Grosvenor Americas reveals 10-year expansion plan

Grosvenor Americas, one of four regional operating businesses of The Grosvenor Group, is seeking to scale up in the world’s largest property market.

“We do have some aggressive growth plans,” said Steve O’Connell, chief executive of Grosvenor Americas, in an interview with PERE. “We would like to target doubling our AUM over a plus or minus 10-year period. That’s roughly what we’ve done over the last 10 years, so we’d like to replicate that.”

The platform, which managed $3.6 billion in assets at year-end 2020, intends to double its AUM largely through the launch of two new North American multifamily investment programs for which it is seeking external investors. One of the investment programs will have a value-add strategy for which Grosvenor will pursue the acquisition of existing assets, while the other will have a build-to-core strategy. For each programmatic joint venture, the firm will aim to amass $1 billion of assets under management over a 10-year period, with each portfolio achieving net-zero operational carbon emissions by 2030.

“Through those two programs alone we’re hoping for some significant portfolio growth,” O’Connell said. He added that portfolio growth would also come from Grosvenor Americas’ development pipeline outside of its programmatic ventures, as well as capital appreciation.

The two ventures will be targeted at the metropolitan areas of San Francisco, Washington, DC, Seattle and Vancouver, which Grosvenor believes will continue to be growth markets. “That’s probably a question that we spent more time on in the last year and a half than we probably have in five years preceding because of the potential impact of work from home and what’s that going to mean for these high-cost urban centers,” he said. “We essentially are still believers in the fundamental things that have made those cities outperform over the last 50 years.”

For the new ventures, “we are looking for one or two select partners that we can engage in a very long-term relationship with so it’s really important that we be like-minded about that long-term perspective,” O’Connell said, noting that the average partnership term for Grosvenor Americas is 20 years. The business also will be seeking partners that are like-minded in their desire to have a positive social impact through their investments, he added.

Grosvenor Americas currently has nine active joint venture partners, including Canadian pension plans Public Sector Pension Investment Board, Alberta Teachers’ Retirement Fund and the Civil Service Superannuation Board of Manitoba, according to its 2020 financial statements.

The partners can be domestic or international institutions that would be able to write check sizes in the $300 million to $400 million range to the joint venture, while Grosvenor Americas would commit 20 percent of the equity.

“All of our historic relationships are programmatic in nature and that’s really worked well for us,” noted Steve Guberer, who joined Grosvenor Americas from CBRE Capital Advisors in June to lead capital raising activities in the US and Canada. “We certainly would be flexible and open to other structures, such as a separate account. But we do believe that this would work best for us and the type of investor we’re seeking… The decisions that we’re making aren’t predicated on whether our fund is closing, or we have to liquidate within a year.”

Grosvenor Americas is the second largest of the four regional operating companies of The Grosvenor Group, which is the property company of the Duke of Westminster. The largest operating company, Grosvenor Britain & Ireland, had $7 billion in AUM at year-end 2020, while Grosvenor Europe and Grosvenor Asia Pacific accounted for Grosvenor Europe $2.3 billion and $1.3 billion, respectively. Each business operates independently with its own balance sheet, executive team and board of directors. The four businesses represented 89 percent of the Grosvenor Group’s capital last year, while its indirect investment platform accounted for the remaining 11 percent.