Cadogan Annual Report 2022

Annual Report 2022

Cover image

The King’s Road Platinum Jubilee Street Party

Inside front cover Floral Queen’s Guard on Pavilion Road for Chelsea in Bloom 2022 ‘British Icons’

Strategic Objectives

Cadogan is a family business which owns and manages an extraordinary property portfolio comprising mainly retail, residential and office assets in Chelsea and Knightsbridge. The business has a long heritage which provides a remarkable foundation upon which to base a contemporary, forward looking and dynamic business able to anticipate and respond swiftly to the changing needs of our customers and markets.

Cadogan’s long association with Chelsea began when Charles, Baron Cadogan, wed Elizabeth Sloane in 1717, some 300 years ago. Since that time, the family and place have grown together – today the Cadogan Estate is one of London’s most characterful and distinctive neighbourhoods.

Stewardship and community are central to our approach. Our long-term commitment comes with responsibility to ensure that we are making a positive contribution towards a sustainable environment, protecting the area’s unique heritage and supporting a thriving community.

OUR CORE OBJECTIVES

• We aim to protect and enhance the Estate’s position as one of the world’s leading locations in which to live, work and visit.

• We have a proud heritage and aim always to safeguard our future and protect the portfolio as a long-term investment – creating and maintaining outstanding buildings and environment.

• As long-term stewards of Chelsea, we have a responsibility to make a positive contribution towards a sustainable environment and a thriving community.

• Our reputation is paramount. We always select the best external advisers and recruit the strongest internal team to deliver excellent customer service, be good neighbours and ensure that integrity is at the heart of all business decisions.

Opposite Sculpture of a Chelsea Pensioner at Duke of York Square, by Roman Lokati for Kensington & Chelsea Art Week

Overleaf Enjoying the fountains at Duke of York Square

Defined by our heritage. Dedicated to the future.

Chairman’s Statement

vibrant and compelling neighbourhood. In the spirit of a long-term, family business, our investment in Chelsea carried on throughout the pandemic despite the uncertainty we faced and the adverse impact on profits and property values at the time.

In 2022, total income increased to £186.5m (compared to £168.9m in 2021) exceeding the previous highest income recorded in 2019, which was £171.0m. The value of the property portfolio increased to £5.1 billion (2021: £4.8 billion), representing healthy growth even though this remains below the valuation in 2018 at £6.2 billion.

It gives me great pleasure to present a year in which Cadogan has performed so strongly. During 2022 total income has grown to the highest level in our history.

Looking back, I was delighted that my family’s business was able to significantly support our occupiers when they needed it most, together with charities serving the local community and the NHS, through the £20m Business Community Fund established at the very outset of the pandemic. This was coupled to extensive marketing activity to encourage footfall, supporting occupiers’ quick return to financial health. By the end of 2022, it was encouraging to learn that overall, our retail occupiers were reporting higher turnover and profitability than in 2019.

The ability of retailers to trade profitably has resulted in healthy demand for shops in Chelsea. This has been mirrored by a buoyant occupational market for office and leisure space together with a strong market for homes in Chelsea. The result has been good income growth and low vacancy levels across the portfolio.

Chelsea is a highly desirable place to live, work and visit. The success of Cadogan reflects this exceptional location in a residential area just outside the centre of London –one of the world’s truly international cities – together with our continuing investment in placemaking, the fabric of our buildings and careful curation to provide a

We made good progress during the year with our commitment to achieve Net Zero carbon emissions by 2030 and our other sustainability goals. The retrofit programme needed to ensure all our properties become compliant with Minimum Energy Efficiency Standards (“MEES”) is well underway.

Through a combination of my family’s charity, which is a shareholder of the business and chaired by my father, Earl Cadogan; the charitable donations made by the Cadogan business itself; and our "Chelsea 2030" strategy, Cadogan has continually supported and invested in charities, communities and a sustainable environment locally and far beyond. This approach is consistent with our values over a very long time and personally, I believe that it is vital in the twenty-first century that we are very clear on our broader purpose beyond the important job of delivering returns to our shareholders.

The placemaking investment of £46m into a transformation of Sloane Street’s public realm commenced during the year, in close partnership with the Royal Borough of Kensington and Chelsea.

VISCOUNT CHELSEA DL

One of our long-standing core objectives is to make a positive contribution towards a sustainable environment and thriving community

The project, which is a very good example of our long-term commitment to Chelsea, encompasses the entire length of Sloane Street from Knightsbridge in the north to Sloane Square in the south, and involves extensive greening including over 100 new trees, new high-quality paving and street furniture and widening of pavements to improve the pedestrian experience. The aim of this significant investment is to enhance Chelsea for residents and visitors alike and to cement Sloane Street’s reputation as one of the best luxury shopping destinations in the world.

Despite the poor macroeconomic environment, the continuing war in Ukraine, high inflation and interest rates and, more recently, several banking failures, I am confident that the investment we are making in the Estate will protect and enhance Chelsea for the long-term.

Our people are critical to our success, working in close partnership with our myriad of loyal suppliers and contractors, many of whom have worked with Cadogan for decades. Working physically together in Chelsea is a key factor in understanding the area, forging close relationships, creating a strong culture and encouraging

personal development. Since our team returned to the office virtually full time, I have seen strong evidence of the positive impact this has had on our performance.

I would like to thank all of our staff and external partners for their loyalty and efforts in helping to deliver an exceptionally strong performance in 2022. I was delighted to welcome Alison Nimmo to my board to provide further breadth to an impressive team. I would also like to personally thank all my fellow board members for their continued support, guidance and wise counsel.

VISCOUNT CHELSEA DL

4 May 2023

Above Summer in Sloane Square

Overleaf Sloane Street transformation –an artist’s impression of the finished works

Strategic Report

Chief Executive’s Review

An important contributor has been our unwavering focus on a long-term approach to managing and curating the Estate. Our concentrated, continuous property ownership of the area over very many years has allowed us to curate a mix of retail, restaurant, hospitality and cultural uses which contribute greatly to making the area a compelling place to visit. This includes the vital layering of uses over time that combine to create a place with which people develop an emotional connection, such as leisure uses in various forms ranging from a concert hall to a theatre and uses that matter to local residents such as medical facilities, eating and meeting places, schools, parks and beautiful open spaces. This approach applied consistently over a long period has supported a vibrant and thriving residential village in the heart of Central London that has a loyal residential population supplemented by local workers making it less reliant on tourists for footfall. This helps explain why our footfall figures have remained comparatively higher than other parts of central London.

This performance was driven by many factors. Amongst them was our commitment to continue investing throughout the various lockdowns. Our major development projects continued to operate safely, providing financial security for our loyal contractors and advisers as well as ensuring future income streams remained on target. Another factor was the carefully targeted support provided to our occupiers (as well as local charities supporting the community and the NHS) through targeted financial help from the £20m Business Community Fund, set up at the very start of the pandemic. Alongside this we delivered strong marketing support to encourage visitors to return when conditions made this possible, and the provision of over 900 alfresco seats and tables which provided a safe and attractive place to visit and meet family and friends as well as supporting local restaurants.

If 2021 was a year of recovery then 2022 was one where we finally emerged from the long shadow of the pandemic and benefitted from our carefully targeted support and investment to deliver an exceptional performance.

HUGH SEABORN CHIEF EXECUTIVE

Cadogan Estate footfall 2022 vs 2019

Footfall is a good indicator of local economic activity. This started to recover following the end of the third national lockdown in April 2021, grew steadily through 2022 and consistently surpassed pre-pandemic footfall levels from April 2022 onwards. Compared to the UK as a whole and other prime central London areas, the footfall growth in Chelsea has been impressive. The high number of visitors was coupled with an increase in average spend per visitor, which led to the majority of our retail and food and drink occupiers seeing turnover and profitability return to or exceed numbers last seen in 2019.

We experienced increasingly buoyant retail leasing activity through 2022, resulting in competing interest for shops and restaurants towards the end of the year. The outcome has been that our vacancy levels remained low, averaging below 3.75% throughout the year and new retail lettings achieved an average rent of 25% above our valuers’ somewhat depressed December 2021 estimated rental values. In the second half of the year, coinciding with an

increase in international visitor numbers, there was a marked increase in activity for retail units on Sloane Street. This has been particularly from existing brands increasing the space they occupy, as well as international luxury brands seeking to open a first store in this location. Rents are typically being achieved at, or in excess of, pre-pandemic levels.

In terms of residential, there was strong demand in 2022 for short-let flats and houses coupled to a limited availability of quality units, which translated to healthy rental growth. We started 2021 with a higher level of residential short let vacant properties as a result of the large number of residents vacating during the pandemic and following lockdowns. We devoted significant resources to refreshing these properties so that by the beginning of 2022, vacancy levels had returned to the very low levels which are more typical. This allowed us to take advantage of the strong letting market and boosted rental growth to deliver our highest ever residential income.

“Pavilion Road off Sloane Square, created and managed by the Cadogan Estate, has become one of London’s most popular mews streets. With its collection of artisan food shops, cafes and restaurants that attract local residents and visitors alike, there’s always plenty going on, no matter the season.” – Vogue, July 2022

PANDEMIC RESTRICTIONS IN FORCE CHELSEA IN BLOOM, PLATINUM JUBILEE AND SEASON OF SUMMER EVENTS CHRISTMAS LIGHTS AND ACTIVITY

Opposite Pavilion Road

Our sustainability strategy, "Chelsea 2030", is an embodiment of our core objectives of creating and maintaining outstanding places and buildings while making a positive contribution towards a sustainable environment and a thriving community over the long term. Climate-related risks and opportunities are considered as part of our strategic approach and financial planning, through the lens of our long-term stewardship and commitment to the community.

In 2022 we focussed on our programme to de-carbonise the portfolio and made good progress, alongside extensive communication with our occupiers and suppliers to assist them with their sustainability objectives. In this report, we will share details of our performance to date against our Chelsea 2030 goals and the status of the various programmes comprising the strategy.

Underpinning our performance is a strong focus on customer service. We aim to:

• Create value through close, direct customer relationships.

• Deliver exemplary customer service to strengthen brand loyalty. We conduct regular surveys of our occupiers, including those that are departing, to understand and learn from their views and experience.

• Forge a strategic collaborative approach to promoting and developing our destinations to drive the success of commercial occupiers.

• Communicate regularly with our occupiers, including regular face-to-face briefings, to communicate our placemaking, development and marketing activities, allowing us to hear feedback and encourage networking.

• Collect trading data to advance our understanding of retail and hospitality performance and inform our estate management strategies.

We have continued to increase investment in destination marketing and local events to promote the area and encourage more people to visit more often and stay for longer. In support of this approach we have initiated and led the creation of two new Business Improvement Districts (BIDs) in the area (The King’s Road Partnership and The Knightsbridge Partnership) both launched after successful ballots, in late 2021. The two BIDs are already demonstrating their value through increased engagement with local property owners, occupiers and wider stakeholders including the local council and residents’ groups, to enhance the environment in their respective areas, increase visitor numbers and improve representation of their members.

We continue to invest heavily in the local area through development and refurbishment activity and through placemaking. The Duke of York Square, which is now well established and was thought to be the first public square created in London in over 100 years, was the result of our acquisition and sensitive redevelopment of the Duke of York’s Barracks. More recently, Pavilion Road was created after we consulted closely with residents about the types

of businesses they would like to see. As a result, it is occupied by a variety of artisanal shops able to provide the day-to-day needs of local residents and visitors. This includes a cheesemonger, fishmonger, wine shop, butcher, bakery, shoe repairer, dry cleaners, delicatessen and an eclectic range of restaurants and cafes. Since it has become established and pedestrianised by the local council, it has become a bustling environment in which to meet, be seen and people watch.

We are making an investment of £46m in Sloane Street in partnership with the Royal Borough of Kensington and Chelsea to comprehensively enhance the public realm. This includes replacing all the paving with the highest quality materials, installing carefully designed street lighting and furniture, widening pavements and introducing extensive planting and trees along the entire one kilometre length of the street. Our vision for the project is to reinforce the reputation of Sloane Street as one of the best luxury shopping boulevards in the world while providing beautiful public realm for local residents and all visitors to the area to enjoy.

Opposite

A giant floral Corgi on Sloane Street for Chelsea in Bloom 2022 ‘British Icons’

Below

A tour guide introducing visitors to the neighbourhood during Chelsea in Bloom

“This Community Award is for a brand that has  demonstrably supported its own people along all its value and supply chains as well as its local community and the community at large. The winning award goes to Cadogan for its outstanding contribution to making the Royal Borough a flourishing, sustainable community.”

– Caroline Rush, CEO British Fashion Council and Judge, Great British Brands Awards

The launch in 2021 of our sustainability strategy "Chelsea 2030", was accompanied by our Net Zero Pathway (which sets out how we intend to achieve the carbon target). The strategy was developed in collaboration with our local stakeholders and community, peer review and industry analysis. We engaged with a wide range of experts, local organisations and community members through a series of roundtables and a survey which gained over 2,000 responses from members of the local community. Our strategy spans all areas of our business including investments, development and operations.

Our approach is to seek to design, develop and manage buildings to enhance the health of the environment and improve the quality of life for our occupiers and local communities over the long term.

We have committed to designing and building net zero buildings. In every project we aim to reduce lifecycle emissions by prioritising material retention and reuse, adopting smart design, employing the latest construction methods and ensuring net zero is a target in every development from inception. Additionally, with long-term ownership and stewardship in mind, we design and build for resilience and adaptability in a changing climate and society.

To meet our net zero target and stay ahead of impending 2028 Minimum Energy Efficiency Standards (“MEES”) requirements of a minimum EPC rating of B for commercial buildings and minimum EPC rating of C for residential, we have developed a £90m decarbonisation programme which aims to improve the energy efficiency of our assets through insulation, airtightness and carbon reduction, efficient lighting and heating. Strong engagement with our occupiers will not only improve the energy efficiency of accommodation fitout but support behavioural measures to encourage a reduction in consumption within our spaces over time.

Net-zero carbon by 2030

10% carbon saving

Over 2,800 vulnerable people reached, across 39 grassroots organisations £90m decarbonisation programme launched

12.3% increase in Urban Greening Factor

£1.3m annual subsidy of keyworker and community housing, with rental freezes in 2022 to ease cost-of-living pressures

270 people supported with targeted skills development

60 community events

53% increase in operational waste recycled

Contributing towards a flourishing and sustainable local community has always been central to Cadogan’s approach to estate management. As a longterm family business, stewardship – the responsible management of resources for the benefit of current and future generations – has been at the heart of everything we do.

CHELSEA 2030A SUSTAINABLE FUTURE

CHELSEA 2030

Opposite Shopping, dining and summer events draw high footfall to Duke of York Square

Chelsea 2030 and Net Zero Pathway reports

OVERVIEW OF 2022

88.9%

FOOTFALL CONSISTENTLY SURPASSING 2019 LEVELS

The business has performed strongly in 2022. Total income increased by 10.4% to £186.5m (from £168.9m in 2021), moving decisively ahead of the pre-pandemic high of £171.0m achieved in 2019. In 2022, there was no cost of rental support, rent free periods and write-offs of previously amortised lease incentives as a result of the pandemic (2021 – £3.1m).

Operating profit before capital items (an indicator of underlying operating performance as it excludes profit on the sale of investment properties and revaluation movements), reduced from £100.8m to £98.4m, down 2.4%. The decrease compared to the rise in total income was mainly due to an increase in property expenses as we increased investment in major projects such as the Sloane Street Public Realm.

The capital value of our property portfolio increased by 5.4%, adjusting for purchases, sales and capital expenditure, from £4.8 billion to £5.1 billion. This follows cumulative reductions in 2019 and 2020 before values stabilised in 2021. Values remain 17.2% lower than their 2018 peak of £6.2 billion (lower by 17.5% after adjusting for purchases, sales and capital expenditure).

In 2022, we invested £89.1m in purchases and development which will generate further rental income over time. This was substantially ahead of 2021 (£43.7m) and included three acquisitions of commercial properties with a total cost of £36.2m.

Rental collection has been impressive, returning to prepandemic levels and averaged 99% for commercial rents and 98.5% for residential rents during the year. Almost all the pandemic-related rent arrears have either been collected or disputes have been settled. The net figure for rents written off during the year was nil (2021: £0.6m).

In addition to the usual UK corporate taxes that apply to the group, the trusts that are the ultimate owners of the business are subject to a ten-yearly inheritance tax charge, based on the capital value of the assets and funded by the business. The latest charge was due and paid in 2022. Since 2013, over £200m of dividends paid by the business to its parent company have been used to fund the payment of this tax charge. We have a comprehensive strategy in place to ensure the substantial funding necessary to meet this tax charge is available and will continue to be so at ten-year intervals in future. Key financial highlights of 2022 are set out overleaf.

