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Grosvenor Square
The Duke of Westminster owns 300 acres of prime central London land in Mayfair and Belgravia including Grosvenor Square. Photograph: Jonathan Brady/PA
The Duke of Westminster owns 300 acres of prime central London land in Mayfair and Belgravia including Grosvenor Square. Photograph: Jonathan Brady/PA

Duke of Westminster's £12bn property firm hit by London slump

This article is more than 6 years old

Grosvenor Group reports worst UK performance since 2008 as Brexit and stamp duty rise cause slowdown in capital

The 26-year-old Duke of Westminster, who is believed to be the world’s richest person under 30 with a £9bn fortune, has been hit by a steep drop in returns on his family’s British property empire, which includes many of the most famous addresses in London’s Mayfair and Belgravia.

The Grosvenor Group, which Hugh Grosvenor inherited last year following the death of his father Gerald Grosvenor, reported on Tuesday that returns on its British & Irish property portfolio had collapsed to just 0.3% last year compared with 10.7% in 2015. It is the company’s worst UK performance since the 2008 financial crisis and follows six successive years of returns above 10%.

Mark Preston, chief executive of Grosvenor Group, said Brexit and the increase in stamp duty on luxury properties had “greatly contributed to a slowdown in the London residential market” and warned that he expected returns this year to be “significantly weaker”.

The total assets under management by Grosvenor Group were worth £12.7bn at the end of 2016, compared with £13.1bn in 2015. Of that, the company itself owned £6.6bn worth of property.

Overall the company made pre-tax profits of £136.8m, according to its annual report, significantly less than the £527m it made in 2015. Preston said profits would have been even lower if it were not for the better performance of the company’s foreign properties, which were also flattered by the collapse in value of the pound.

“With just under half of our assets outside the UK, our longstanding strategy of international diversification has yet again helped to deliver solid returns of 8%,” Preston said. He added that without the depreciation of sterling total returns would have been 3.5%.

The Duke of Westminster in 2013, when he was aged 22. Photograph: John Stillwell/PA

Grosvenor Group sold off £1bn of assets in 2016, including more than £500m of properties in the UK. Preston said the sale of expensive London homes was “well-timed” as the company expects the top end of the market to decline further. “At the top end of the market, we saw (and made sales ahead of) more evidence of falling prices, caused in part by higher stamp duty and a mood of general uncertainty in the run-up to the UK’s EU referendum in June and thereafter,” Preston said.

The Grosvenor property empire stretches back to 1677 when the family converted swamp and farmland to the west of the City of London into a series of stucco-fronted squares and streets that was named Mayfair after the annual May Day fair. A second big development by the family 100 years later became Belgravia, named after the village of Belgrave, near the family’s country seat in Cheshire.

The family has since diversified its holdings to other countries and now owns property in 61 cities across the world. The group is also moving into more affordable housing projects in the UK, including a 1,500-home development in Bermondsey, south London, a 26-hectare garden suburb north of Oxford, and a 1,200-home development south of Cambridge.

Lesley Knox, the chairman of Grosvenor Group, said Gerald Grosvenor had been taken at “too young an age” when he died in August aged 64 and it was a “terrible blow” for the company.

Hugh Grosvenor inherited the family fortune despite being the third of four siblings as he is the only son of the late duke and his wife, Natalia. He had kept largely out of the limelight, until he came to the attention of the world’s media when he became the youngest and wealthiest of Prince George’s godparents.

The new duke, who went to a state primary school and studied countryside management at Newcastle University, was two years younger than his father was when he took on the fortune aged 27.

His 21st birthday party at Eaton Hall, the ancestral seat in Cheshire, reportedly cost £5m. He hosted about 800 guests, including Prince Harry, at the “black tie and neon” bash, where comedian Michael McIntyre and hip-hop duo Rizzle Kicks topped the bill.

As well as Grosvenor Group, the duke also controls the family investment office, which employs more than 470 people and manages rural estates in Lancashire, Sutherland, and southern Spain, as well as the family’s art collection, which includes pieces by Velázquez, Rembrandt and Freud.

Speaking about his son in 1993, Gerald Grosvenor said: “He’s been born with the longest silver spoon anyone can have, but he can’t go through life sucking on it. He has to put back what he has been given.”

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