Results Announcement for 2016
A successful year for Cadogan with healthy growth in rental income and profits.
Rental income up 10.0% to £142.7m. Operating profit before capital items was £92.6m, and an increase of 11.9%. Property valuation up 2.4% to a new peak of £5.99bn. Total return of 4.6% resulting in a 5-year average of 14.8% per annum.
Despite the increasingly unsettled backdrop, 2016 was a strong year for Cadogan and resulted in healthy growth in both rental income (up 10% to £142.7m) and in operating profit before capital items (up by 11.9% to £92.6m). The total return of 4.6% in 2016 contributes to a five-year average total return of 14.8% per annum.
In the previous five years, Cadogan’s gross property investments increased in value by an annual average growth rate of 11.6%, however in 2016 this was more muted with an overall increase in values of 2.4% across the whole portfolio. Retail provided strong growth of 6.0%, while residential, office and leisure values were flat or marginally negative.
Commenting on the results, Hugh Seaborn, Chief Executive, said: “The growth in rental income and revenue profit reflect estate management and investment activity over the past few years. In 2016 Cadogan invested nearly £100m in property acquisitions and development expenditure and there are, as a result, further increases in rental income to follow across the portfolio. Our absolute focus on quality, both in the built environment and in our tenant mix, together with our active estate management strategy, continues to produce outstanding results.”
A particular highlight in the year was the completion of George House on Sloane Street, which has become the home of Marshall Wace, one of the world’s leading alternative asset management firms. The building also houses a number of international luxury fashion brand flagships including Giorgio Armani, Boutique 1, Delpozo, and Red Valentino. Behind this development, backing on to Pavilion Road, Cadogan has created a new neighbourhood destination which, following local consultations, offers independently owned food shops which enhance Chelsea’s village feel and provide local facilities for residents and visitors – a butcher, baker, cheesemonger, greengrocer and wine merchant.
This development scheme reflects Cadogan’s long-term estate management approach – enhancing the wider neighbourhood with a diverse retail mix on the estate by creating a new destination for independent artisans at Pavilion Road, in addition to attracting luxury flagship brands to Sloane Street and strengthening its position as one of the world’s leading luxury retail destinations.
Stewardship and Community Engagement
Cadogan’s involvement in Chelsea stretches back 300 years and this leads to deep roots in the local community.
Lord Chelsea, Chairman, commented: “We are a large landowner with a significant concentration of ownership in a relatively small part of central London. Therefore we have the potential to have a major impact on the local community and we recognise that it is our responsibility to safeguard and enhance the well-being of all those who live, work and visit in this area now and in the future. We see this as a form of stewardship with our aim being to maintain and enhance the area for the very long term.”
During the year Cadogan has supported many local activities and events for the benefit of local charities and the wider local community. One of these organisations is the Kensington and Chelsea Foundation, which works with 300 grass roots charities across the Royal Borough to provide support and help raise funds to benefit the local community and has recently been instrumental supporting victims of the Grenfell Tower disaster.
Further commenting on the results and on future prospects, Hugh Seaborn said:
“We believe that London can meet the challenges and fluctuations which the vote for Brexit has introduced. The broad spread and depth of economic activity and growing population should enable London to maintain its position as a global city and the capital city of European business.“Against these many and varied uncertainties, Cadogan continues to be exceptionally well positioned. Our financial position remains strong and we are continuing to invest in enhancing the estate. We hold a focused portfolio of unsurpassed quality, with high levels of occupancy and further opportunities to strengthen income and value. We pride ourselves on the consistency of our strategy and our ability to take a long-term view for the ultimate benefit of the estate and the local community.
“We do not expect the current economic environment to provide much assistance to the progress of our business in the immediate future. Most predictions for property values anticipate small declines this year and next, but we remain confident that the many initiatives and developments which we are undertaking across a broad front will continue to enhance the business and enable us to prosper in the future.”
For further information please see our Annual Report.