“...central London is all about location. But you have to ask why the location is desirable in the first place. It’s not because they are super-prime that they are being invested in and managed in this way; it’s because they are being invested in and managed in this way that they are super-prime.”

– FT Wealth magazine, Dec 2022

Opposite One of the ‘Eggs of an era’ sculptures, a public art trail in support of wildlife conservation charity The Elephant Family

Property Portfolio

INVESTMENT PERFORMANCE HIGHLIGHTS

Total property portfolio value increase of 5.4% to £5.1bn

(equating to £262.5m increase after adjusting for purchases, sales and capital expenditure)

Commercial portfolio value higher by 5.2% to £3.6bn

Retail portfolio increased by 10.7% equating to £222.9m

Office portfolio lower by 4.2% equating to £31.2m

Leisure and other lower by 2.4% equating to £13.8m (after adjusting for purchases, sales and capital expenditure)

Residential portfolio value increase of 6% to £1.5bn (equating to £84.6m after adjusting for purchases, sales and capital expenditure)

While the portfolio grew in value overall, our principal sectors performed differently - which was also a theme over the pandemic – providing greater portfolio resilience, with retail and residential values growing while office and leisure values declined.

Retail was most affected before and during the pandemic by the acceleration of changes in consumer behaviour driving more retail transactions online and we have not been immune to these macro-forces. The speed of this change during the pandemic required retailers to rapidly rationalise their bricks and mortar presence, retaining stores in the best locations while closing down poor performers. Post-pandemic it has become clear that Chelsea has emerged well from these changes, as retailers have understood that they were able to trade profitably in this location. We have seen this evidenced by strong growth in demand and rents.

The Chelsea office market has proved to be resilient. Where space has become vacant, it has re-let quickly resulting in continuing low vacancy levels averaging less than 1%. Despite, or perhaps because of, continued higher levels of home-working, our experience has been that there is demand for well specified and located office space from small and medium sized businesses that place a high value on being located in an attractive ‘lifestyle’ environment. Office rents grew in 2022 but not sufficiently to offset an increase in valuation yields, resulting in a decrease in the value of the portfolio.

The residential short-term letting market in Chelsea proved very strong with high demand as people continued to return to London, coupled to limited supply. As a result, the short-let income has grown continuously since mid-2021 (when it stood at £30m) to nearly £34m at the start of 2022, ending the year at nearly £37m.

Retail, our largest sector at 45.3% of the portfolio, increased in value, up 10.7% to £2.3bn (after a cumulative like for like fall of 35% between 2018 and 2021). The result is that the retail element of the portfolio is £0.9bn (27.8%) below the 2018 value peak. Retail gross rental income increased by 7.1% to £86.3m per annum (47.7% of the total rent roll), remaining behind the 2019 high of £89.9m.

Offices, which represent 14.1% of the portfolio, decreased in value by 4.2% to £719.6m. The portfolio has remained virtually fully let through the pandemic and 2022. Office rental income increased by 16.0% to £39.1m per annum (21.6% of the total rent roll).

The Residential sector represents 29.5% of the portfolio by value. The headline valuation at £1.5bn was unchanged from the previous year but on a like-for-like basis after adjusting for purchases, sales and capital expenditure, the portfolio increased in value by 6.0%. This is the second annual increase following five years of declines which started in 2016. Gross rents for the market let portfolio increased by 8.7% to £36.7m from £33.8m, building on a 12.3% increase in the previous year. Adding ground rents from long leaseholds of £2.8m, residential comprised £39.5m or 21.9% of the gross total rent roll.

Opposite Summer on Duke of York Square

Left

Guests enjoying the King’s Road Jubilee Street Party

Post-pandemic it has become clear that Chelsea has emerged well…as retailers trade profitably in this location

Retail is our largest sector, accounting for 45.3% (up from 43.2% last year) by capital value and 47.7% (last year 48.8%) of income.

The growth in capital value was driven by an increase in rents achieved on new lettings in excess of our valuers' estimated rental values, offset by a modest widening of yields in some areas in response to rising interest rates and a worsening general economic outlook.

During the pandemic, retailers experienced an obvious acceleration in the underlying structural changes in consumer behaviour. Their response to the rapid move of sales online was to rationalise their store numbers, focusing physical presence in locations which traded well and most effectively supported their on-line businesses. Cadogan benefited from this, as retailers, when faced with such choices, generally opted to retain their Chelsea stores while closing others. Similarly, a number of strong retail brands chose Chelsea to open new stores because of the desirable demographic of the catchment and evidence from existing retailers of profitable trading. This has been supported by a positive outcome to the business rates revaluation for many of our retail occupiers, which will see their business rates bills reduce from 1 April 2023, easing the cost pressures arising from high inflation and energy prices.

2022 saw increasingly buoyant retail leasing activity and total retail rental gross income increasing by 7.1%

Based on sales data that we obtain from over 170 occupiers, it is evident that footfall and trading performance are closely correlated. As footfall rapidly returned to pre-pandemic levels on the Estate, driven in part by our curation of the area and marketing and placemaking strategies, we have seen a strong increase in demand for vacant retail and hospitality space and a consequent strengthening in lease terms and rents achieved. Despite the market adversity over the past few years, we have maintained our standard lease terms which support our holistic estate management strategy.

We have experienced healthy demand from new brands wishing to enter the area and existing retailers seeking expansion locally. The increasing retail lettings activity emerged in the second quarter of 2021 and continued through the course of 2022. The King’s Road and Duke of York Square were early benefactors of this interest which widened to Sloane Street by the second half of the year.

We have experienced healthy demand from new brands wishing to enter the area and existing retailers seeking expansion locally

We were thrilled to welcome many new and exciting brands during 2022. These included pre-loved luxury fashion from Lampoo, American women’s fashion label Anine Bing, sustainable women’s fashion brand Reformation, the great British success story of Rixo, women’s ready to wear brand Self Portrait, young UK independent fashion from Wyse, traditional French children’s fashion by Jacadi, eco-friendly footwear AllBirds and French beauty brand Oh My Cream; all on the King’s Road and Duke of York Square. On Sloane Street, we welcomed the family run luxury Italian menswear brand Kiton plus the fragrance and wellness maison Diptyque. In the meantime, both the multinational French luxury brand Christian Dior and the Florentine fashion house Ermanno Scervino, committed to substantial up-sizes. With the aim of further strengthening the food offer on Sloane Street we secured the restaurant group Aqua led by David Yeo, which will open a new concept in Autumn 2023.

The business continued its long track record of maintaining low vacancy levels, finishing the year with a retail vacancy rate of 2.0%, lower than the start of the year when it was 2.7%, including a reduced number of temporary retailers – pop-ups – which allow us to introduce new and emerging names and concepts as part of our wider curation of the mix, contributing to vibrancy and excitement for consumers.

The public realm project on Sloane Street commenced on-site during the year. When complete in 2024, Sloane Street will be transformed into a safer, greener and more beautiful one kilometre boulevard. This will include extensive greening including new street planting and over 100 new trees, carefully designed new lighting and street furniture and where appropriate, wider pavements. The result will be a hugely enhanced pedestrian experience with a neutral effect on vehicular traffic. Inevitably there will be some disruption during the period of the works affecting traffic using the road, local residents, businesses and occupiers. Cadogan are working in close consultation with the Royal Borough of Kensington and Chelsea, who are overseeing the project, to minimise disruption.

Below (L-R)

The bar at Rixo’s new King’s Road store; Hermes on Sloane Street; Soho Home’s flagship at Duke of York Square

Offices

Offices account for 14.1% of the portfolio by capital value of £719.6m. By income, offices represent 21.6% of the total and gross rents increased by 16.0% over the year, primarily due to inflation-linked increases and a number of new lettings.

The office portfolio has continued to be virtually fully let through 2022, with a year end vacancy rate of 1.1%. Office occupiers on the Estate typically highly value the vibrant local environment and lifestyle. Our observation is that they also tend to favour physical collaboration and presence in the office and this contributes to our wider estate management by introducing an influx of workers to the area, stimulating physical and economic activity locally.

Activity across London has continued to increase through a combination of more workers returning to the office and a rise in tourists. London remains one of very few world capitals that offers a magnetic mix of access to talent, finance, culture and services which makes it a highly attractive location in which to live and to work.

Left Chelsea’s lifestyle appeals to many as a head office location

Opposite Louis Vuitton on Sloane Street, who have extended to offices above ground floor retail

Below 224-226 King’s Road development, including new office space

The office portfolio has continued to be virtually fully let through 2022

Residential

The gross value of our residential portfolio represents 29.5% (30.5% in 2021) of the total. Income from residential represents 21.9% (22.1% in 2021) of the total. Residential remains our second largest sector (after retail) and is important as it diversifies performance, drives our customer service understanding and reflects our strong stake in a thriving local community.

The high percentage change in value relative to the actual movement in gross value during the year is primarily due to a programme of planned disposals, representing £50.7m by book value.

The lower relative income yield produced by residential compared to commercial, reflects the combination of

reversionary long leases which produce little income (but provide a return when the long leaseholders choose to enfranchise) and the private rented sector portfolio which generates a rental yield that is lower than commercial property.

The proceeds from enfranchisement sales during 2022 were £34.5m compared to £26.3m in 2021, remaining significantly lower than the ten-year average prior to 2019 of £74m. These sales represent the disposal of interests in 48 units (2021 – 29 units). Proceeds from 16 further discretionary sales totalled £30.6m (2021 –£55.9m). These disposals generated an overall profit of £14.4m.

£1.3m

annual subsidy of keyworker and community housing, with rental freezes in 2022 to ease cost-of-living pressures

A review of residential leasehold reform legislation relating to long leasehold property was announced in 2021. The simplification of this arcane area of law is generally welcomed however, amongst the extensive proposals are two areas that we believe will have unintended adverse consequences and a direct impact upon the Cadogan business:

• An intention to “abolish” the marriage value element of compensation to freeholders. This would result in a completely inequitable one-off transfer of value (often a significant element) from freeholders to leaseholders. Prior to these proposals, leaseholders would have had no reasonable expectation of such a windfall. The impact for Cadogan would be to reduce future enfranchisement proceeds and inevitably reduce our ability to invest in the Chelsea estate over the long term. Although the financial impact over time will be substantial, this future potential revenue is largely discounted in our valuations as the timing is unknown and the proposed reforms have introduced greater uncertainty, and therefore only a small element is included within the balance sheet.

• The second element of concern is the proposal to lower the percentage of residential space required for collective enfranchisement claims (the compulsory purchase of a freehold) from 75% to 50%. Under this proposal more owners of commercial property assets will be bought out by the residential upper parts. The reduction in the ability to manage the properties will effectively deter investment in mixed use regeneration schemes which generate housing supply in city locations. It will also undermine high streets across the country by limiting the ability to effectively curate ground floor commercial uses and discourage long term investment.

There have been six housing ministers over the past 12 months - in this time these reforms have not progressed far. We are continuing to work with civil servants and the new housing minister to assist Government in understanding the potential impact of the proposals and our hope remains that these elements will be removed from the reforms.

Our private rented sector portfolio comprises nearly 700 houses and flats. A strong rental market led to properties letting as soon as they became available, often at higher rents. Our ability to take advantage of the very healthy market was strengthened by ensuring our short let residential homes are delivered to the specification and quality demanded by the market and supported by a very high level of customer service provided to our occupiers.

Residential is important as it diversifies performance, drives our customer service understanding and reflects our strong stake in a thriving local community

All images and previous spread A beautifully refurbished period home on Sloane Street

Leisure and Other

This category comprises hotels, restaurants, pubs, our growing regional portfolio, and a variety of other properties such as schools, cultural and artistic venues, car parks and medical uses. Leisure and Other accounts for 11.2% of the value of the portfolio, up from 10.8% in 2021. Rental income increased by 10.4% (2021: 2.1%) due to growth in income of the regional portfolio and, to a lesser extent, new lettings on the Estate.

The main reason for the valuation decline on a like for like basis was a fall in the value of the regional portfolio of 14.8%, driven by a large widening of yields on industrial properties which comprise over half of the portfolio. The leisure component was subject to a like for like increase in value of 1.4%. The overall increase in gross value despite the like for like reduction, was due to acquisitions of £36.2m and development expenditure of £27.3m.

The gross value of the regional portfolio was £116.3m at the year end (£104.4m in 2021), the increase caused by the resumption of acquisitions totalling £26.3m following a long pause in investment as a result of firstly, political uncertainty in 2019, then the pandemic and finally the turmoil following the September 2022 mini-budget. Subsequently, as the property market has rapidly repriced, we have seen the market disruption caused by the increase in UK Gilt rates in the fourth quarter of 2022, as an opportunity to deploy investment capital at adjusted values providing stronger income for the future.

The number of food and drink offers on the Estate has more than doubled over the last five years

Left

The newly refurbished Cadogan Arms on the King’s Road

Below

The recently acquired Draycott Hotel on Cadogan Gardens

Meat the Fish on Cadogan Gardens

The sole strategic objective of the regional portfolio is to help finance the ten-yearly inheritance tax liability paid by the trust settlements that ultimately own Cadogan. Therefore, the aim is to secure commercial property investments that provide a secure level of income that is higher than the Chelsea estate. The resilience was evidenced during the pandemic when we experienced 100% rent collections and no tenant failures. Our intention is to grow this portfolio further over the coming years, subject to market conditions.

The leisure sector is vital to our strategic estate management approach as these uses contribute immensely to the identity of Chelsea and the connection which residents and visitors feel for the area. For example, we own eight pubs in Chelsea. We do so because we consider them to be an important use for a compelling locality and to support the community, as elsewhere in the area many pubs have been lost to residential conversion.

Above Summer in Sloane Square

Right Cantinetta Antinori on Sloane Street

Our strategic aim is to increase the extent and breadth of food and drink outlets in the area. The number of food and drink offers on the Estate has more than doubled over the last five years to 39 businesses, with further opportunities planned. These businesses strengthen the holistic experience for visitors and residents and improve the attraction of Chelsea. In 2022 we converted two retail units to provide high quality space for restaurants on Sloane Street and Pavilion Road. The first of these units was let after strong competition for the space and will open later in 2023 as a 200-cover restaurant. The famous Tuscan restaurant Cantinetta Antinori on Harriet Street and Meat the Fish on Cadogan Gardens are both due to open in 2023.

We look forward with great anticipation to the launch of our latest hotel at 1 Sloane Gardens which will open in 2023 after an extensive re-development and fit-out. The intimate hotel (35 rooms) as well as a basement bar and top floor restaurant will be run by the celebrated Parisian hotelier and restaurateur Jean-Louis Costes. We expect this to transform the area around Sloane Square, complementing the existing restaurants such as Colbert and The Botanist.

Our strategic objective of raising investment in the hotel sector is aimed at increasing the diversification of our income coupled to the estate management advantages of enhancing local hotel provision. Since 2019 we have developed and opened two hotels, The Cadogan and Beaverbrook Townhouse and launched serviced apartments at 3 Sloane Gardens and 20 Cadogan Gardens. In December 2022 we acquired the Draycott Hotel on Cadogan Gardens – a well-established 35 room hotel - which is undergoing a rolling refurbishment while remaining operational. The hotel sector attracts visitors to Chelsea from abroad and from within the UK, who contribute to the local economy through their spend in local shops, restaurants and attractions.

Below The Anya Café’s signature cakes

Developments

We continually invest in maintenance, refurbishment and redevelopment across the Estate, to deliver consistently high quality outcomes for our customers, to respond to rapidly changing markets and to enhance the fabric of the Estate including environmental credentials and historical character. In 2022 our total expenditure on redevelopment and major refurbishments increased to £59.8m (£51.1m in 2021).

We maintained construction activities safely throughout the pandemic with the exception of small residential schemes which were typically in confined spaces where social distancing was challenging. This was considered important to maintain the momentum of our projects and financially support the wide eco-system of contractors and their sub-contractors and employees who we rely on to provide outstanding results.

The majority of construction expenditure in 2022 was in respect of two schemes.

1 SLOANE GARDENS , which is the restoration and conversion of an Edwardian apartment block into a boutique hotel and restaurant. This new hotel, opening in 2023, will be operated on our behalf by the celebrated Parisian hotelier and restaurateur Jean Louis Costes.

196/222 KING’S ROAD is a 100,000 sq ft redevelopment of a large site which will deliver flagship shops to the King’s Road, community retail on Chelsea Manor Street and affordable and market let residential apartments, a Curzon cinema, rooftop bar, public house and an enhanced Waitrose supermarket. We have managed this complex scheme carefully to enable the Waitrose supermarket to remain open despite surrounding construction, due to its importance locally. This development is due to reach practical completion of the shell construction later in 2023, followed by an 18 month fit-out programme for the offices and residential space.

