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In the heart of Mayfair is a square called Brown Hart Gardens that includes a raised terrace built to cover the Duke Street electricity substation in 1906 and subsequently abandoned. This year, the terrace was resurfaced, landscaped and transformed into a public garden with trees, plants, a café and outdoor food market. Along the east of the square, another development is nearing completion: the conversion of a striking Art Deco garage into a five-star hotel, the Beaumont, that opens this month.
The two schemes are examples of the ongoing rejuvenation of the Duke of Westminster’s 300-year-old Grosvenor Estate, which began in 1677 as 500 acres of land including Mayfair and Belgravia. Today it is a £175m private property firm with £11.8bn of global assets under management and £5.8bn of directly held assets.
Driving the redevelopment is Mark Preston, group chief executive, whom I meet in Brown Hart Gardens where he is being photographed for this article standing on a plinth in the middle of the terrace. His communications director, Fenella Gentleman, turns to me and says: “He’ll hate being on show like this. He’s quite a private person.”
Preston celebrates 25 years with the company this week – something he says is both good and bad.
Good, because having worked his way up the ranks since graduating in 1989, he knows exactly how each part of the business works. Bad in that he has no other experience to draw on, save the knowledge and perspective he acquires from sitting on many outside boards and bringing in a diverse mix of staff. He became group chief executive six years ago, just after the financial crash.
“The Lehman shock was a month into my tenure and I had to hit the ground running,” he says, once we are settled in a meeting room at the company’s Grosvenor Street headquarters. “It was clear to me that the usual chain of command and procedure were not adequate for the speed and clarity required at that extraordinary time, when people didn’t even know whether their cash was safe in the high street banks. I adopted what I call the traffic light system. Red here, green there and almost no amber anywhere. This was not a time to be equivocal.”
Preston’s strategy helped keep Grosvenor afloat during the most turbulent years of the recession. Another reason the company was less exposed was its global reach, which helped minimise risk. “Given that we have just one shareholder, the Grosvenor family, which invests much of its wealth and assets through this company, it behoves me to give them as much diversification as I can,” he says.
Grosvenor has reported steady growth in revenue and returns since 2009. The latest annual results – published in April and covering the period to March 2013 – show returns of 9.7 per cent, up from 7.2 per cent the previous year, with revenue profit before tax at £175.1m, up from £84.5m in 2012. Funds have continued to rise in the past five years and now stand at £3.5bn, their highest level to date.
A broad international reach in a diverse range of sectors – from residential to industrial – has been a key feature of the Grosvenor strategy since it entered Canada 60 years ago. “When some things are down, others are up,” says Preston. “We get a less volatile picture in our returns.”
One of Preston’s peers at this level of land management is Hugh Seaborn, chief executive of Cadogan Estates. He speaks approvingly of the new directions Preston has taken in terms of investments: “Mark’s team is increasingly pioneering in the property industry. Inevitably, this is one of the organisations that others, like ourselves, look at to cross-check and see if we are keeping up.”
Preston is keen to stress the increasingly global nature of the company, split equally in terms of assets between the UK and the rest of the world. “People have a great interest in Mayfair and Belgravia, and, although I’m not denying the importance of London as our most valuable asset, it doesn’t fully reflect what we are now.”
The company has steadily increased its presence overseas, with the exception of Australia where it closed its division in 2011, and remains active through indirect investments only. Grosvenor appointed a new head of the Asia-Pacific business last month, Benjamin Cha, who will be its second chief executive in 20 years and “comes with new ideas and perspectives”, says Preston.
Elsewhere, notable global schemes include Ambleside, a mixed-use scheme in Vancouver; 1645 Pacific Avenue, an upmarket penthouse complex in San Francisco; and The Westminster, a 99-unit apartment block next to Roppongi Hills in Tokyo. The group also has ambitions to invest in emerging markets such as sub-Saharan Africa. Preston says it is researching several fast-growing cities, such as Accra, with a view to “dipping its toe in the water” with a small investment – likely to be in the shopping centre sector – in the next year. “Africa is the world’s last great urbanisation story, and we want to be part of that,” he says.
Mark Preston travels. A lot. Between now and Christmas, he is scheduled to visit Hong Kong, Tokyo, San Francisco, Paris and Porto – “at any given time there’s a pretty decent chance I’ll be going to, at, or flying back from some far-flung destination”. This doesn’t bother him. His father was a soldier and the young Preston spent much of his childhood living in army camps across the world. Today, he lives with his wife and three children (aged nine, 13 and 15) in rural North Yorkshire, but spends most weeknights in London as well as many weekends away on business. His most memorable overseas holiday was to Cambodia in 1996 when it was only just safe to go; in terms of professional trips it was Beijing, where he took the whole Grosvenor board for a week in 2011 and “attempted to get under the skin of that fascinating country”.
