Mayfair landlord Grosvenor warns of 'complacency' over property boom

Grosvenor - the Mayfair landlord owned by the Duke of Westminster - has warned investors of the dangers of "complacency" about the global property investment boom as it reported its strongest results since the financial crisis.

The privately owned group, which controls hundreds of acres in London's West End plus a substantial international property portfolio, reported record pre-tax profits of £681.8m for 2014, a 35 per cent increase on the previous year.

The majority of Grosvenor's profits came from an increase in the value of its property portfolio to £6bn, up from £5.5bn a year ago. Excluding this impact, revenue profits were £80.1m, reflecting the group's move into international property development including residential schemes in the US and Asia, as well as letting activity in its traditional Bond Street heartlands.

Total property returns - reflecting capital values and property income less expenditure - reached a six-year high of 13.1 per cent, though the group cautioned it expected this to modify to 8 per cent "over the next few years".

Property prices are rising worldwide as investors searching for higher-yielding assets pour cash into real estate, but Graham Parry, Grosvenor's research director, cited record-low yields in several of the world's biggest property markets as a cause for "concerns about overheating".

"The main risk is complacency," Mr Parry warned. "The current mixed fortunes in the global economy are reinforcing the benefits to investors of holding a diversified real estate portfolio. With interest rates expected to remain low for at least another year, there is a risk that investors begin to underprice the prospect of an eventual normalisation in growth and interest rates over the medium term."

The company has "dusted down" contingency plans it made during the last property crash in 2007 and is making "preparations" because it believes "the prospect of a [market] correction is increasing," finance director Nicholas Scarles said.

Grosvenor has built up its overseas operations in recent years: 40 per cent of the company's assets by value are now outside the UK.

Total assets under management across the group are now £11.4bn including properties managed by Grosvenor Fund Management. The group said its international development pipeline stood at £5.5bn at the end of 2014.

Grosvenor group shares are all owned by family trusts. According to last weekend's Sunday Times Rich List, the Duke of Westminster is the ninth richest person in the UK with a family fortune of £8.6bn.

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