Sloane Street Public Realm is a major scheme in partnership with the Royal Borough of Kensington and Chelsea, to transform Sloane Street into a compelling and elegant space for pedestrians, residents and visitors alike, and to reinforce the street’s position as one of the world’s finest luxury shopping boulevards. The bulk of the £46m

expenditure on the scheme will be reflected in our accounts during 2023 and 2024.

Our development pipeline at the end of 2022 comprised 81 projects of which 8 were under construction. The overall pipeline of expenditure was £554m (2021: £489m).

We are constantly aware that our construction activities can and do impact upon those around us. As well as ensuring we respond to our neighbours during construction and mitigate the disturbance where possible, we aim to be exemplary in the way in which we consult and engage locally when preparing a scheme, to understand local concerns and consider how we can respond to them. A programme of regular communication ensures that those people that are affected and/or interested, remain fully informed. Our aim is to be the most trusted local developer and therefore to be able to adapt and respond to changing needs to ensure the area remains relevant and desirable to present and future generations of residents and visitors.

Sloane Street’s transformation will reinforce its position as one of the world’s finest luxury shopping boulevards

Below Seasonal planting scheme for Sloane Street by multiple Chelsea Flower Show award winner Andy Sturgeon

Bottom Arts and Crafts inspired cast-iron lamppost detail, part of the Sloane Street transformation

SPRING SUMMER

AUTUMN WINTER

Outlook

the pandemic behind and deliver an exceptional performance over the past year.

This perspective and agility has enabled us to carry on investing in the Estate throughout the uncertainty of the pandemic, provide crucial support to our occupiers and contractors, as well as assist charities serving the local community when it was needed most – looking beyond short term disruption to the future.

This consistent long-term approach, coupled with the unique features of Chelsea, our diversified but geographically concentrated portfolio and inflation protected income has enabled us to leave the effects of

Of course, the pandemic has been replaced by new and emerging uncertainties such as the Russian invasion of Ukraine which has led to increases in the cost of energy and food products, exacerbating a general inflationary environment caused by the sudden increase in world demand for commodities and raw materials and blockages in supply chains as life returned to normal. More recently there have been some high profile banking failures and concerns of contagion in the financial markets.

Central banks have acted to bring inflation under control by increasing the cost of borrowing. This contributed to fears of a recession in the UK, although more recent forecasts have been less negative and suggest that we will experience little or no growth in the UK. The long period of cheap and available money following the Global Financial Crisis has come to an end which brings challenges to real estate markets which rely on debt funding.

Our strength is our ability to consistently apply our strategic approach over the long-term, while being able to anticipate and respond swiftly to the changing needs of our customers and markets.

Inflation and supply chain pressures have particularly impacted construction costs which we have experienced in Chelsea. Although this is starting to settle, the cost increases continue to reduce returns on our development activities. It remains unclear whether rising mortgage costs will adversely impact consumer confidence and spending across the UK and therefore retailer prospects. Although Chelsea faces the same economic headwinds as the rest of the UK, the high quality characteristics of our portfolio, our occupiers and the consumer catchment, provide an element of protection, giving me confidence that we will deliver a positive performance in the year ahead as well as over the long term. This confidence is underpinned by the strong recovery of our retail, leisure and hotel occupiers, coupled to the index-linked characteristics of our income.

We are experiencing continued healthy demand for our residential, retail, office and leisure properties which is supported by limited supply in the market as vacancies remain negligible. The forecast continued gradual increase of international visitors to London, particularly the reopening of China’s borders to outbound travel, is expected to boost retail business in international centres including Sloane Street in particular.

Valuations for UK commercial property over the past year have been adversely impacted by the widening of yields driven mainly by expectations of higher long-term borrowing costs. The market appears to have adjusted swiftly and there are signs in many sectors that values are stabilising, which brings greater market stability and provides reasons for measured optimism for future capital value growth prospects.

We place great value on collaborative teamwork at Cadogan reflecting our agile, multi-disciplinary and highly experienced team. Our return to the office once restrictions were lifted last year, has been a decisive factor in our excellent performance as we have benefited from stronger collaboration, productivity and staff development which in turn has allowed us to respond to opportunities swiftly, navigate adversity nimbly and provide consistent, excellent customer service.

It has been a period of adjustment for everyone in the work environment. However, despite the additional challenges everyone has faced, I have never ceased to be impressed by the loyalty, determination, ‘make it happen’ ethos and dedication of our team and the extensive network of consultants and contractors on whom we depend. Therefore, it is entirely fitting to conclude by thanking my management team, all our staff as well as our external partners for their vital contribution to the delivery of an impressive set of results.

HUGH SEABORN CHIEF EXECUTIVE

4 May 2023

We place great value on collaborative teamwork at Cadogan reflecting our agile, multi-disciplinary and highly experienced team

Opposite (L-R) Shoppping on Duke of York Square; a Corgi enjoys the King’s Road Platinum Jubilee party; Christmas on the King’s Road

Left

A giant floral Queen’s head on Sloane Square, for Chelsea in Bloom 2022 ‘British Icons’

Financial Review

booked as a cost in Cost of Sales. There was no impairment charge in the year (2021: £0.6m).

Rent collections returned to pre-pandemic levels in 2022, averaging 99% for commercial occupiers and 98.5% for residential tenancies.

Operating profit before capital items decreased by £2.4m to £98.4m. Had we restated the misstatement due to the rent smoothing adjustment above in 2021 we would be reporting a £7.8m (8.2%) increase in operating profit before capital items from £95.7m in 2021 to £103.5m in 2022. The improvement in turnover was mostly offset by a rise in property and administration expenses due to increased development and trading activity.

SANJAY PATEL FINANCE DIRECTOR

Turnover includes income from hotels and serviced apartments of £8.9m (2021: £3.1m), the increase driven by a strong recovery of the hospitality sector following the first year since the pandemic started when hotels were no longer faced with restrictions on opening or trading.

During the year an overstatement of 2021 gross rental income by £5.1m was identified relating to a rent smoothing adjustment. We have chosen not to restate the prior year revenue figure given the amount is immaterial. Had a restatement been made we would be reporting gross rental income growth of £16.5m (10.3%) between 2021 and 2022. The significant year on year increase reflects a year of strong growth in leasing activity accompanied by rents achieved on average in excess of ERV and the impact of inflation-linked rent increases across the commercial and residential sectors.

There were no additional rent concessions provided in the year recognised as a reduction to gross rental income (2021: £3.1m)

In relation to rent deferrals or rents outstanding, the rental income is recognised as normal with the deferred rent or rent receivable balance remaining in trade debtors until settled. Where there is a credit risk over recoverability of a balance that is contractually due, any impairment is

Property expenses increased mainly as a result of carrying out more refurbishments in the year and the commencement of the Sloane Street Public Realm project. Hotel and serviced apartments cost of sales reflected a full year of costs for the Beaverbrook Town House, which opened in August 2021.

Administration expenses increased mainly as a result of costs incurred for the arrangement of long-term private placement financing, increases in salary, marketing and overhead costs.

The profit from the sale of investment properties in 2022, which includes profits from leasehold enfranchisements, contributed £15.1m compared to £12.2m in 2021 despite lower net proceeds. There was a higher number of transactions completed at 64 compared to 49 in 2021.

The consolidated income statement reflects the movement on the annual revaluation of the investment property portfolio. All categories apart from office and the regional portfolio increased in value during the year resulting in a net revaluation gain of £262.5m (2021: £34.6m).

The charge for current taxation in the year was £13.3m, a decrease of £5.6m compared to 2021 and a larger decrease than the decrease in operating profit, mainly because of a larger gain chargeable to corporation tax in 2021 from the sale of investment properties.

Turnover increased by 10.4% to £186.5m

(2021 - £168.9m)

Gross rental income increased by 3.8% to £170.8m

(2021 - £164.5m)

Operating profit before capital items decreased by 2.4% to £98.4m

(2021 - £100.8m)

Gain on revaluation of investment properties £262.5m

(2021 – £34.6m)

Increase of 5.4% in capital values on a like for like basis

Residential property disposal and enfranchisement proceeds reduced by 20% to £65.8m

(2021 – £82.2m)

Profit on property disposals and enfranchisement sales increased by 23.8% to £15.1m

(2021 – £12.2m)

Profit on ordinary activities before taxation (including revaluation gains) of £340.2m

The overall figure for taxation in the income statement for 2022 was a charge of £79.0m (2021: charge of £228.7m). The reduction compared to 2021 is due mainly to a deferred tax charge in 2021 recognising an enacted future increase in the corporation tax rate from 19% to 25% in April 2023.

There were two dividends paid to shareholders in 2022, a first interim dividend of £49.6m in April and a second interim dividend of £26.9m in December. The first interim dividend was paid mainly to provide further funds to the major shareholder so it could meet an upcoming tenyearly inheritance tax charge which was due in 2022. A proportion of the second interim dividend and all normal dividends is set aside by the major shareholder to provide funds for future ten-yearly inheritance tax charges. A further portion of the dividend is paid to a charitable trust set up by the Cadogan family which requires the funds to make charitable donations.

Cadogan is mindful of its tax obligations and is liable for, and collects on behalf of HMRC, various taxes in its operations. The table below shows the tax paid by Cadogan and that collected and remitted to HMRC by Cadogan. As in previous years, the tax collected is significantly greater than the direct tax charge shown in our accounts, demonstrating our wider contribution to the UK economy.

income tax. Furthermore, a substantial proportion of the dividend is used to provide for the ten-yearly charge to inheritance tax in relation to certain of the trust assets. In the case of the principal trust, it paid the latest ten-yearly charge in 2022 and is now starting to put funds aside for the next ten-yearly charge, due in 2032. We calculate that total dividends required by the family trusts from Cadogan to pay the inheritance tax charge due in 2022 amounted to £205m.

BALANCE SHEET AND BORROWINGS

The value of our properties at the end of 2022 was £5.10bn, an increase on the previous year’s figure of £4.80bn. On a like for like basis this reflected an increase in value of 5.4% compared to a small increase in 2021 of 0.7%. Consequently, Group shareholders’ funds increased from £3.26bn to £3.44bn. Net assets per share increased to £28.68 from £27.14, an increase of 5.7%.

Cash inflow from the Group’s operating activities rose to £126.5m, compared to an inflow of £44.0m in 2021. The cash flow in 2021 was lower mainly because of a £51m short-term loan advanced to the parent company Cadogan Settled Estates Holdings Limited to enable the latter to make a capital distribution to the trust settlements that own the Group to fund the 2022 inheritance tax liability. The loan was repaid in April 2022.

Year end borrowings, excluding cash of £62.0m (2021 –overdraft of £2.4m), increased during 2022 from £806.8m to £850.4m. In December we received £100m from a deferred drawdown of a private placement completed earlier in 2022. As a result of these proceeds, the revolving credit facility was not utilised at the year end, a decrease of £35m compared to 31 December 2021. There were loan repayments in the year totalling £19m, comprising a £4m capital repayment in March on a loan maturing in 2025 and £15m in December in respect of maturing loan notes from a 2012 private placement. There was a reduction of £2.4m in 2022 after translating our dollar denominated borrowings at the year end exchange rate and recognising the fair value of the related cross currency swaps. At 31 December 2022 the average maturity of our debt was 16.33 years (2021: 12.28 years) and the average effective rate of interest across all drawn loans reduced from 4.44% in 2021 to 4.19%. Apart from the revolving credit facilities, all our debt is at fixed rates.

There was a reduction in year end balance sheet gearing to 22.9% from 24.9%. Gearing as measured under our loan covenants, reduced by 1.6% to 18.9%, while interest cover decreased to 3.2 times from 3.4 times, comfortably in excess of our financial covenants. At the year end there were total undrawn facilities available to the Group of £300m under revolving credit facility arrangements.

In addition to the tax set out in the table, Cadogan Group’s dividends flow through to several family trusts and are (save in the case of a charitable trust) subject to

In February and March 2022, we arranged £300m of long-term funding from three private placement deferred loans, taking advantage of low interest rates in anticipation

of projected funding requirements over the next five years. £100m of this funding was drawn in December 2022, £50m is deferred to September 2024, £50m to March 2025, £50m to September 2025 and £50m to September 2026. The initial tranche of £100m matures in 2043 and the remaining tranches have maturities in 2060 and 2062.

On 15 March 2023 we refinanced our revolving credit facilities, increasing them by £50m to £350m in a new syndicated revolving credit facility for a term of 3½ years expiring on 15 September 2026, with two 1-year extension options exercisable from 1½ years and 2½ years of the start date.

GOING CONCERN

We have undertaken a stress test with a severe but plausible downside scenario of an economic downturn beginning in the second half of 2023, to assess the potential impact on headroom for liquidity and loan covenant compliance, taking account of mitigations available. Details of the stress test are provided in the Going Concern section of the Directors’ Report on pages 94 to 95 and the conclusion is that, in the severe but plausible downside scenario modelled, we would have sufficient liquidity and satisfy all our loan covenants in 2023 and 2024.

APPROACH TO RISK MANAGEMENT

Cadogan has a well-developed strategy and process for risk management. Overall responsibility for risk management lies with the Group board, which is responsible for determining the Group’s risk appetite and ensuring that the Group’s risk management system properly identifies, understands and manages all relevant risks.

The Group’s risk appetite and processes for managing risk are regularly reviewed by the board. The Finance Director, supported by the senior management team, is responsible for compiling the Risk Register which is updated on a regular basis. The Risk Register identifies the principal risks impacting on the business and the Group’s financial position. It provides an assessment of the likelihood of the identified risks materialising and includes an estimate of the potential impact of each area of risk on the business. The Register is formally reviewed by the board at least annually and this forms an important part of the overall risk management process. The Group also makes use of appropriate external specialists to advise on compliance with established policies and external regulations.

Cadogan is a long-term property investor with a clear focus on high quality property assets located in central London. Because of its private ownership and long-term outlook, the Group aims for, and is able to achieve, a high level of resilience in all areas of the business.

Cadogan assesses risk under three principal headings:

• Strategic risk

• Financial risk

• Operational risk

RISK OUTLOOK

Our proactive support of occupiers during the pandemic, coupled with strong place making and curating of our portfolio has enabled the business to rebound swiftly during 2022 with high occupancy and demand for vacant space across all sectors driving robust rental growth. We have not yet seen a slackening in demand caused by the economic slowdown, benefiting from the high income demographic mix of the resident population in Chelsea and visitors to the area. Our occupiers, similarly, have experienced healthy increases in turnover as evidenced by the trading data we receive from a large proportion of our retail and hospitality occupiers.

With COVID-19 restrictions lifted and the success of the vaccination programme we view the pandemic as a receding threat but remain alert to the risk of more virulent variants emerging in future.

The recent stabilisation of the UK political environment is welcomed as it should reduce economic volatility notwithstanding the continuing risks posed by a high rate of inflation, forecast to reduce to low single digits by the end of 2023, consequential increases in the cost of borrowing and the ongoing war in Ukraine. Some of these factors could adversely impact rental income and UK property values.

Looking further forward, a change in government in 2024 could result in new policies, particularly on tax, the environment and property reform, which could impact our business.

STRATEGIC RISKS

Property market risks – the risks arising from property cycles and from shorter-term unexpected changes in the market for property investment, development and occupation. Retail has been subject to structural changes for many years, such as the ongoing shift to online transactions. These trends were accelerated by COVID-19, forcing the closure of many weak retail businesses, while others have successfully adapted their models to trade successfully in the new environment. Cadogan has been preparing for many years for the shift of retail sales to online by having a diversified asset portfolio, positioning its Estate towards luxury and distinctive retail propositions, increasing non-retail leisure and food and beverage options to increase attractiveness and increase dwell time in the area, and minimising vacant units with short-term lets to on-trend retail and hospitality occupiers. Cadogan led on the establishment of the first two Business Improvement Districts (BIDs) in 2021 in the Royal Borough of Kensington and Chelsea, on the King’s Road and Brompton Road. These are already helping to promote these areas, enhancing their vitality and attractiveness.

The move to more flexible working caused by COVID-19 has made the long-term demand for office space less certain, though Cadogan has not experienced a reduction in

demand to date with vacancy levels remaining low at around 1%. The migration out of London of residential short-let tenants caused by the pandemic has largely reversed since the second half of 2021 with residential demand and occupancy stronger than before the pandemic.

