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Grosvenor profit down 74% as group braces for market 'correction'

Grosvenor Group is set to target mid-market developments after market uncertainty saw pre-tax profit fall 74 per cent to £137m, down from £526m in 2015.

The Duke of Westminster’s property group has reported that stamp duty rises and uncertainty in the property market following the Brexit vote had affected the firm, which has a £6bn development pipeline.

Total return on the group’s estate, which has an estimated £11.8bn of assets under management, was 8 per cent for the year to 31 December 2016, down from 9 per cent in 2015 but helped by the fall in the value of sterling since June last year.

According to Grosvenor, without the fall in the value of the pound, returns would have plummeted to 3.5 per cent. The group attributed the fall in profit down to “market revaluations” of it’s operations in the UK and Ireland.

Grosvenor Group chief executive Mark Preston said: “Investor and occupier unease before and after the UK’s EU referendum, and the imposition of higher stamp duty on purchases, greatly contributed to a slowdown in the London residential market which we anticipated and planned for.

“Looking ahead, we expect our returns in 2017 to be significantly weaker due to limited room for market value appreciation and a reduction in revenue profit following some well-timed disposals.

“The proceeds of these sales will be re-invested into our £6bn pipeline of projects to be delivered in several years’ time, resulting in a recovery in returns.

“We will continue with our long-term approach of investing in vibrant commercial and residential projects with the aim of delivering both good returns and making a lasting positive impact on their communities.”

The group expects a potential recession in a number of unspecified economies, described as a ‘cyclical correction’ in a statement in Grosvenor’s annual report.

Group executive director Peter Vernon said: “Over the foreseeable future, we may be operating in an unusually uncertain geopolitical environment, characterised by slower growth in the developed economies, a weight of capital looking for investment and the likelihood of a cyclical correction.

”Within this context, achieving strong returns will be challenging, and, as such, maximising our competitive advantage as a group is now as important as ever.”

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