Learning how to do business in other cultures is crucial, he says, recalling an incident that took place when he moved to California to run the US business in 2002.
“I commented to an American friend how naive I thought his fellow countrymen were, for always asking waiters to recommend what was good from the menu. Surely, I said, they will simply recommend the fish that is going off? It was only when I learnt that waiters in the US keep most or all of the tips left to them, while in the UK most goes to the house, that it dawned on me they are absolutely motivated to give the ‘right’ answer.
“Two lessons from this: first, take great care in using your home-country yardstick to make judgments elsewhere and, second, incentives drive behaviour.”
Talk of moving into other global markets does not necessarily mean a retraction from the UK, Preston insists. “While international expansion means that, in percentage terms, the UK share is likely to fall, it does not mean in value terms that it won’t continue to grow. Because of the nature of the group, we can use our retained profits to service overseas without denuding our London heartland. The London estate is undoubtedly a very stable, powerful asset in the group’s balance sheet.”
He points to continued opportunities for Grosvenor to invest in its London estate, in particular through public realm improvements – such as Brown Hart Gardens – and office retrofits including 65 Davies Street and 20 Grosvenor Street. But there are also new commercial opportunities, most notably in the private rented sector (PRS).
“We want to help address the housing crisis in London, which comes in part from a lack of rental accommodation for mid-market occupiers. That’s what caused us to buy 12 acres of land in Bermondsey last year – an uncharted location for us – and plan for 1,200 new homes. PRS is definitely part of our thinking there. The densification of our cities is inevitable as the population grows – derelict and underused land must be brought into use.”
The company has 500 rental units across Mayfair and Belgravia and the sector lends itself to the long-term interest Grosvenor seeks. “High-end residential in London is flipped very quickly; there’s a sort of impermanence to that sector which is less attractive to us.” Grosvenor sold £240m of top-end residential in London last year in response to concerns that the market was overheating. But Preston insists that there are no plans to abandon the sector.
“We still have £1bn of luxury residential here and believe London’s vibrancy and advantages are as powerful as ever.”
Grosvenor’s London heritage has also proved a draw for overseas investors familiar with Mayfair and Belgravia, and intrigued by the prospect of doing business with a historic English institution. Notwithstanding any frustrations about being known principally for stuccoed Georgian façades and grand Mayfair squares, Grosvenor is unlikely to distance itself from that heritage. “That would be a strange move,” says Preston, whose priority nevertheless is to continue to diversify.
Cadogan’s Seaborn concurs, saying: “It is quite different from the other landed estates in that it has had this global reach for a long time, which has become part of its pedigree, though the London estate is very, very significant,” he says. “For Grosvenor, the future will be about maintaining a balance between widening its international reach while continuing to invest in London.”
CV highlights: Mark Preston
Born: 20 January 1968, Westow, North Yorkshire
Education: Bramcote School; Eton College; Reading University (BSc Hons Land Management)
Group chief executive, Grosvenor Group (2008-present);
chief executive, Grosvenor Britain & Ireland (2006-08);
president, Grosvenor USA (2002-06);
group fund management director (2000-02)
Trustee, Westminster foundation;
non-executive director, Persimmon;
board member, ULi Greenprint Advisory Board;
board member, The University of Cambridge Land Economy Advisory;
board member, The Association of foreign investors in Real Estate;
non-executive director, Sonae Sierra SGPS
Favourite city: San Francisco
Favourite film: Where Eagles Dare
Favourite book: Dreadnought, by Robert Massie
Favourite building: The Olympic Park Velodrome (Hopkins Architects)
Professional role models: Rod Kent for his brilliant business mind; and Robin Broadhurst for his supreme property professionalism
A brief history of the estate
The Grosvenor Estate began as the Manor of Ebury, a 500-acre parcel of land north of the river Thames. It was inherited by Mary Davies, who married Sir Thomas Grosvenor in 1677. The land remained largely untouched by the Grosvenor family until the 1720s, when they developed the northern part – Mayfair, around Grosvenor Square. A few generations later, in the 1820s, the focus moved south to what is now Belgravia. Later in the 19th century, the area of Pimlico was developed before being sold in 1953 – the year of the estate’s first overseas property investment.