Most property markets are cyclical, and this is particularly true of central London. As a long-term investor the Group is less reliant than others on predicting property market cycles and aims to manage the impact of the property cycle and any other short-term fluctuations in values or activity levels by ensuring a relatively high proportion of committed long-term loan finance, planning for significant headroom against external financial covenants and high levels of available liquidity. These factors also assist the Group in managing cash flow and liquidity risks.

Geographic concentration – the Group accepts the risks inherent in the small geographic area in which the Group’s properties are concentrated. The Group’s properties are primarily located in Kensington and Chelsea which for many years has been an area renowned for long-term prosperity and economic resilience. The Group also seeks to balance this geographic concentration through a diversified portfolio of uses and through close attention to the balance between sectors. The largest individual property represents 5.1% of the total portfolio value and the highest individual rent 3.6% of total annual rental income.

Cadogan has carefully curated its Estate over many years to create a vibrant local neighbourhood where spending is dominated by its residents and less reliant on visitor footfall. This was evidenced by the comparatively smaller reduction in footfall during the pandemic than other central London areas.

The Group monitors and is actively involved in consultation with the Royal Borough of Kensington and Chelsea where it considers that it could be affected by changes or developments to local planning policies. The Group is committed to close liaison with stakeholders and the community to ensure that its strategy and developments are understood externally. In addition, there are statutory and regulatory risks which are closely monitored.

Development risks – Cadogan regularly undertakes substantial development projects, but carefully considers the timing to ensure that the Group’s exposure to development risk is controlled, both relative to the overall portfolio and to potentially competing schemes in the same area. Cadogan consults widely with diverse stakeholders on development schemes to ensure that schemes are designed to the highest quality and to assist in obtaining the most appropriate planning consent.

COVID-19 had a number of adverse effects on development activity. Some development projects were delayed to preserve financing headroom in the face of uncertainty as to the length and severity of the pandemic. Compliance with social distancing guidelines meant

fewer workers were allowed on some sites, affecting productivity. Materials shortages led to delays and increased inflation in input costs, which may lead to cost overruns on some projects. There is a need to incorporate additional flexibility in future development projects to allow a wider range of end uses following recent changes in planning use guidelines and changing market demand over time. Movement of international labour caused by travel restrictions impacted some projects relying on specialist skills from other countries. Most of these risks have abated during 2022, though high inflation continues to affect costs.

In 2022, we undertook a comprehensive review, resulting in changes to the way we procure major development projects (those costing more than £10m) and, for high value projects, we appointed new cost consultants and quantity surveying firms experienced in overseeing large, complex projects.

Risks associated with London's position as a global capital – London’s position as a global capital has been a significant factor in the overall prosperity of central London in recent years. There are risks to this position from several factors, most significantly from Brexit, from terrorism, from under-investment in infrastructure and from adverse changes to the tax regime, particularly affecting overseas investors. The Group cannot manage or control these risks but Cadogan takes an active role in lobbying through organisations such as BusinessLDN and the British Property Federation amongst others, to ensure that the long-term health of London is at the forefront of the minds of national and local government.

COVID-19 reduced the number of international visitors to the UK which adversely impacted retail on the Estate in the short-term. This has been exacerbated by the withdrawal of tax-free shopping by the Government, making the UK the only major European country that does not have a practical tax-free shopping scheme for overseas tourists. Inbound tourism has rebounded during 2022 but has still not returned to pre-pandemic numbers unlike some competing capital cities in Europe such as Paris, which is thought to be partially linked to the withdrawal of tax-free shopping. Cadogan is working closely with its retailers on enhanced marketing strategies for attracting more UK and international visitors to the area in 2023 and beyond.

FINANCIAL RISKS

Interest rate risk – The majority of long-term borrowings are at fixed rates of interest, achieved either by agreement with the lender, or through the interest rate derivatives market. The board requires at least 75% of long-term debt to be subject to fixed rates of interest. The Group does not undertake financial instrument transactions that are speculative or unrelated to trading activities. Board approval is required for the use of any new financial instrument. In December 2021 and January 2022, the Group took advantage of low prevailing interest rates to raise £300m of fixed-rate, long-term deferred borrowing

with maturity dates ranging from 2043 to 2062 which will be drawn in tranches in 2022, 2024, 2025 and 2026.

Inflation risk – The reopening of the world economy following the pandemic has led to widespread shortages of labour, raw materials and energy leading to higher inflation. This has been exacerbated by the war in Ukraine. The Office for Budgetary Responsibility forecasts that inflation will come down to target levels by the end of 2023, but the war in Ukraine and increasing demand from China as it emerges from its long period of isolation could mean that high inflation persists for longer and increases the risk of stagflation (low growth, high inflation). Interest rates have increased steeply to quell inflation, affecting our cost of debt and the economic outcome of investment decisions, impacting our investment strategy. Persistent inflation could also lead to increased operational costs. Rents on most of Cadogan’s commercial and residential leases are linked to RPI, mitigating against cost inflation.

Construction costs on development projects can be locked at the outset through fixed price contracts, but in a high inflation environment it could lead to higher construction costs for new projects and projects where the costs have not been fixed as contractors seek to mitigate their risk. High inflation can help retailer profitability where they are able to pass on costs through higher pricing, providing retail occupiers, particularly luxury retailers, with a hedge against higher rents.

Refinancing risk – The Group seeks to manage refinancing risk using a spread of loan maturities. In normal circumstances loan terms, other than bank loans, are for an initial period of ten years or more. The incidence of maturities is spread to ensure that major refinancing is spaced out over time. On 15 March 2023, the Group refinanced £300m of existing revolving credit facilities that were due to expire in April 2024, with a new £350m syndicated revolving credit facility having a 3½ year term expiring in September 2026 which has two 1-year extension options exercisable at any time 1½ years and 2½ years after the inception of the facility.

Foreign currencies – Some of the private placings of debt which the Group has undertaken have included a significant proportion of US dollar borrowings. All exposure to US dollars in relation to both interest and capital repayments has been swapped into sterling on the date on which the loans were committed, and as a result there is no residual foreign exchange risk exposure to the Group. Operationally the Group has no foreign currency exposure.

Compliance with financial covenants – The Group has provided financial covenants to its lenders to support its unsecured borrowings. The Group’s financial position is regularly monitored against the covenant requirements to ensure that the Group has significant financial headroom and is not at risk of breaching any of the covenants. Scenario planning is used to assess the sensitivity of potential changes to the principal financial measures which might impact the ability to meet covenant requirements.

Customer creditworthiness – COVID-19 resulted in a sharp fall in rent collection rates and an increase in defaults. Cadogan responded quickly through a number of initiatives. It identified a list of the smaller and most financially vulnerable businesses and offered various financial support packages including deferrals, waivers, turnover only rents and monthly in arrears payments, the purpose being to enable them to survive the crisis and remain operational afterwards. The frequency of credit control meetings was increased from 8 to 12 times a year, and additional staff were recruited to liaise with customers to help assess and deal with their requests. These actions resulted in minimising commercial vacancies and defaults and increased rent collection rates which have returned to pre-pandemic levels during 2022.

OPERATIONAL RISKS

Property loss and damage – All the Group’s properties are insured against loss or damage on a full reinstatement basis, including three years’ loss of rental income. Cover includes terrorism risk which is provided by a major insurer and member of Pool Re. COVID-19 illustrated the limitations of insurance cover and highlights the importance of maintaining a strong financial position and liquidity headroom to enable the business to withstand uninsurable or unknown future events. In 2022 we started a project to digitise all our remaining paper property deeds and records to mitigate against the risk of loss due to fire or flooding.

Health and safety risks – The Group accords a high priority to health and safety. Health and safety issues are always discussed at the monthly Property Management Committee meeting of senior leadership and all incidents are reported and reviewed on a monthly basis. From time to time the Group undertakes external reviews and audits of its health and safety policies and procedures, the results of which have confirmed the quality and integrity of health and safety practices. An online health and safety system has been implemented since 2021 to enhance compliance monitoring.

Risk of energy shortages – The war in Ukraine highlighted the risk to the business and its occupiers of shortages in energy. We have back-up generators for our main site which can provide electricity for short periods of outage. Our teams are equipped to work from home for longer periods if necessary. We have collated a list of vulnerable residential tenants to ensure that vital support can be provided to them if there are prolonged power cuts, especially during cold weather.

COVID-19 resulted in employees working more flexibly. All staff are required to complete online assessments to ensure their equipment, furniture and home environment are suitable for working from home, in addition to workplace safety assessments. Mental health awareness training has been provided for staff as well as access to confidential helplines with trained professionals and there will be four mental health first aiders in place by the end of May 2023.

A similar emphasis is placed on health and safety on our construction sites, with our consultants monitoring contractors’ compliance with safety rules.

Climate change – Climate-related risks are considered to be principal risks and their management is integrated with the overall risk management strategy.

There are four climate specific risks identified which comprise both physical and transition risks and opportunities from climate change:

- Medium-term impact of climate change on our property and business, including the risk of damage caused by river or surface water flooding and the risk caused by rising temperatures and extreme weather events. The Group works closely with its principal insurer and external experts to support physical and transition climate risk assessments and strategies to implement mitigations.

- Short-term changes in environmental and climate regulation including increasing building energy efficiency and reporting requirements. Changes in legislation are monitored internally, by trade bodies of which Cadogan is a member, and our legal advisers, and suitable changes made where necessary.

- Medium-term, increasing energy and carbon pricing. Improved energy usage monitoring and management is intended to reduce consumption over time, alongside efficient equipment and renewable generation. Our energy prices were fixed under a three year contract which expires in October 2023. We will face potentially higher energy costs following that date if current high energy prices persist. Our carbon offset hedging strategy will explore the potential for pre-purchasing offsets to reduce exposure to extreme price increases in the latter half of this decade.

- Loss of social licence to operate if we are perceived not to be acting in the wider interests of the area and the country. We actively engage with the local council, the Royal Borough of Kensington and Chelsea and stakeholders in the community.

Cadogan publicly announced its new sustainability strategy, Chelsea 2030, in 2021 following its approval by the board in December 2020. Chelsea 2030 seeks to address and mitigate all the above risks.

In 2021 we conducted a climate risk review in line with the TCFD recommendations. The conclusions are summarised below, grouped under physical and transition risk.

Physical Risk

- We worked with our insurers Zurich to understand the physical risks climate change poses to our Estate, taking a building-by-building approach to modelled global risks through qualitative and quantitative scenario analysis using climate data from Jupiter Intelligence’s Climate Score Global v2.3.

- We considered risk in the short term until 2030, and medium term up to 2050, with long term information to 2100 provided for context. Our analysis focused on two distinct climate scenarios (called “Shared Socio-economic Pathways” or “SSPs”) used by the Intergovernmental Panel on Climate Change (IPCC): a scenario where global average temperature increases by under 2 degrees by the end of the century (SSP 1-2.6), and a scenario where temperatures increase by over 4 degrees by 2100 (SSP 5-8.5). Following international pledges made at COP 26 in Glasgow, we look to be on track for a climate scenario between these two.

- The scenario analysis assessed the change over time of perils including fluvial flood, precipitation, wind, hail, thunderstorm, drought, heat and wildfire. These perils were considered in the context of building vulnerabilities, including building height, presence of basements, tenant type and building structure. Together, risk was quantified by impact on building value and rental income.

- An increase in precipitation severity of approximately 6% is modelled between the baseline period and 2020-2030, and a more marked increase of 11% - 14% is projected by 2050 for both scenarios. These extreme precipitation events would see more than an average historical month’s total rain falling in 24 hours, potentially resulting in surface flooding, due to the capacity of drainage systems being exceeded.

- A small differentiation between properties regarding river flooding is observed due to terrain effects, with two properties showing a significant increase in flood risk by end of century. Properties with basements are generally more vulnerable to river and precipitation flooding, and account for over 40% of the total building value and annual rent on the Estate.

- The occurrence of severe drought conditions that impact soil moisture and reservoir storage is projected to increase by 2050 in both scenarios. Impacts of reduced soil moisture include subsidence, which affects buildings differently due to their age and type of foundations, potentially causing cracking and damage to pipes including water and gas. Other impacts of drought are felt through water availability.

- From the near-term out to the end of the century, heating is likely to remain an important requirement, although the number of hot days is also likely to increase over the century in both climate change scenarios. This is important to feed into the decarbonisation plan for the estate as heating is electrified and insulation protection provided against both extreme heat and cold.

- This physical risk is managed through both extensive consideration in new developments, and refurbishment works identified both through theoretical risk assessments and actual incidents.

Transition Risk

Three principal transition risks and mitigations have been identified as we progress towards a net zero economy:

- Risks (and opportunities) from our retail occupier concentration in high fashion and luxury goods and the fashion industry not adopting stronger ESG strategies. These risks are mitigated through our Chelsea 2030 strategy and working in partnership with occupiers and suppliers to create a more sustainable Chelsea in which brands with strong ESG strategies want to locate.

- Risk of increasing energy and carbon pricing. Our extensive energy efficiency and carbon reduction investment programme will deliver significant energy savings and protection against rising energy costs. This combined with proactive purchasing and exploration of other energy and carbon offset procurement models (such as energy trading, power purchase agreements for energy and pending issuance units for carbon offsets) will mitigate energy cost and carbon pricing risk.

- The risk of continuing changes in environmental and climate regulation. Legislation is proactively monitored, assimilated and estate management policies adapted accordingly. Through our membership of the British Property Federation we respond to consultations, contribute to industry papers and work to shape forthcoming legislation so it acts in reality as intended, ensuring we can ensure a compliant approach and support the country’s transition to a net zero economy.

IT, telecommunications and business continuity risks –The Group ensures its IT and telecommunications systems are robust and fit for purpose, with an emphasis on the development of inherent resilience and backup capability. The Group has a detailed business continuity plan which is regularly reviewed and updated. The Group undertakes regular external cyber security reviews, the last one being conducted during 2022, and implements any resulting recommendations for security improvements.

Staff are regularly reminded of e-mail and IT security threats and undergo rolling training on IT security throughout the year. As a result of its operational preparedness, Cadogan staff were able to transition seamlessly to working from home from the start of the first pandemic lockdown and IT systems have worked without any major downtime throughout the pandemic. All electronic files are stored and backed up in the Microsoft Azure Cloud. Our cyber threat response is planned to be refreshed during 2022 and we have cyber insurance in place ostensibly to provide ready access to the best IT, legal and security expertise in the event of a cyber breach or attack.

Compliance with General Data Protection Regulations (“GDPR”) is embedded within the organisation, with GDPR Champions appointed for each team, who undergo training every six months. New joiners are required to undergo compulsory GDPR training on joining and on a regular basis thereafter.

‘Nature’s Architects’ trail across the neighbourhood, in collaboration with the Museum of Architecture

Left The Anya Café Overleaf Picnics at Duke of York Square, part of the King’s Road Platinum Jubilee Party

Our Community

Chelsea 2030 Update

Contributing towards a flourishing and sustainable local community has always been central to Cadogan’s ethos.

‘Chelsea 2030’, our commitment to improving local quality of life and creating a more sustainable city, was launched in 2021 – setting out clear targets to tackle priorities including carbon emissions, air quality, greening, waste reduction, water usage and local wellbeing. To achieve this, we are working in partnership with many local stakeholders, suppliers and partners – combining forces to maximise positive impact.

Highlights from the last year include launching a comprehensive Estate-wide decarbonisation programme (including the installation of solar panels on our head office), beginning a significant "greening" project on Sloane Street, introducing a new electric cargo bike waste scheme along with planting further "pocket forests" and creating new natural ponds to foster biodiversity.

We have also combined our wellbeing, culture and charitable targets to enable greater social impact. This has involved building on our extensive social value programme with the launch of significant skills and training opportunities for the local community, while also supporting diversity within the property industry - including a new apprenticeship bursary and entrepreneurial skills programmes for local secondary school students. Given the challenging economic climate, we have also frozen rents across our community, keyworker and social housing portfolio, which we continue to subsidise by over £1.3 million (in addition to the rent freeze) each year.

The following pages bring this work to life, reviewing our performance against these ambitious targets and the governance surrounding them.

COMMITTED TO OUR COMMUNITY

Creating social value lies at the heart of our commitment to a sustainable future. The Chelsea 2030 strategy was developed in collaboration with our local stakeholders and community as well as via peer review and industry analysis. We engaged with a wide range of experts, local organisations and community members through a series of roundtables and a survey which gained over 2,000 responses from members of the local community.

Together with national frameworks and empirical research, this community consultation led to the creation of our three strategic priorities:

- Maximise local employment and skills development.

- Make a measurable improvement to our communities’ health and wellbeing.

- Enhance community cohesion between local stakeholders.

