CPN Reprint Marketing Guide - (Page 3) London Calling Old-Line Grosvenor Eyes New-World Growth By Paul Rosta EDITORIAL REPRINTS are customized printed ■a ext to The Grosvenor Group Ltd., just about any real estate firm active in the United States Third-Party Strategy The in Philadelphia voted to part m ment is a mere newcomer. In fact, by the time a band of upstarts Grosvenor Group Ltd. plans to expand its development and investment work, but it is also claiming a share of the U.S. ways with King George III in 1776, the firm’s ancestor estate fund-management market. Through Grosvenor Fund had already been handling the real F Grosvenor family business for a century. Management, which operates independently of the investment m ment N The Business of Real Estate July 2008 w w w. c p n o n l i n e . c o m London Calling Old-Line Grosvenor Eyes New-World Growth joint-vent joint-venture acquisition, with Dermot Co., of a Brooklyn de high-rise development site; ■ a purchase of a 142-unit Teaneck, N.J., seniors housing facility slated for conversion from condominium to rental units by and development business, the firm manages $6.1 billion worth w joint-venture partner American Heritage Communities; Despite its distinguished lineage, privately held Grosvenor of assets in the United Kingdom, continental Europe, Asia and ■ the acquisition of the 1.5 million-square-foot Research Triacquisit Group harbors no snobbery toward the former colonies. On the the United States. Center in Du Durham, N.C., for an open-ended core fund; and contrary, the $26 billion investment, development and fund-manIn 2006, the company expanded its U.S. real estate investv vest■ the formation of a joint venture with Vision Equities L.L.C. to formatio agement company has been an active, if often low-profile, investor ment arm by acquiring the United States-based Legg Mason Inc. spend $5 m million to upgrade a pair of Parsippany, N.J., office d developer the United States o o e than 50 ye s. and deve ope in t e U ted St tes for more t years. Soon rebranded Grosvenor Investment Management, the firm buildings. Its low local profile appears destined to rise considerably durmanaged almost $1.6 billion worth of assets at the close of 2007. 2 Grosvenor Investment thrives on messy, complicated ing the next few years. Over the long haul, Grosvenor intends to Douglas Callantine, who became president of the unit in 1987, 1987, deals, say its clients and partners. The company manages reduce its holdings in Britain and Ireland, which form its single continues to head the business. $375 million worth of individual assets and portfolios for biggest market, and significantly beef up its presence in the One of the business’ big 2008 initiatives will be launching a $2 Pennsylvania State Employees’ Retirement System, one of United States. While the current dip in the U.S. commercial real billion fund that will acquire and develop value-add multi-family amily the first pension funds to invest in real estate, a 15-year relapens estate market has delivered a blow to some U.S. players, assets in the New York City metropolitan area. Scheduled to d tionship that Grosvenor inherited from Legg Mason. “They’re Grosvenor views the country as a cornerstone of its future. close this fall, the fund has a $2 billion target size. Because a ause just a great old shop, and they’re not afraid to roll their “Our North American activities make an important contribuGrosvenor’s investment arm plans to use tax-exempt municipal c cipal sleeves up and do a lot of work,” said David Kalman, director an irector tion to Grosvenor’s international business,” explained Mark bonds for most of the fund’s financing, the capital markets rkets of real estate investments for the pension fund, who has estat ho Preston, who became CEO last month, succeeding longtime crunch should not create an obstacle, Callantine explained. Like been familiar with Legg Mason since his days as a lender in nder leader Jeremy Newsum (see “Homegrown Leaders” on page 4). U.S. assets from the largest of those markets: properties but also in office propmany other fund managers and investors, Grosvenor Investment m ment the 1980s. Gr d Grosvenor Investment and the pension fund have Homegrown Leaders Long-term, he said, the U.S. states and Canadian provinces that Washington, D.C., and San Francisco. erties, which make up 26 percent has sat on the bench so far this year, waiting for the market to e et partnered on multiple seniors housing, workforce-housing ousing While The Grosvenor Group Ltd. expands in of the portfolio. By comparison, the company has targeted have a bright economic and demographAt least in Grosvenor’s case, familiarity turn around. and shopping center developments. Grosvenor Investment stment ic future. Preston also cited the consistently solid returns that with markets breeds confidence. The firm the United States, the 300-year-old company is Grosvenor’s U.K. residential The company’s 2007 highlights include an array of markets rkets excels at matching investment partners with developments, mat