaw the branding of the 1.1km- London estate in October 2015. It draws on long Rue de la République for its client. the area’s art and design heritage and adds The brand, which uses a lion in its logo, to a string of recent additions including the was successfully launched in May at the Phillips gallery and sales room, designer World Rose Festival on the street itself and Hussein Chalayan’s first store and Sir aims to give the 66,000m2 core portfolio a Anthony Gormley’s habitable sculpture stronger identity. ‘ROOM’ at the Beaumont Hotel. What is the difference between Who owns Grosvenor Grosvenor is not a listed Image on back cover Image on front cover the ‘Grosvenor Estate’, ‘Grosvenor (and how does the Duke company and is not required © Michael Vertat © Thomas Alexander Photography Group Limited’ and ‘Grosvenor’s of Westminster fit in)? to produce a reporting suite London estate’? Grosvenor is part of the Grosvenor of this sort, so why do it? ‘The Grosvenor Estate’ is the term used Estate, which encompass all the assets We have been sharing financial and to represent all the interests of the and business interests of the Grosvenor other information with our partners for Grosvenor family headed by the 6th Duke family, headed by the Duke of Westminster. many decades, in line with our belief in of Westminster. There are three principal The assets are held by a number of UK a straightforward, transparent approach elements to these activities: Grosvenor Trusts on behalf of the family and the role to business relationships. Group Limited, Wheatsheaf Investments of the Trustees is to represent the interests Limited and the Family Investment Office. of both the current and future generations We believe that the right question is not Further information can be found at: of the family. “Why disclose?” but “Why not disclose?” www.grosvenorestate.com. So, in April 2000, we introduced our There are six Trustees including the Duke, first formal Annual Report and Accounts ‘Grosvenor Group Limited’, the subject of who is Chairman. The other five Trustees and it has continued to evolve ever since. this Annual Review, is the urban property are not members of the family and have no group, which is the largest business in the personal interest in the assets of the Trusts; In April 2011, we published our first portfolio of The Grosvenor Estate. the Executive Trustee leads the Grosvenor Environment Review and now we provide Estate, in effect as its Chief Executive; the detailed environmental data, along with ‘Grosvenor’s London estate’ is the land in remaining four Trustees have been chosen information on our socio-economic impact, Mayfair and Belgravia managed, and in for their experience and knowledge. in a Non-financial Data Report available part owned, by Grosvenor Group Limited. Mark Preston will become a Trustee on online at: 1 January 2017 when he succeeds Jeremy www.grosvenor.com/nonfinancialdata2015 Newsum as Executive Trustee. Monitoring our performance helps us The Trusts own all of the shares focus on what is material to our business in Grosvenor, hence the Trustees and make improvements where necessary. are sometimes referred to as ‘the Shareholders’.

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

The financial information set out on page 9 does not constitute the Group’s statutory financial statements for the year ended 31 December 2015 and 2014, but is derived from those accounts. Statutory financial statements for 2014 and 2015 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. List of offices Glossary