“In the context of the built environment, social value is created when buildings, places and infrastructure support environmental, economic, and social wellbeing and in doing so improve the quality of life of people.” – UK Green Building Council

Above ‘Designers at work’ sustainability workshops at Saatchi Gallery during London Fashion Week

Opposite Giant feasting table at the King’s Road Platinum Jubilee Party

Employment and Skills

TARGET

Maximise local employment and skills

Kensington and Chelsea is one of the most diverse communities in the country, with the second largest wealth gap in the UK, and a quarter of working residents earning less than the London Living Wage –inequalities which were exacerbated during COVID.

An estimated 14,800 local jobs are supported by Cadogan, with the majority of direct employment being in the retail and hospitality sectors – equivalent to nearly 20% of the Borough’s workforce. Approaching 8,000 local people are currently unemployed or economically inactive in the Borough, yet wanting to work1, and we are in a position to be able to support local recruitment.

“We are very excited to be working closely with Cadogan to open up employment and skills opportunities for residents of the Borough. We hope that this joint initiative will provide much needed access to employment opportunities, while supporting employers with their talent needs and providing links with local communities.”

– Councillor Josh Rendall, RBKC Lead Member for Skills and Enterprise

‘A

in the Day’ community competition and exhibition at the Saatchi Gallery

Therefore, in partnership with the Royal Borough of Kensington and Chelsea, we have created the role of "Employment Opportunities Coordinator" – a position dedicated to working proactively with local businesses to support their recruitment requirements. The aim is to create opportunities for local residents – including marginalised communities, young people and the longterm unemployed – by understanding the needs of individuals and employers and finding creative ways to bring them together. This includes identifying transferable skills and opportunities to reskill and upskill potential local candidates, alongside supporting businesses to provide quality, sustainable employment opportunities.

In addition, working with the Kensington and Chelsea Foundation, Cadogan has sponsored the creation of the St Giles Trust’s Job Club. This charity uses expertise and real-life past experiences to empower and engage people held back by poverty, exploited, abused, dealing with addiction or mental health problems, or caught up in crime. Since its creation in 2021, the Job Club has supported residents with CV writing and employability skills, alongside applications for Universal Credit and forms of identification. In 2022, 45 people were supported into employment or education through this service.

Cadogan is committed to paying at least the London Living Wage and supporting local upskilling in all businesses (including our leisure and hospitality operators) – we have also set this requirement for all suppliers and contractors. Our development contractors on our major sites have themselves appointed 14 apprentices and upskilled 56 people this year alone.

We support greater diversity in the property industry through participating in the Pathways to Property programme run by the Reading Real Estate Foundation, offering work experience and guidance to young people who might not otherwise have access to such opportunities. In 2022, Cadogan also created a bursary through the Worshipful Company of Chartered Surveyors, funding a student from an underprivileged background through their Real Estate degree and providing support and guidance along the way.

Together with our school engagement programme –supporting local students to develop entrepreneurial skills, facilitating workplace visits, and hosting engaging sessions to promote careers in property – we have reached over 270 individuals in targeted skills development in 2022.

CASE STUDY

Upskilling new Hospitality Talent

To provide a long-term solution to both the hospitality industry struggling to recruit and retain staff, and local unemployment challenges, Cadogan has partnered with the Royal Borough of Kensington and Chelsea and five local hotels to bring the Saira Hospitality training programme to the Borough. Through an intensive four-week training programme, work experience and personal development, 23 local people (all of whom were previously unemployed, most for over 12 months) have gained new skills and connections in the hospitality industry, with four students securing jobs before the programme completed. We will remain in touch with all students to track the longterm impacts of the programme and will consider similar initiatives targeting luxury retail and restaurant industries.

CASE STUDY Supporting Apprentices

Cadogan has employed an apprentice to work closely with our seasoned Gardens team, nurturing the next generation of urban horticulturists. We have also donated our Apprenticeship Levy to local hospitality operators – redistributing this fund which would not otherwise benefit the local economy – to smaller organisations in the Borough, enabling them to take on apprentices and upskill existing staff, supporting business growth and increasing opportunities for local people.

Opposite

Below ‘Designers at work’ sustainability workshops at Saatchi Gallery during London Fashion Week

Supporting the hospitality industry

Health and Wellbeing

TARGET

Make a measurable improvement to health and wellbeing

With particular emphasis on the health and wellbeing issues affecting the Royal Borough of Kensington and Chelsea through Chelsea 2030, Cadogan focuses on creating healthy spaces and supporting community wellbeing.

The connection between the physical environment and health is well established. Air quality and access to green spaces is key to supporting a resilient and thriving community – both of which are addressed in our targets. Our development standards include the recommendations of Fitwel and WELL healthy building standards2, enabling us to target full certification in conjunction with occupiers.

In 2022, Cadogan created opportunities for over 2,500 people to take part in activities benefiting their health, from school and community use of the Duke of York Square running track with run clubs, yoga, and sports days, to cycle maintenance workshops and walking tours. We also expanded SMART London’s ability to provide mental health support through gardening – by using our greenhouses to grow seedlings to sell and food to use in their café, local vulnerable people have the opportunity to develop skills, build connections and enjoy light exercise in a nurturing environment.

Cadogan also supports a case worker at St Giles Trust, working on their SOS Programme targeted at reaching local young people at risk of or involved in criminal exploitation and serious youth violence. Of the 52 clients the Cadogan-sponsored case worker supported in 2022, all are at reduced risk of harm or participating in criminal behaviour, 45 people were supported into employment, training or mainstream education, and 40 people reported an improvement in their wellbeing through constructive activities. This transformational work is helping young people find positive alternatives to criminal activity and reintegrate into wider society – having a positive ripple effect on their families and communities.

Through the Cadogan Charity (a shareholder of the business and run by the Cadogan family), we support the London Playing Fields Foundation – chaired by The Hon. William Cadogan – which transforms lives through sport and physical activity by protecting and promoting London’s playing fields, running social inclusion projects and directly managing several grounds across the capital.

2 Fitwel and WELL are two certification systems, accrediting buildings which meet specific health-oriented targets, such as indoor air quality and user experience.

Left Run Club at Duke of York Square

CASE STUDY Pavilion Road, Chelsea

In 2016, in response to community feedback after thorough local consultation, and despite planning policy which favoured residential accommodation, we created a "village high street" on Pavilion Road. Previously comprising service access, garages and a busy vehicle cut-through parallel to Sloane Street, the area had poor air quality and contributed little to the local community.

Following redevelopment comprising striking architecture, sensitive restoration, extensive planting, restaurants and a range of independent artisan food shops

(including a butcher, baker, cheesemonger, and fishmonger, among others) a new "village hub" was created, generating over 100 jobs. Pedestrianisation was granted by the Council in 2021 bringing much improved air quality and a social centre for the local community to congregate in –something that proved invaluable during COVID restrictions – and in 2022 attracted nearly 10 million visitors.

Maintaining a street of independent businesses that meet the community’s need creates long term social value; “[Provenance Butcher’s] Struan Robertson attributes the hight street’s success to his landlord’s careful stewardship” (Financial Times, 2 December 2022).

Above

Volunteers from Cadogan, Louis Vuitton and Moet & Chandon planting a ‘pocket forest’

CASE STUDY Cadogan Hall

Cadogan transformed a disused place of worship into a world-class music venue in 2004, to safeguard a characterful building and celebrate Chelsea’s artistic and musical heritage. It is now one of London’s leading concert venues and home to the Royal Philharmonic Orchestra.

2022 marked a triumphant year for live performances as the first undisrupted operating year following the pandemic. The remarkable turnout in both box office attendance and concerts staged matched 2019 levels, presenting over 250 live performances and attracting footfall exceeding 200,000 attendees.

An array of orchestras, artists, and ensembles from all corners of the globe were welcomed to Chelsea, highlighting the venue’s commitment to providing a diverse and inclusive space for performers and patrons alike.

The Hall successfully re-established its position as a cultural hub, offering a platform for artists and audiences to reconnect and celebrate the power of live performance. It remains dedicated to delivering a rich and varied program of live events, reinforcing London’s status as a thriving global centre for arts and culture.

Below Cadogan Hall, home to the Royal Philharmonic Orchestra

Opposite Local schoolchildren enjoy the ‘Eggs of an Era’ public art trail

“From community gardening projects to spreading happiness at Christmas, our friends and neighbours have joined hands with us to improve mental health across the Borough. There is no doubt that this community cares.” – Amelia

Mustapha, Director, SMART London

Community Cohesion

TARGET

Enhance community cohesion between local stakeholders

Kensington and Chelsea is one of the most diverse communities in the country, which presents significant opportunities and challenges. The Borough is usually associated with affluence, yet 23% of its Council Wards are among the 20% most income-deprived in England and Wales3. Our strategy for supporting and delivering social value is framed around creating inclusive and accessible spaces and supporting Chelsea’s long pedigree as a place of creative culture, which together encourage meaningful connections with the area and each other. In 2022 our community investment totalled over £430,000 – directly supporting over 2,800 individuals across 39 organisations.

As the Principal Supporters of the Kensington and Chelsea Foundation, we support grassroots initiatives across the Borough which deliver meaningful change where it is most needed. In 2021-2022, the Foundation supported 165 local causes, reaching 28,907 residents in need – detailed in the Foundation’s 2021-2022 Impact Report

Recent initiatives delivered with the Kensington and Chelsea Foundation include the creation of a new "Improving Skills and Employment Programme", funding seven impactful projects which will reach 1,275 people over the next three years – including a programme providing work experience, training and mentoring to support women with careers in construction, and a learning and development group providing 1-1 employability skills and work experience for neurodiverse adults.

In addition to our direct financial support, we have created an Endowment Fund administered by the Foundation, to which we encourage all residential and commercial occupiers joining the Estate to donate – creating a lasting positive legacy to support our local community.

We are committed to good standards of accessibility and inclusivity. In partnership with AccessAble, one of the UK’s leading providers in accessibility information, we offer up-to-date, detailed access guides to each of our destinations, making available crucial information to visitors so they can get the most out of their visit to Chelsea.

3 Ministry of Housing, Communities and Local Government (2019) English Indices of Deprivation – Income deprivation

Our programme of over 60 complimentary events for the community this year were enjoyed by many thousands of people and included: a Platinum Jubilee Street Party on the King’s Road; weekly running club; "giant egg hunt" in support of wildlife charity The Elephant Family and "Nature’s Architects" trail in collaboration with the Museum of Architecture to showcase how nature can inspire eco-friendly innovation; Chelsea’s first "Dog Day" in support of The Dog’s Trust and public sculpture series "The Chelsea Look", comprising life-size silhouettes inspired by Chelsea style icons through the years, from Vivienne Westwood to the celebrated Chelsea Pensioner. September included our first sustainability showcase as part of London Fashion Week – held at the Saatchi Gallery. "Designers at work" saw four revolutionary fashion designers run free workshops to inspire the public to embrace the circular economy, accompanied by a food market featuring 15 sustainable pioneers. The annual Chelsea Awards was created in 2019, to celebrate and reward those who contribute so greatly to Chelsea’s unique character, with hundreds gathering each year to see the award made for categories including "Community Hero" and "Cultural Champion".

Cadogan once more hosted the "Big Sleep Out" in 2022 to support local charity Glassdoor, providing targeted and long-term transitional help for the homeless. This one night in October resulted in over 130 supporters gathering and raising over £70,000 for the charity.

The Cadogan family Charity also extensively supports the historic Royal Hospital Chelsea - which today remains active in providing a home and care for 300 army veterans, amongst many other causes.

Opposite Chelsea Dog Day, part of the community events programme Below Children enjoying dance lessons at the King’s Road Platinum Jubilee party

Above

A sculpture from the ‘Eggs of an Era’ public art trail, in support of wildlife charity The Elephant Family

CASE STUDY Community Housing

We commit over £1.3million each year to subsidise affordable, community and key worker housing.

Given the challenging economic climate, we have also frozen rents across this portfolio during 2022, ensuring that many people, including nurses, teachers and police officers, can afford to live at the heart of the community to which they make such a valuable contribution.

“Living here means that I truly feel part of the local community and I can feel its ‘energy’ – my work is a huge part of my daily life and it’s important for me to be here in the centre of things. Chelsea is beautiful, vibrant and thriving, I love the neighbourhood and all it has to offer.” – Local teacher, Holy Trinity Primary School

“It makes a huge difference to have a lovely home a short distance from the hospital when I come back exhausted between shifts. I received a very warm welcome from Cadogan and love living in Chelsea, with everything I need on the doorstep and beautiful walks along the river to clear my head! - Nurse, Chelsea and Westminster Hospital

Above Picnics at Duke of York Square

CASE STUDY Twinning

Our ambition to replicate and "twin" successful Chelsea 2030 projects elsewhere in the Borough is intended to share things we have learnt, create new community connections and maximise environmental and social benefit. In 2022, we twinned Pavilion Road’s Edible Trail of seasonal native edible plants by creating a new Edible Garden at Chelsea Academy. Focussing on fruits, vegetables and herbs tailored to the local environment, this Garden aims to provide wellbeing support to the school’s students with special educational needs through gardening, alongside growing produce to be used in the school’s culinary programme.

“Everyone should have a chance to shine. A Day in Your Life has the power to change lives and uncover the creative visionaries of the future, opening doors for young people to high quality education and paid work in the creative industries.” - Alison Jackson, BAFTA Awardwinning photographer and Founder, A Day in your Life

Above and below

The local community celebrating ‘A Day in the Life’ competition and exhibition at Saatchi Gallery

Overleaf ‘Nature’s Architects’ trail across the neighbourhood, in collaboration with the Museum of Architecture

Our Commitment to a Sustainable Future

Target Summary

AIM TARGET

2030 DETAIL

CARBON EMISSIONS NET ZERO EMISSIONS Net zero emissions across Cadogan’s scope of influence

AIR QUALITY

SUPPLIER CONSOLIDATION

At least 40% of commercial tenants to join offsite consolidation scheme

ZERO-EMISSION SUPPLIERS 80% of suppliers to deliver by zero-emission transport

ELECTRIC VEHICLE INFRASTRUCTURE

All service bays and residential parking lots to have EV charging by 2025, and all new developments after 2021 to include EV charging

GREEN INFRASTRUCTURE

IMPROVED GREEN INFRASTRUCTURE

WASTE WASTE REDUCTION

Improve quality and quantity of green infrastructure, including a 25% increase in the Urban Greening Factor

WATER

WATER USE REDUCTION

Send zero commercial and operational nonhazardous waste to landfill

Reuse or recycle over 90% of commercial and operational non-hazardous waste

Reduce absolute mains water consumption by 50%

Carbon

Net zero emissions across Cadogan’s scope of influence by 2030

We have updated our net zero pathway, taking into account the emissions reductions achieved so far, increases in actual data provision and improved estimates for the remainder, and updated Estate retrofit modelling setting out the reductions we expect to achieve in building performance across Chelsea. We now believe we can achieve 53% emissions reduction through our pathway actions of tackling embodied carbon in developments, reducing operational impacts across landlord and occupier spaces, and maximising renewables – leaving 16,646 tCO2e to offset in order to reach net zero in 2030, together with continued emissions reductions targeted beyond 2030.

Since our 2019 baseline of 35,664 tCO2e, we have achieved a carbon saving of 10%. The greatest reductions have come from energy efficiency measures across landlord and tenant spaces, low-carbon development and supplier engagement.

Whilst landlord procured energy only represents 10% of our total footprint, we have seen a 7% reduction since 2019, driven by efficient lighting and heating retrofit, improved heating controls, and greatly improved data quality leading to easier analysis and identification of opportunities for improvement. Occupier consumption comprises 62% of our impact and our operational focus on improving occupier data sharing, energy monitoring and engagement is resulting in 3% energy reductions compared to 2019 (excluding the two abnormal COVID years).

We have committed to designing and building net zero buildings. In every project we aim to reduce lifecycle emissions by prioritising retention and material reuse, adopting smart design, employing the latest methods of construction and ensuring net zero is a central target in every development from inception. With long-term stewardship in mind, we design and build for resilience and adaptability in a changing environment and society.

We are signatories to the Better Buildings Partnership Climate Change Commitment and recognise our role as one in which we can support industry-wide innovation and act as a catalyst for change.

We are signatories to the Better Buildings Partnership Climate Change Commitment and recognise our role as one in which we can support industry-wide innovation and act as a catalyst for change.

STREAMLINED ENERGY AND CARBON REPORTING

Note: Energy relating to transport (including business travel) is extremely low so excluded from the table above – but it is included in our total footprint.

CASE STUDY Supplier Engagement

Tackling the 20% of our footprint which comes from our supply chain requires a collaborative approach. 2022 saw engagement with over 100 of our closest supply partners, across a scale of size and sector (from sole traders to listed companies, from planning agencies to contractors), to enable them to measure their carbon footprints. Through a series of campaigns, workshops and meetings, we now have actual supplier emissions reporting for 26% of our supplier spend.