ments, North America’s vital urban markets generated for Grosvenor durplaces a premium on deep market knowledge progressing through an orderly leadership transi- holdings total 28.5 percent, and and property types, as well as clients, such as institutional o onal according to Kalman. “They are just very, very creative inand strong local contacts. “The tive tion, both at its headquarters in London retail accounts for 45.5 percent. ing recent years. investors, private funds and high-net-worth individuals: sourcing deals the hardest part of the business.” dea and stateside. Coincidentally, several When that will translate into more revenue for the company more you do, the easier it gets,” leaders have decided, after decades of Jewels in the Crown remains to be seen. Like many investors and developers, Americ in January after serving as chief development officer Americas Bibby explained. Thus, the comservice, to retire or move to new posiGrosvenor has spent much of the past 12 months waiting out the since 2 2006. And North America should eventually account for a pany focuses its development Grosvenor Americas is also Company executives believe this combination of relatively low acquiring fewe core properties and focusing more on developy fewer tions within the firm. The new leaders shifting away from investment, capital markets upheaval and the economic slowdown. “We’ve much b bigger piece of Grosvenor Group’s holdings than the 16.5 and investment efforts in areas e ellent leverage and robust cash will allow the firm to find some excellent ment projects a value-add deals. and intend not to make wholesale changes which now forms 80 percent of been operating with a great deal of caution,” noted chief invest- percent slice it encompasses today. where it operates established n nt G old values. Market conditions may also aid another element of Generally, Grosvenor Americas assumes a minimum hold term but instead to build on the successful its activity, as development ment officer Andrew Galbraith. In 2008, the company has bid on Tho Though the parent company has the final say in how much capoffices and employs local staff, Grosvenor’s strategy: its preference for buying assets, often B and of five years for acquisition and development projects, which , strategies of their predecessors. a few assets but purchased no properties. ital flows to each region, Grosvenor Abelmann reported. “Because offers greater potential for strong e erated mpany’s C quality, that offer considerable upside. The approach generated Abelmann said reduces the level of speculation in the company’s Global Reach Global Reach o e “We think succession planning is returns. Its development projects If asset prices remain stable and other Americas, like all the firm’s affiliates, we are close to the property and a at s a 14.4 return fourth year in (distribution of Grosvenor Group Ltd investment & percentput that in 2007, theplay. “Decisionsa row that the underwriting. But the affiliate tends to hold properties much develop a deep understandLtd. very important and have consequently tend to be of moderate size but economic conditions improve, the firm must capital into can a ached try firm’s returns have hit double digits. Profits, meanwhile, reached longer. It make 10-year cash-flow projections, the industry stanmakes planned our changes carefully over a distinctive. For example, in the might make some acquisitions before the development assets by region, as of Dec. 31, 2007) need to be taken locally,” Newsum said. ing of its politics, demographics $856.9 million last year, up from $673 dard, but it has held many for 20 years 5.0% 3.0% long time,” said Jeremy Newsum, who recent case of San Francisco’s year is out, he reported. “There’s lip service paid to this idea by and economics, we can make Andrew Bibby million in 2006. or longer. Still, it also sells pr operties roperties stepped down last month after 19 years 185 Post St., the affiliate renoToday’s market conditions notwithmost people, but we genuinely practice it.” more informed property deciR a eg s Retail Reigns Retail Reigns in good capital markets. “As an owner n as CEO but remains on the board as a non-exec- vated and upgraded a retail prop11.0% standing, however, the United States will Like other companies that have (distribution of Grosvenor Group Ltd. investm & used sions,” he observed. r rosvenor investment Addition by Subtraction with a strong capital structure, we do That less-is-more philosophy has also led utive director. “We think a great deal about future erty built in 1907 on Union , command sizable attention from low leverage in recent years, Grosvenor development assets by sector, as of Dec. 31, 2007) e ets 51.0% 51.0% % Grosvenor Group’s plans for the tend to own assets longer than many of company to increase staff leaders and how best to develop them. Square into a 25,833-square-foot the Grosvenor. The firm will probably plac http://www.cpnonline.com http://www.nxtbook.com/ygsreprints/ygs/ygs_nxtprintbook/index.php
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