Area Future development commitment London estate Separate account All figures given are for the gross area. The expected costs to complete the Grosvenor’s portfolio of properties A private real estate portfolio managed development programme to which in the Mayfair and Belgravia areas of by Grosvenor Fund Management on Assets under management we are committed. London’s West End. behalf of a third party. 14 The total investment in property 2 assets managed by the Group, Gearing Market value Shareholders’ funds 4 including the future costs of Total short– and long–term borrowings, Market value is the amount for The balance sheet value of the 5 committed developments. including bank overdrafts, less cash which an interest in an asset could be Shareholders’ interest in the Group. 10 16 1 and cash deposits, as a percentage exchanged between knowledgeable, 7 CGI of Shareholders’ funds. willing parties in an arm’s length Structured development finance 6 9 15 Computer-generated image. transaction. For investment properties, Lending to property developers 11 GRESB it is determined by independent that is subordinated to senior lending in 13 12 17 8 Co–investment A real estate industry-driven external valuers. return for a profit share in the Where Grosvenor invests equity organisation committed to assessing completed development. in joint venture or fund vehicles 3 the Environmental, Social, Governance MWh (Mega Watt hours) alongside third parties. (ESG) performance of real assets Equal to 1,000,000 watts of electricity Total return globally, including real estate portfolios used continuously for one hour. Total return on property assets is Condominium and infrastructure assets. revenue profit before financial expenses A form of property where a specified Occupancy rate but after major refurbishments, plus part of real estate (usually a multi– Grosvenor–managed The average occupancy by floor area for the net gain on revaluation and sale family property) is individually A property or other investment that the relevant year. of investment properties and other owned while use of and access to is managed by the Group. investments and including fair value common facilities are controlled Operating Companies adjustments and exchange movements by an association of owners. Group Grosvenor’s regional investment and recognised in reserves, as a percentage Grosvenor Group Limited and its development businesses and Grosvenor of average property assets (before Conservation area subsidiary undertakings. Fund Management. current year revaluations) and An area considered worthy of cash. Joint ventures and associates preservation or enhancement Holding company Property assets are treated proportionally for the because of its special architectural Grosvenor Group Limited. Investments in property and purposes of this calculation. or historic interest. property–related instruments: IFRS 1 Calgary 5 London 9 Milan 14 Stockholm comprises investment properties, Trading property Currency International Financial Reporting development properties, trading Property held as a current asset in the Grosvenor Americas 70 Grosvenor Street Corso Garibaldi 86 Smålandsgatan 10, 4tr. Financial information is presented Standard(s). properties, mezzanine loans and equity balance sheet that is being developed Suncor Tower London 20121 Milano 111 46 Stockholm in Sterling, with the exception of the investments in property companies. with a view to subsequent resale. Suite 5050 W1K 3JP Italy Sweden Operating Company-specific sections Impairment A reduction in the recoverable 150 6th Avenue England Tel: +39 0 2 43 912 517 Tel: +46 8 4073170 on pages 28-55, where it is presented in Property yield Value–add the principal currency of the respective amount of a fixed asset or goodwill The annual return likely to be received Above–market increase in value SW Calgary, Alberta Tel: +44 (0) 20 7408 0988 Operating Company. below its carrying amount. from a property investment, calculated as a result of active management T2P 3Y7 by a year’s rental income as a (i.e. change of use or refurbishment). Canada 10 Paris 15 Tokyo Development exposure Indirect investment percentage of asset value. Grosvenor’s share of development Investments managed by 6 Luxembourg 5th Floor 24th Floor Weighted average cost of capital Tel: +1 403 699 9822 properties, including its share of the Grosvenor Fund Management or Proportional The weighted average cost of debt 46a, Avenue John F Kennedy 69 Boulevard Haussmann ARK Mori Building future development commitment, as a third‑party managers. The total of the Group’s wholly-owned and the notional cost of equity. 1855 Luxembourg 75008 Paris 1–12–32 Akasaka percentage of property assets including and its share of jointly-owned property Used as a benchmark for total 2 Edinburgh Luxembourg France Minato–Ku the future development commitment. Investment property assets or net debt as accounted for on return performance. A property that is held for the purposes 33 Castle Street Tel: +352 26 00 52 13 Tel: +33 (0) 1 44 51 75 00 Tokyo 107–6024 an IFRS basis. Development pipeline of earning rental income or for capital Westminster Foundation Edinburgh Japan The development programme, including appreciation or both. Resilience (in the context of gearing) The Westminster Foundation directs EH2 3DN Tel: +81 (0) 3 5575 5300 proposed projects that are not yet The extent to which market values of the charitable giving of the Grosvenor Scotland 7 Lyon 11 Philadelphia committed but are likely to proceed. IPD property assets, on a proportional family, headed by the Duke of 73 rue de la République 201 King of Prussia Road Investment Property Databank. A series basis, can fall before Group financial Westminster, and the Grosvenor Estate. Tel: +44 (0) 131 225 5775 Development property of indexes and benchmarks covering covenants are breached. 69002 Lyon Suite 650 16 Vancouver A property that is being developed for both asset and fund-level returns. France Radnor PA 19087 2000 The Grosvenor Building future use as an investment property. Revenue profit Joint venture 3 Tel: +33 (0) 4 72 40 44 67 USA 1040 West Georgia Street Profit before tax, excluding profits Hong Kong An entity in which the Group invests 3505 Jardine House Tel: +1 215 575 3770 Vancouver BC Economic property interest on the sale of investment properties, Grosvenor’s equity interest in and which it controls jointly with the gains or losses on other non–current 1 Connaught Place V6E 4HI properties (or debt) after deducting the other investors. investments, revaluation movements, Central 8 Madrid Canada share attributable to minority investors. major refurbishment costs and Hong Kong Plaza de Colon 2 12 San Francisco Tel: +1 604 683 1141 LEED derivative fair value adjustments. Financial capacity Leadership in Energy and Tel: +852 2956 1989 Torre 2 Planta 7 One California Street Wholly-owned unrestricted cash Environmental Design. 28046 Madrid Suite 2500 and undrawn committed facilities. Spain San Francisco CA 94111 17 Washington, DC Like‑for‑like A portfolio of assets that has been 4 Liverpool Tel: +34 (0) 91 292 08 90 USA 1701 Pennsylvania Avenue, NW in our management control for two Management Suite Tel: +1 415 434 0175 Suite 1050 years or more, also known as the 5 Wall Street Washington DC 20006 ‘static’ portfolio. Liverpool USA L1 8JQ 13 Shanghai Tel: +1 202 293 1235 England Unit 602-603 Platinum Tel: +44 (0) 151 232 3210 233 Taicang Road Shanghai 200020 China Tel: +86 21 2322 3666 www.grosvenor.com