This improves the accuracy of our emissions reporting and ultimately helps us to better manage our joint impact. Through 2023 we will broaden and strengthen this engagement, supporting our partners in emissions reduction activities and working towards our net zero target.

Below ‘Strawberries & Screen’ Wimbledon al fresco at Duke of York Square

Air Quality

TARGET

Supplier consolidation, zero-emission transport, and EV charging infrastructure by 2030

During initial public consultations, air quality was identified as the most important local environmental concern. We are addressing this through a three-pronged approach: reducing vehicle journeys, encouraging zero-emission transport, and supporting this with relevant infrastructure.

In 2022 air pollution continued to improve in Chelsea. Whilst the annual maximum level of nitrogen dioxide did not change year-on-year, it was 16% lower than 2019 levels4. In partnership with Breathe London (a network of air quality sensors across the capital, run by the Environmental Research Group at Imperial College London), we sponsor two sensors on the Estate to measure nitrogen dioxide and PM2.5. These indicate particulates on Sloane Street are half that of the UK target, but still double the goal set by the World Health Organisation. We will continue to use these sensors to monitor air quality throughout the Sloane Street public realm improvement works and beyond.

An extensive freight and logistics survey of Chelsea retailers was launched this year in collaboration with the King’s Road and Knightsbridge Partnerships. 250 commercial occupiers completed the survey, which will identify opportunities to reduce pollution and congestion over the long-term, as well as improve waste management in Chelsea. We will be sharing results and recommendations with our occupiers in 2023 and will use this to seek to create a lasting positive impact to make the neighbourhood a cleaner and less congested place to live, work and visit.

In collaboration with Cross River Partnership, we engaged five suppliers who regularly drive vehicles within the Estate. By monitoring vehicle movements for two months, we were able to identify the most suitable electric vehicle replacement, offer constructive and specific advice on payloads, charging and financial models, and the most suitable locations for charging infrastructure. This resulted in three suppliers commencing the transition of their fleets to electric vehicles sooner than originally planned, reducing airborne pollutants and emissions.

“We recognise the urgent need to decarbonise the construction industry. Measuring and reporting our carbon emissions helps us to ensure that we are utilising every opportunity to minimise our environmental impact, protects the health and wellbeing of our operatives, promotes accountability and helps us to track progress towards our net zero target.”

– PJ Harte, Restoration and Refurbishment Contractors

“Measuring our carbon footprint is allowing us to identify hotspots, which we are working in collaboration with Cadogan to reduce over time.”

– Oakwood Property Services Ltd

CASE STUDY

Consolidating and Recycling

To reduce the number of large waste vehicles and eliminate unsightly waste left on our streets, we have introduced a waste consolidation point and e-cargo bike programme. While focusing initially on Sloane Street, this facility for waste storage and sorting enables rapid and zero-emission waste collections, improving air quality as well as reducing noise and congestion. Waste consolidation schemes like this already benefit 36% of Cadogan occupiers, reducing emissions from waste collection by 35%.

Alongside our extensive public realm improvement works, this initiative will help to ensure that Sloane Street becomes a cleaner, greener and more beautiful luxury retail and leisure destination.

Below Duke of York Square

Green Infrastructure

TARGET Increase Urban Greening Factor by 25% by 2030

The environmental and social benefits provided by nature are numerous5 – from improving air quality and stabilising air temperatures, absorbing carbon and regulating flood waters, to mental and physical health benefits.

From a baseline Urban Greening Factor6 of 0.18, we have to date achieved a 12.3% increase to 0.20, alongside the creation of an additional 540m2 of green space.

Our approach has long focused on climate resilience, acknowledging that this requires a transition to ‘nearnative’ species and a holistic, systematic approach. This does present challenges, such as how we improve bare ground cover under trees without extensive watering to help plants establish.

By partnering with academic specialists, including the Natural History Museum, Professor James Hitchmouth and Dr Mark Spencer, we have set a biodiversity baseline from which to improve across our 14 gardens. Through 2022, our biodiversity focus has included the introduction of ponds and expansion of wildflowers and pollinator-friendly planting. Whilst a small intervention, natural ponds bring a significant benefit to local wildlife – and have enabled frogs to thrive in this small corner of Chelsea.

Building on the success of the Heritage Pocket Forest on Pont Street planted in 2021, our second "rewilding" project in partnership with Louis Vuitton, Moët & Chandon and SUGi resulted in 240m2 of previously hard surfaced land planted with 780 trees and shrubs. Located at the north end of Chelsea Square between the Royal Marsden and Royal Brompton hospitals, the Serenity Pocket Forest aims to create a connection with nature and an oasis of calm for hospital workers, visitors and local residents alike –providing health and wellbeing benefits in addition to environmental gains.

“Our mission is to restore native ecosystems in cities around the world, providing an antidote to the monoculture tree planting we often see. One small ‘pocket forest’ supports a diverse ecosystem of pollinators while locking in carbon and can grow to the density of a 100-year-old forest in about 20 years.”– Elise van Middelem, Founder of SUGi

Above A map by artist Cierra Block, celebrating Chelsea’s iconic trees Opposite Local school children get involved with planting a pocket forest

CASE STUDY

Case study: Greening Sloane Street

A major transformation of Sloane Street has begun, with the aim to create a stunning green boulevard spanning from Knightsbridge to Sloane Square, due for completion at the end of 2024. The £46 million investment includes significant widening of the street’s pavements, along with a magnificent planting scheme, elegant street furniture and enhanced lighting while subtly "designing in" additional security measures, to create a more welcoming environment for pedestrians. Planting is being overseen by multiple Chelsea Flower Show winner,

Andy Sturgeon, who will follow a "royal" colour palette of rich maroons, reds, purples and blues for the diverse and climate-resilient mix of flowers, shrubs and over 100 new trees.

With the project’s partners committed to a more sustainable future, the whole life of the scheme is designed to be low carbon. In addition to the significant planting on the street, a newly cultivated "pocket forest" (created in a partnership between Cadogan and Louis Vuitton) extends the greening, beehives and ponds in Cadogan Place Gardens encourage biodiversity, and new waste collection bikes are taking trucks off the road and further supporting the improvement of local air quality.

Above An artist’s impression of the Sloane Street transformation

Proposed improvements looking south from Emilia Wickstead.

CASE STUDY

Cadogan partners with Louis Vuitton and Moët & Chandon to create second "Pocket Forest"

At the heart of a residential square and adjoining two hospitals (the Royal Brompton and Royal Marsden) the "Serenity Pocket Forest" has resulted in 240m2 of previously hard-surfaced land planted with 780 trees and shrubs.

The pocket forest was first displayed at the entrance to Chelsea Flower Show in 2022, illustrating how minimal urban space can create maximal biodiversity, reintroduce indigenous species and reconnect people with nature in our cities.

It is the second time that SUGi, the globally renowned organisation dedicated to restoring 100% native forests in urban spaces, has joined forces with Louis Vuitton and Cadogan to increase the neighbourhood’s biodiversity and contribute towards healthier air quality (our first project saw a pocket forest planted on Pont Street in Chelsea in autumn 2021). With the intention of becoming selfsustaining withing three years, this project is a blossoming example of urban rewilding and ecological sustainability.

CASE STUDY

Nurturing Innovation

Innovative technology offers significant opportunities to help tackle global challenges. Through 2022 we partnered with Gentian to use satellite data to remotely assess viability for living roofs in Chelsea. This is an essential first step in greening our buildings – taking a portfoliolevel, science-based approach to deliver the greatest impact. We expect to install our first living roofs in 2023.

Bottom

Below left and right Beehives on Sloane Street, in Cadogan Place Gardens

An artist’s impression of the ‘Serenity Forest’ once established

Waste

TARGET

Zero non-hazardous waste to landfill and 90% recycling or reuse by 2030

Our approach focuses on resource circularity, ensuring materials are sustainably sourced and then have as many lives as possible – from designing for longevity, to connecting materials to waste streams to maximise recycling.

Waste on the Estate comes from both construction activities and the day-to-day operations of our occupiers and public spaces. Construction waste volumes vary significantly, but generally have a much higher recycling rate – our focus here is to increase the quality and quantity of data we get from our smaller contractors and reduce waste generation overall through considered focus on material retention and reuse at the beginning of projects.

Operationally, recycling rates are more challenging to influence, but we continue to work in close partnership with our occupiers to provide them with the recycling options they need, as well as focus on optimising bin positioning and signage in the public realm to encourage more effective recycling. We introduced food waste recycling at both Duke of York Square and Pavilion Road in 2022, as well as introducing coffee cup recycling, cartons and flexi-plastics. The introduction of new drinking water fountains in Duke of York Square and on Sloane Street aims to reduce single-use plastic and waste, supporting our virtually single-use plastic free Fine Food Market and programme to tackle single-use plastic across the Estate.

In 2022 there was a 53% increase in the Estate’s operational recycling rate and we maintained over 90% recycling for construction projects. We send zero waste to landfill, and waste not recycled is sent to energy recovery.

CASE STUDY

The full material lifecycle

Our aim is to reduce the volume of total waste produced on the Estate, and maximise reuse and recycling, in accordance with the circular economy. This requires a holistic approach: working in partnership with retailers to understand what materials they use and dispose

of (particularly packaging), and then providing targeted waste solutions. Through 2022 this led to the introduction of new waste streams, including food and cartons, and impacted purchasing decisions of retailers, away from plastic and towards recyclable and reusable items. This not only improves recycling rates but also streamlines processes, reduces vehicle journeys, and aims to reduce costs.

Below

The single-use plastic free weekly food market at Duke of York Square

Water

TARGET

50% reduction in mains water consumption by 2030

Reducing water usage remains one of the most challenging targets in our Chelsea 2030 strategy, as 94% is consumed by occupiers and is therefore outside of our direct control. However, as a resource under increasing pressure from climate change, addressing water use and conservation remains vital.

From a baseline of 490,683m3 in 2019, we have achieved a water use reduction of 10%. Despite returning to normal operations following two abnormal COVID years, we saw a 9% reduction in occupier water consumption in 2022.

Together with climate resilient planting requiring less water, weather-sensitive irrigation systems, and highly water efficient cleaning, we continue to review our processes and standards across the Estate to reduce water consumption – achieving a 54% reduction in landlord water consumption since 2019.

CASE STUDY

Occupier water audits

With 68% of our water footprint coming from commercial occupier consumption, working in partnership is essential to understanding and reducing consumption. Cadogan has commissioned a series of water audits for commercial occupiers to identify opportunities for water (and associated energy) savings.

Simple cost-effective interventions identified include equipment and control updates, leakage remediation and pipe insulation. We will be rolling out these audits to commercial occupiers throughout 2023, to reduce energy and water wastage across the Estate.

Opposite Greenhouses in Cadogan Place Gardens

Below

Enjoying the fountains at Duke of York Square

Customer Commitment

We are committed to delivering an outstanding experience for our customers who live and work within the Estate, to foster long lasting relationships and contribute to a strong sense of community across the neighbourhood.

We listen carefully to customer feedback and respond accordingly where we can. We receive real time feedback through our customer research partner RealService7 which provides the insight to improve continually the customer experience and helps to shape our business strategy.

COMMUNICATION AND ENGAGEMENT

We seek to maintain a regular dialogue with our customers, neighbours and the wider community throughout the year. This helps us to understand their priorities and work in partnership, as well as keeping them informed.

From the "Welcome Pack" received by occupiers on arrival to the Estate, we communicate frequently with our retail and hospitality customers. This includes regular newsletters and seminars to update them on neighbourhood news (from footfall and sales trends to new openings, public realm investment and lobbying campaigns) and work alongside them on a destination marketing and events programmes. In 2022, we hosted five breakfast briefings with over 450 attendees, providing an opportunity to network and share these neighbourhood updates.

All of our residential and commercial customers receive complimentary access to our premium "Cadogan Concierge" service, which assists with day-to-day requests as well as bringing our community closer together – retail customers benefit from reaching an exclusive residential audience, while our residents enjoy invitations and exclusive offers from the array of shops, restaurants and cultural attractions on their doorstep. Our newsletters, magazines and digital channels ensure that we keep audiences across the Estate informed. From Sloane Square magazine to Cadogan VIP and destination websites, newsletters and social feeds from the King’s Road, Sloane Street, Duke of York Square and Pavilion Road, each works independently to reach a combined audience of over 300,000 both locally and beyond, keeping followers up to date and creating continual reasons to enjoy the local area, or visit Chelsea.

This extensive information helps customers become familiar with the area and their new home or business space, as well as informing them of the services we provide.

Cadogan launched the King’s Road Privilege Card scheme in 2022, which aims to encourage localism – supporting businesses while rewarding residents and local workers for doing so. It already has over 5,000 members, with 80 participating businesses who offer a range of incentives.

We seek to maintain a regular dialogue with our customers, neighbours and the wider community throughout the year.

Sloane Square magazine, produced by Cadogan for the community

The team "on the ground" includes Area Supervisors who live locally and are key to our customer facing service provision. They are usually "first responders", central to our 24/7 emergency response capability and carry out regular inspections of all buildings. The feedback on this team consistently highlights how approachable, friendly, helpful and knowledgeable they are.

2022 also saw Cadogan initiate and lead the creation of two new neighbourhood ‘Business Improvement Districts’ – the King’s Road and Knightsbridge Partnerships – to secure significant new private sector investment into the district over five years, focusing on pressing issues such as security, environmental upgrades and promoting the area.

CONSULTATION

We are constantly investing in upgrading the Estate through maintenance, restoration, refurbishment and redevelopment activities – allowing us to enhance the wider environment and deliver homes and business space that meets the need of our customers.

Our aim is to be exemplary in the way in which we consult and engage locally, because it is crucial to understand local views and keep the community informed. Through this approach, we build trust and are able to adapt and respond to the changing needs of society, customers and markets. This helps to ensure the area remains relevant and desirable to both residents and visitors, now and for the future.

OUR SUPPLIERS

We work with a wide range of external advisors, contractors, suppliers and partners and particularly value long-term relationships with people and organisations who share our values and desire to deliver excellent results. They are expected to operate ethically and responsibly, ensure high standards of health and safety and support a positive relationship with our customers and the communities within which we operate. We pride ourselves on being a good client that consistently treats our suppliers fairly and transparently, while expecting commercially competitive outcomes.

We host events and webinars for groups such as construction contractors, through which we can share knowledge and best practice on topics including health and safety, heritage and community engagement. Our suppliers are selected carefully because we see them as an extension of our own team, working in genuine collaboration, motivated by the same values and highest of standards.

Our aim is to be exemplary in the way in which we consult and engage locally

Chelsea & Knightsbridge NEIGHBOURHOOD GUIDE

The King’s Road Privilege Card

STATEMENT OF COMPLIANCE WITH SECTION 172 OF COMPANIES ACT 2006

Throughout 2022, the Directors have performed their duty to promote the success of the Company under section 172 of the Companies Act 2006, taking consideration of:

- the likely long-term consequences of decisions

- the interests of stakeholders, including amongst others: employees, customers, suppliers, local authorities and local communities, by engaging with them to understand the issues to which they must have regard

- the impact of our actions on our local communities and the environment

- the company’s purpose and values including maintaining a reputation for high standards of business conduct

- the need to act fairly between members of the company

The Cadogan Group has an association of over 300 years with Chelsea, where it has been and remains the largest landowner. The Group has always taken a long-term view, promoted by its members who see it as their duty to hand over the business to the next generation in a better condition than they inherited it, and strongly supported by the Board. The Group’s success is judged by its members not only on measures of commercial returns but also its reputation, based on the way it deals with and treats its stakeholders and local communities.

Our core objectives, set out in page 2 of this report, encapsulate the above.

More information on the Group, its purpose and relationships with stakeholders is provided in the Strategic Report pages 8 to 47, Our Community pages 48 to 89 and our website www.cadogan.co.uk

Opposite Chelsea Dog Day, a new addition to the community events calendar

Methodology and Governance

METHODOLOGY

This GRI-compliant report follows the GHG Protocol, and UK Green Building Council and Better Buildings Partnership Climate Change Commitment frameworks for carbon reporting.

All environmental targets reflect the operational boundary of The Cadogan Estate, including all Cadogan Group Limited owned buildings and investments. In 2022, 6 new properties were acquired and added, and 54 were sold therefore removed from the reporting scope.

Scope 1 emissions are direct emissions from activities controlled by us that release emissions into the atmosphere, and scope 2 emissions are indirect emissions associated with our consumption of purchased energy. Cadogan’s scope 1 comprises emissions from natural gas, diesel, fuel oil and refrigerant gases, and scope 2 emissions are from electricity purchased for common areas and shared services. All material sources of scope 1 and 2 emissions are reported, with only 2% of electricity and 39% of gas consumption estimated. Fuel oil is reported where information is available, but the small data gaps are not material to total impact. Energy is reported in kWh and converted to tCO2e using location-based DEFRA emissions factors, with no normalisation applied. Intensity metrics refer to the floor area served by the energy measured, taking note of where electricity might only supply common parts but gas supplies whole buildings.

Scope 3 emissions are those that are a consequence of our business activities, but which occur at sources we do not own or control. The GHG Protocol identifies 15 categories of which 9 are relevant to us. The table below describes how each scope 3 category is treated in our reporting. In 2022 we made a significant effort to increase the percentage of actual data used in scope 3 reporting, meaning that 30% of scope 3 emissions in 2022 are based on actual utility data rather than estimated. This includes actual data covering 36% of occupier space and 26% of supplier spend.

Scopes 1 and 2 calculation methodologies have remained the same as previous year’s reporting, and scope 3 has been updated as follows:

- Upstream emissions now use the US EnvironmentallyExtended Input-Output (EEIO) emission factors rather than Quantis factors, in order to improve the accuracy of reporting given their improved granularity and more recent issuance. This has led to a 10-fold decrease in previous emissions estimates, and therefore we have restated relevant emissions for every year since our baseline of 2019.

- Cadogan Income Fund properties are accounted for in scope 1 and 2 (as direct managed properties) rather than scope 3 (as investments). With a carbon impact of 16 tCO2e, this has not required a restatement of previous years.

- FERA (Fuel- and Energy-Related Activities) emissions for scope 3 categories (development energy, occupier energy, business travel, commuting, and other transport) are now accounted for within those scope 3 categories, rather than in the FERA category, according to best practice.

- Water emissions from development activity, investments and occupiers are now excluded, according to best practice. Water consumption is still measured and reported as part of or water reduction target, but exclusion from the footprint led to a 1.5% decrease in occupier emissions and a restatement.

- Commuting now includes the new DEFRA factor for working from home, replacing our own estimation methodology used in previous years. With only 0.2% of emissions coming from this category, no restatement has been made.

- Occupier emissions have been restated, with an improvement in floor area data and vacancy rates resulting in better estimations. The same BEES benchmark has been used as in previous years where actual data is not available.

More detail on our scope 3 emissions calculation methodology can be found on the next page.

This category includes emissions from developments: site energy (including FERA), waste generation, and embodied carbon of materials used in construction. We work with a consultant to calculate the total embodied carbon emissions for each medium and large development, with these emissions reported in the year of project completion. Where embodied carbon data is not available, emissions are calculated by multiplying procurement spend by EEIO emission factors for each relevant economic sector of spend. Site energy and waste data are reported per project using data provided by relevant contractors. Purchased

Supplier-reported emissions (pro-rata for turnover derived from Cadogan activities) are calculated from energy reporting and DEFRA emissions factors. Where primary supplier data is not present, emissions are calculated by multiplying procurement spend by EEIO emission factors for each relevant economic sector of spend. Landlord

Emissions from landlord-purchased water, including water subsequently consumed by occupiers. This excludes water used in construction activities and water procured directly by occupiers, but includes properties managed by a third party who buy water on Cadogan’s behalf. Actual consumption in cubic meters is converted into emissions using location-based DEFRA emissions factors. Capital

This category reflects emissions from capital goods purchases made by Cadogan in 2022, including but not limited to new vertical transport, HVAC equipment and machinery. Emissions are calculated by multiplying procurement spend by relevant EEIO emission factors – noting to deduct spend from supplier emission estimates above to avoid double counting.

activities Yes

Upstream transportation & distribution Yes

Waste Yes

Transmission and distribution (T&D) and well-to-tank (WTT) losses associated with landlord-procured electricity and natural gas. This excludes FERA associated with Scope 3 energy (development energy, occupier energy, business travel, commuting, and other transport), as this is included with the respective scope 3 energy emissions figures for those categories.

This category includes emissions generated from the transport of materials delivered to, and waste removed from, our 2 major construction sites. Data is not extrapolated to medium and minor sites. The calculation multiplies primary transport data by the relevant DEFRA emissions factor, and includes FERA.

Emissions associated with waste produced by the landlord, and occupier where reported. Where we don’t have tenant reported waste data, we have not extrapolated across the portfolio. Emissions exclude development and refurbishment waste, which is included in Scope 3: Purchased Goods & Services –Developments. Emissions are calculated by multiplying weight of waste by the relevant DEFRA emission factor for different treatment methods.

Calculated by multiplying distance and type of travel by relevant DEFRA emission factor, and includes relevant FERA.

Emissions associated with the commute of Cadogan employees and homeworking, as reported with no extrapolation. Calculated by multiplying distance and type of travel, and number of homeworking days, by relevant DEFRA emission factor.

Upstream leased assets No

Downstream transportation & distribution No

Processing of sold products No

N/A: Cadogan does not lease assets, so there are no emissions to report in this category.

N/A: Cadogan does not manufacture products, so there are no emissions to report in this category.

N/A: Cadogan does not manufacture products, so there are no emissions to report in this category. Use of sold products No

End-of-life treatment of sold products No

Downstream leased assets Yes

N/A: Cadogan does not manufacture products, so there are no emissions to report in this category.

N/A: Cadogan does not manufacture products, so there are no emissions to report in this category.

Emissions associated with occupier-purchased energy (including FERA), and refrigerants where reported. Occupier water emissions are excluded, and occupier waste is included in Scope 3: Waste. Where actual energy consumption data is available, emissions are calculated by multiplying metered consumption by relevant DEFRA emission factors. Where no actual data received from occupiers, emissions are calculated by multiplying the Net Lettable Area by the most relevant Building Energy Efficiency Survey (BEES) benchmark.

Franchises No

N/A: Cadogan does not have any franchises, so there are no emissions to report in this category.

Investments Yes

Emissions from the four Cadogan owned hotels is calculated by multiplying actual metered energy consumption by relevant DEFRA emission factors, including FERA.

GOVERNANCE

Our Chief Executive has ultimate responsibility for climate-related risks and opportunities. The Board has overall responsibility for oversight of risk and opportunities, undertaking an annual assessment of principal risks facing the business – which includes climate-related risks. Climate-related risks and opportunities are considered in long-term strategy setting, acquisitions and investment decisions.

The Board is updated on sustainability and climaterelated performance twice a year, which this year has focussed on decarbonisation and a detailed plan to manage risks of transitioning to a net zero estate.

Ongoing ownership and management of all sustainability and climate-related risks and opportunities is led by the Head of Sustainability, with support from all departments. Our commitment to address climate-related risk and generate value for our community is embedded across the business, with all teams owning relevant targets and key performance indicators of Chelsea 2030 reported internally on a quarterly basis

A dedicated Decarbonisation Working Group provides specific oversight and coordination to estate decarbonisation and the journey to net zero, reporting to the Board annually.

We recognise the importance of the Taskforce for ClimateRelated Financial Disclosures (TCFD), with this report including relevant TCFD recommendations as follows:

GOVERNANCE

STRATEGY

RISK

Strategic Report: page 87

Strategic Report: pages 14 to 17, and 64 to 68

Strategic Report: pages 45 to 47

METRICS & TARGETS Strategic Report: pages 64 to 68

INDEPENDENT ASSURANCE STATEMENT

We have obtained external limited assurance on 2022’s scopes 1 and 2 carbon emissions (metrics identified with * in the tables above), in accordance with ISAE 3410 – please see BDO’s Assurance Statement here. In addition, we have undertaken pre-assurance/ readiness for Scope 3 this year and intend to obtain limited assurance for principal scope 3 categories next year.

SANJAY PATEL FINANCE DIRECTOR

4 May 2023

Opposite Crowds enjoy the Chelsea Christmas Lights switch-on

Overleaf

‘Designers at work’ sustainability workshops at Saatchi Gallery during London Fashion Week

Awards & Recognition

OUR RECENT AWARDS AND RECOGNITION INCLUDE:

EDIE AWARDS

NATURE AND BIODIVERSITY PROJECT OF THE YEAR

Shortlisted for our heritage forest

GREAT BRITISH BRANDS

CADOGAN

Winner, ‘Championing Community’ Award

LABC BUILDING EXCELLENCE AWARDS

BEST NON-RESIDENTIAL EXTENSION OR ALTERATION

Winner, for Durley House, Beaverbrook Town House

LABC BUILDING EXCELLENCE AWARDS

BEST CONVERSION OR ALTERATION TO AN EXISTING HOME

Highly Commended for Cadogan Gardens

LONDON LIFESTYLE AWARDS

LONDON’S FAVOURITE LIFESTYLE STREET

Winner for Duke of York Square

ESTATES GAZETTE AWARDS

‘UK COMPANY’

Shortlisted

Governance and Financial Statements

Directors and Secretary

LIFE PRESIDENT

DIRECTORS

* Non-executive

THE EARL CADOGAN KBE DL

VISCOUNT CHELSEA DL* Chairman

THE HON. JAMES BRUCE* Deputy Chairman

HUGH SEABORN CVO Chief Executive

SANJAY PATEL Finance Director

CHARLES ELLINGWORTH*

JOHN GORDON*

HARRY MORLEY*

DAME ALISON NIMMO DBE*

FRANCIS SALWAY*

SECRETARY

REGISTERED OFFICE

COMPANY NUMBER

AUDITOR

PAUL LOUTIT

10 DUKE OF YORK SQUARE LONDON SW3 4LY UNITED KINGDOM 2997357

BDO LLP

55 BAKER STREET LONDON W1U 7EU

Directors’ Report

The directors present their report and the financial statements for the year ended 31 December 2022.

PRINCIPAL ACTIVITY AND REVIEW OF THE BUSINESS

The principal activity of the Group during the year continued to be property investment. The Group’s other activities include the operation of a concert hall and hotels. A review of the Group’s business during 2022 and its future prospects is contained in the Strategic Report on pages 8 to 47.

DIVIDENDS

Interim dividends of £76,571,000 (2021 – £34,119,000) were declared and paid during the year.

RISK MANAGEMENT

A summary of the principal risks and uncertainties has been included in the Strategic Report on pages 41 to 47.

DIRECTORS

Of the directors listed on page 92, all held office for the financial year and up to the date of this report, except Dame Alison Nimmo who was appointed to the Board on 10 March 2022.

The ultimate holding company maintains liability insurance for its directors and officers and for those of its subsidiaries in respect of proceedings brought by third parties, subject to the conditions set out in section 234 of the Companies Act 2006. Such qualifying third party indemnity provision remains in force as at the date of approving the Directors’ Report.

CHARITABLE CONTRIBUTIONS

The Group’s direct charitable contributions for the year were £425,000 (2021 – £273,000). In addition, the Cadogan Charity, a shareholder in the company, makes donations to a variety of local and national charities.

GOING CONCERN

The group’s business activities, together with the factors likely to affect its future development, its financial position, financial risk management objectives, details of its financial instruments and derivative activities, and its exposures to price, credit, liquidity and cash flow risk are set out in the Strategic Report on pages 8 to 47.

The group has considerable financial resources derived from an established investment property portfolio in prime central London. The group has substantial longterm committed financing arrangements and has access to overdraft and revolving credit facilities from its bankers. The overdraft is renewed annually and therefore not committed for the full review period.

The directors have considered the appropriateness of adopting the going concern basis in preparing the financial statements for the year ended 31 December 2022 taking into account new inflationary pressures on the economy, consumers and our tenants and the possibility of an economic downturn. The assessment is based on the Group’s experience over the last three years and financial forecasts for the periods to 31 December 2024 overlaid with a severe but plausible downside economic downturn scenario.

The budget for 2023 has been prepared prudently. Assumptions regarding rent receipts and lease renewals are more prudent than our actual experience during 2022. Development and investment activity increases further during 2023. Property values are assumed to fall by 5% on average in 2023.

The Group has also assessed a severe but plausible downside scenario based on the occurrence of an economic downturn having an impact similar to that of the pandemic in its first year. An economic downturn would reduce sales for our retail, leisure and hospitality tenants, damaging their cash flow and ability to pay rent. Trading would take at least 12 months to recover. The main impacts would be a further fall in property values, a decline in rent collections for at least 12 months, with a slow recovery thereafter and an increase in impairments and rent concessions.

For 2023 and 2024, we have assumed there would be no new financing activity other than repayments of maturing private placement loan notes of £11.6m in August 2023, annual payments in March of £4m on a long-term loan and the receipt of £50m in September 2024 from the delayed drawdown of private placements undertaken in 2022.

The severe but plausible downside scenario modelled demonstrates that over the period to 31 December 2024 the group has significant liquidity to fund its ongoing operations and is operating with ample headroom above its debt financing covenants without the need to rely on raising new financing. Asset values would have to fall by 38% from 2022 closing values when the covenant is measured as at 31 December 2023 and by 33% from closing 2022 values over two years as at 31 December 2024 to breach the gearing covenant. To breach the interest cover covenant, operating profit before capital items would have to fall by 50% compared to budget in 2023 and by 50% compared to the forecast for 2024.

Based on these considerations, our experience of the past impact of economic downturns on the business and the directors’ knowledge of Cadogan’s property portfolio and the market in which we operate, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.

DIRECTORS’ RESPONSIBILITIES STATEMENT

The directors are responsible for preparing the annual report and financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 102. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the company and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to:

- select suitable accounting policies and then apply them consistently;

- make judgements and estimates that are reasonable and prudent;

- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

DISCLOSURE OF INFORMATION TO THE AUDITOR

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with preparing its report, of which the auditor is unaware. Having made enquiries of fellow directors and the Group’s auditor, each director has taken all the steps that they are obliged to take as a director in order to make themself aware of any relevant audit information and to establish that the auditor is aware of that information.

AUDITOR

BDO LLP were appointed as auditor during the year. A resolution concerning the re-appointment of BDO LLP as auditor will be proposed at the forthcoming annual general meeting.

By order of the board

PAUL LOUTIT SECRETARY

4 May 2023

Independent Auditor’s Report

OPINION ON THE FINANCIAL STATEMENTS

In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2022 and of the Group’s profit for the year then ended;

• the financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of Cadogan Group Limited (“the Parent Company”) and its subsidiaries (“the Group”) for the year ended 31 December 2022 which comprise Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Company Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated Statement of Financial Position, Company Statement of Financial Position, Consolidated Statement of Cash Flows, and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

INDEPENDENCE

We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

CONCLUSIONS RELATING TO GOING CONCERN

In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group or Parent Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

OTHER INFORMATION

The Directors are responsible for the other information. The other information comprises the information included in the Strategic report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we

identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

OTHER COMPANIES ACT 2006 REPORTING

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

• the Parent Company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

RESPONSIBILITIES OF DIRECTORS

As explained more fully in the Directors’ report, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of noncompliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Through our knowledge of the Group and its sector we obtained an understanding of the legal and regulatory framework applicable to the Group and the sector in which it operates and considered the risk of acts by the Group that were contrary to applicable laws and regulations, including fraud. We performed our own checks of compliance with relevant requirements including, but not limited to, the Companies Act 2006 and legislation relevant to the rental of properties. We considered the Group’s own control environment for monitoring its compliance with laws and regulation, in addition to performing our own procedures.

Our procedures included agreeing the financial statement disclosures to underlying supporting documentation where relevant, review of Board and Committee meeting minutes, and enquiries with management as to their identification of any noncompliance with laws and regulations.

We assessed the susceptibility of the financial statements to material misstatement, including fraud and considered the fraud risk areas to be revenue recognition and management override of controls.

We addressed the risk of management override of controls, by testing a sample of journals processed during the year to supporting documentation and evaluating whether there was evidence of bias by management or the Directors that represented a risk of material misstatement due to fraud.

Regarding the risk of intentional misstatement of revenue, our procedures included setting expectations for the annual revenue to be recognised for the year for each property, comparing it to the actual amounts recognised and investigating variances. We confirmed lease details back to the underlying signed agreements and a sample to receipt of cash (where amounts had been received prior to the year-end).

We agreed all bank balances and loans to direct bank confirmations and agreements.

We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities

This description forms part of our auditor’s report.

USE OF OUR REPORT

This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

THOMAS EDWARD GOODWORTH SENIOR STATUTORY AUDITOR

For and on behalf of BDO LLP, Statutory Auditor London, UK

5 May 2023

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

p.93

p.89-90

Sculpture of iconic local Vivienne Westwood, by Roman Lokati for Kensington & Chelsea Art Week

Pavilion Road Opposite Cadogan Hall

Consolidated Income Statement

For the year ended 31 December 2022

Notes 1 to 24 form an integral part of these financial statements.

Statements of Comprehensive Income

Consolidated Statement of Comprehensive Income

Company Statement of Comprehensive Income

Notes 1 to 24 form an integral part of these financial statements.

Statements of Changes in Equity For the year ended

31 December 2022

Consolidated Statement of Changes in Equity

Company Statement of Changes in Equity

Notes 1 to 24 form an integral part of these financial statements.

Consolidated Statement of Financial Position

Notes 1 to 24 form an integral part of these financial statements.

Company Statement of Financial Position

The group financial statements consolidate the financial statements of Cadogan Group Limited and all its subsidiary undertakings drawn up to 31 December each year. No income statement is presented for Cadogan Group Limited as permitted by section 408 of the Companies Act 2006. The profit for the company for the year is set out in note 9.

Notes 1 to 24 form an integral part of these financial statements.

Consolidated Statement of Cash Flows For the year ended

31 December 2022

Notes 1 to 24 form an integral part of these financial statements.

FOR THE YEAR ENDED

31 DECEMBER 2022

1. Accounting Policies

(A) STATEMENT OF COMPLIANCE

Cadogan Group Limited is a private company limited by shares incorporated in England (registered number 2997357). The Registered Office is 10 Duke of York Square, London, SW3 4LY.

The financial statements of Cadogan Group Limited were authorised for issue by the Board of Directors on 4 May 2023.

(B) BASIS OF PREPARATION

The Group’s and company’s financial statements have been prepared in compliance with FRS 102.

The financial statements have been prepared on a historical cost basis except investment properties and derivative financial instruments that have been measured at their fair value. The financial statements are prepared in sterling which is the functional currency of the Group and rounded to the nearest £000.

Through the Group’s risk management process a number of material risks to the business were identified including climate risk. By their nature these risks were not identified as a material factor to going concern during the relevant period. However, climate related factors will increasingly influence investment property valuations as relevant property characteristics are valued by the market. To the extent that these exist and are significant they will be embedded in the external valuation provided to the Group and held on the consolidated statement of financial position.

Going concern

The group’s business activities, together with the factors likely to affect its future development, its financial position, financial risk management objectives, details of

its financial instruments and derivative activities, and its exposures to price, credit, liquidity and cash flow risk are set out in the Strategic Report on pages 8 to 47.

The group has considerable financial resources derived from an established investment property portfolio in prime central London. The group has substantial longterm committed financing arrangements and has access to overdraft and recently renewed revolving credit facilities (see note 23) from its bankers. The overdraft is renewed annually and therefore not committed for the full review period.

The directors have considered the appropriateness of adopting the going concern basis in preparing the financial statements for the year ended 31 December 2022 taking into account new inflationary pressures on the economy, consumers and our tenants and the possibility of an economic downturn. The assessment is based on the Group’s experience over the last three years and financial forecasts for the periods to 31 December 2024 overlaid with a severe but plausible downside economic downturn scenario.

The budget for 2023 has been prepared prudently. Assumptions regarding rent receipts and lease renewals are more prudent than our actual experience during 2022. Development and investment activity increases further during 2023. Property values are assumed to fall by 5% on average in 2023.

The Group has also assessed a severe but plausible downside scenario based on the occurrence of an economic downturn having an impact similar to that of the pandemic in its first year. An economic downturn would reduce sales for our retail, leisure and hospitality tenants, damaging their cash flow and ability to pay rent. Trading would take at least 12 months to recover. The main impacts would be a further fall in property values, a decline in rent collections for at least 12 months, with a slow recovery thereafter and an increase in impairments and rent concessions.

For 2023 and 2024, we have assumed there would be no new financing activity other than repayments of

1. Accounting Policies (continued)

maturing private placement loan notes of £11.6m in August 2023, annual payments in March of £4m on a long-term loan and the receipt of £50m in September 2024 from the delayed drawdown of private placements undertaken in 2022.

The severe but plausible downside scenario modelled demonstrates that over the period to 31 December 2024 the group has significant liquidity to fund its ongoing operations and is operating with ample headroom above its debt financing covenants without the need to rely on raising new financing. Asset values would have to fall by 38% from 2022 closing values when the covenant is measured as at 31 December 2023 and by 33% from closing 2022 values over two years as at 31 December 2024 to breach the gearing covenant. To breach the interest cover covenant, operating profit before capital items would have to fall by 50% compared to budget in 2023 and by 50% compared to the forecast for 2024.

Based on these considerations, our experience of the past impact of economic downturns on the business and the directors’ knowledge of Cadogan’s property portfolio and the market in which we operate, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.

Basis of consolidation

The Group financial statements consolidate the financial statements of Cadogan Group Limited and all its subsidiary undertakings drawn up to 31 December each year. No income statement is presented for Cadogan Group Limited as permitted by section 408 of the Companies Act 2006.

Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee to obtain benefits from its activities.

(C) JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The following judgement (apart from those involving estimates) has had the most significant effect on amounts recognised in the financial statements:

Operating lease commitments

The Group has entered into commercial property leases as a lessor on its investment property portfolio. The classification of such leases as operating or finance lease requires the Group to determine, based on an evaluation of the terms and conditions of the arrangements, whether it retains the significant risks and rewards of ownership of these assets and accordingly whether the lease requires an asset and liability to be recognised in the statement of financial position.

(D) ESTIMATES AND ASSUMPTIONS

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.

The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

Revaluation of investment properties

The Group carries its investment property at fair value, with changes in fair value being recognised in the income statement. The Group engaged independent valuation specialists to determine fair value at 31 December 2022. The valuers used market value, in accordance with the Appraisal of Valuation Manual of the Royal Institution of Chartered Surveyors. The determined fair value of the investment property is most sensitive to the estimated yield and estimated rental values. Investment properties under construction are measured based on estimates prepared by independent real estate valuation experts. The key assumptions used to determine the fair value of investment property are further explained in note 11.

Estimation of net realisable value for properties under development

Development property is stated at the lower of cost and net realisable value (“NRV”).

NRV for completed development property is assessed by reference to market conditions and prices existing at the reporting date and is determined by the Group, based on comparable transactions identified by the Group for properties in the same geographical market serving the same real estate segment.

NRV in respect of development property under construction is assessed with reference to market prices at the reporting date for similar completed property, less estimated costs to complete construction and an

1. Accounting Policies (continued)

estimate of the time value of money to the date of completion.

Capital gains tax and deferred tax liability

The Group establishes provisions based on reasonable estimates of the expected tax liability under the legislation. The amount of such provisions is based on various factors, such as experience with previous tax audits and takes into account uncertain tax positions where tax authorities could have differing interpretations of tax regulations.

Management estimation is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. Further details are contained in note 7.

Impairment of lease receivables

The Group makes an assessment over the recoverability of its lease receivables on a lease by lease basis. Estimation of recovery is judgemental and is based on the Group’s detailed knowledge of the sector in which the tenant operates and the credit risk of the tenant.

Cash flow forecasts

As part of the Group’s assessment of going concern, monthly cash flow forecasts are prepared using estimates and assumptions based on management’s knowledge of the business and the experience of rental receipts, tenant default and expenditure.

Pension and other post-employment benefits

The cost of defined benefit pension plans is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and the long-term nature of these plans, such estimates are subject to significant uncertainty. In determining the appropriate discount rate, management (as advised by its actuaries) considers the interest rates of corporate bonds in the respective currency with at least AA rating, with extrapolated maturities corresponding to the expected duration of the defined benefit obligation. The underlying bonds are further reviewed for quality, and those having excessive credit spreads are removed from the population bonds on which the discount rate is based, on the basis that they do not represent high quality bonds. The mortality rate is based on publicly available mortality tables for the UK. Future salary increases and pension increases are based on expected future inflation rates for the UK. Further details are given in note 19.

(E) TURNOVER AND REVENUE RECOGNITION

Revenue is recognised to the extent that the Group obtains the right to consideration in exchange for its performance. Revenue is measured at the fair value of the consideration received, net of VAT and comprises gross rents including reverse premium received on early lease termination, commissions and other fees receivable. Turnover in the hotel and concert hall operations represents amounts derived from the provision of goods and services, stated net of VAT.

The following criteria must also be met before revenue is recognised:

Rental income

The Group is the lessor in operating leases. Rental income arising from operating leases on investment property is recognised in the income statement on a straight-line basis over the lease term, except for contingent rental income which is recognised when it arises.

Lease incentives are recognised as a reduction of rental revenue on a straight-line basis over the term of the lease. The lease term is the non-cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the directors are reasonably certain that the tenant will exercise that option.

Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the income statement when the right to receive them arises.

Interest income

Interest income is recognised as it accrues using the effective interest rate (“EIR”) method. The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income is included in finance income in the income statement.

(F) TANGIBLE FIXED ASSETS

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended.

Depreciation is provided on all plant and equipment, at rates calculated to write off the cost, less estimated residual value, of each asset on a systematic basis over its expected useful life as follows:

Plant and equipment 7% to 20%

The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value not to be recoverable.

1. Accounting Policies (continued)

(G) LAND AND BUILDINGS

Land and buildings represent owner occupied properties and are initially recognised at cost which includes purchase cost and any directly attributable expenditure of a capital nature only. They are included in the financial statements at fair value at the year end.

The surplus or deficit on revaluation is recognised in the non-distributable reserve and accumulated in the reserve unless a deficit, or its reversal, is below original cost in which case it is recognised in the income statement for the year.

(H) INVESTMENT PROPERTY

Investment property comprises completed property and property under construction or re-development that is held to earn rentals or for capital appreciation or both. Property held under a lease is classified as investment property when it is held to earn rentals or for capital appreciation or both, rather than for sale in the ordinary course of business or for use in production or administrative functions.

Investment property is measured initially at cost, including transaction costs. Transaction costs include transfer taxes, professional fees for legal services and initial leasing commissions to bring the property to the condition necessary for it to be capable of operating. The carrying amount also includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met.

Subsequent to initial recognition, investment property is stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the period in which they arise, including the corresponding tax effect. For the purposes of these financial statements, in order to avoid double counting, the fair value reported in the financial statements is reduced by the carrying amount of any accrued income resulting from the spreading of lease incentives.

Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use.

Investment property is derecognised either when it has been disposed of or when it is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the income statement in the period of de-recognition.

(I) PROFIT ON SALE OF INVESTMENT PROPERTIES

Profits or losses on the sale of investment properties are calculated by reference to the book value at the end of the previous year, adjusted for any subsequent capital expenditure. Such transactions are recognised on the exchange of contracts, providing that no material conditions remain outstanding.

(J) INVESTMENTS

Investments in subsidiary undertakings are included at cost, less a provision for impairment in value where applicable.

(K) LEASES

The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in the arrangement.

Group as a lessee

A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Group is classified as a finance lease.

An operating lease is a lease other than a finance lease. Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term, except for contingent rental payments which are expensed when they arise.

Group as a lessor

Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Contingent rents are recognised as revenue in the period in which they are earned.

(L) CASH AND CASH EQUIVALENTS

Cash in the statement of financial position comprises cash at bank and in hand and is stated net of outstanding bank overdrafts.

(M) LOAN NOTES

All interest-bearing loans and borrowings which are basic financial instruments are initially recorded at the present value of future payments discounted at a market rate of interest for a similar loan. After initial recognition, interestbearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

1. Accounting Policies (continued)

(N) SHORT-TERM DEBTORS AND CREDITORS

Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the income statement in administrative expenses.

(O) TAXATION

Current taxation including UK corporation tax is provided at the amounts expected to be paid (or recovered) using the tax rates and laws that have been substantially enacted at the balance sheet date.

Deferred tax is recognised in respect of all material timing differences between taxable profits and total comprehensive income that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantially enacted at the balance sheet date. Deferred tax relating to investment property that is measured at fair value is measured using the tax rates and allowances that apply on the sale of the asset.

(P) FOREIGN CURRENCIES

Transactions in foreign currencies are initially recorded in the entity’s functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the income statement.

(Q) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

The Group uses forward foreign currency contracts to reduce exposure to foreign exchange rates. The Group also uses interest rate swaps to adjust interest rate exposures. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

The criteria for forward foreign currency contracts are:

– the instrument must be related to a firm foreign currency commitment;

– it must involve the same currency as the hedged item; and

– it must reduce the risk of foreign currency exchange movements on the Group’s operations.

The Group’s criteria for interest rate swaps are:

– the instrument must be related to an asset or a liability; and

– it must change the character of the interest rate by converting a variable rate to a fixed rate or vice versa.

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Cash flow hedges

For the purpose of cash flow hedge accounting, hedges are classified as cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.

The effective portion of the gain or loss on the hedging instrument is recognised in the Statement of Comprehensive Income (“SOCI”) in the nondistributable reserve, while any ineffective portion is recognised immediately in the income statement. Amounts recognised as other comprehensive income are transferred to the income statement when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised.

If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognised in the SOCI are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in SOCI remains separately in equity until the forecast transaction occurs or the firm commitment is met.

When a derivative is held as an economic hedge for a period beyond 12 months after the end of the reporting

1. Accounting Policies (continued)

period, the derivative is classified as non-current consistent with the classification of the underlying item. A derivative instrument that is a designated and effective hedging instrument is classified consistent with the classification of the underlying hedged item.

(R) PENSION BENEFITS

For defined benefit schemes, the regular cost of providing pensions to employees during the year is charged to operating profit in the year. The full cost of providing amendments to benefits in respect of past service is also charged to operating profit in the year.

The net interest element is determined by multiplying the net defined benefit liability by the discount rate, at the start of the period taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or costs.

Re-measurements, comprising actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability (excluding amounts included in net interest) are recognised immediately in other comprehensive income in the period in which they occur.

The defined net benefit pension asset or liability in the statement of financial position comprises the total for each plan of the present value of the defined benefit obligations (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information and in the case of quoted securities is the published bid price.

For defined contribution schemes, the value of amounts charged to the income statement in respect of pension costs is the value of the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayment in the statement of financial position.

2. Turnover and analysis by class of business

Turnover, Group profit/(loss) before taxation and net assets are analysed as follows:

All operations take place within the United Kingdom. The Group operates in two principal areas of activity, property investment and hotels and concert hall activities.

3. Profit on sale of investment properties

4. Interest payable and similar expenses

5. Operating profit

Non-audit remuneration for the company is not disclosed in the individual financial statements as the consolidated financial statements are required to comply with regulation 5(1)(b) of Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2018 and present this information on a consolidated basis.

The Group’s auditor for the year ended 31 December 2022 was BDO LLP (31 December 2021: Ernst & Young LLP).

6. Directors and employees

Included within directors’ remuneration above are contributions to money purchase pension schemes for one director amounting to £47,000 (2021: one director – £40,000).

The remuneration, excluding pension contributions, of the highest paid director was £1,442,000 (2021 – £1,067,000).

Pension contributions of the highest paid director were nil (2021 – nil).

The average monthly number of persons employed by the Group, including executive directors, during the year was 93 (2021 – 91). 79 (2021 – 76) persons were employed within the property investment business and 14 (2021 – 15) persons were employed within the hotels and concert hall business.

Staff costs for the company were in respect of directors’ remuneration and amounted to £535,000 (2021 – £432,000). There were no pension contributions made by the company in the year (2021 – nil).

(a) Tax on profit

The tax charge is made up as follows:

(b) Tax included in statement of total comprehensive income

The tax charge is made up as follows:

7. Taxation (continued)

(c) Factors affecting tax charge for the year

The tax charge for the current year is higher than (2021 – higher than) the current standard rate of corporation tax in the UK of 19% (2021 – 19%). The difference is explained as follows:

(d) Deferred tax

The deferred tax included in the statement of financial position is as follows:

The liability/(asset) for deferred tax comprises the following:

The Group expects no deferred tax liabilities to reverse in 2023.

Taxation (continued)

(e) Factors that may affect future tax charges

The UK corporation tax rate for the whole of 2022 was 19%. Accordingly, the Group’s result for the accounting period is taxed at an effective rate of 19% (2021 – 19%).

The corporation tax rate is due to increase to 25% from April 2023. At the balance sheet date, the setting of the rate of 25% from April 2023 had been substantially enacted and hence in accordance with accounting standards, the impact of the rate of 25% has been reflected in the Group’s financial statements at 31 December 2022.

Any future rate changes will also impact the amount of future tax payments to be made by the Group.

8. Dividends

9. Retained profit/(loss) for the year

The profit/(loss) for the year has been retained by:

The parent company’s profit before dividends for the financial year was £102,340,000 (2021 – £62,880,000 – as restated).

Prior period adjustment (company)

The company has identified the need to make a correction to the 2021 company statement of changes in equity and the 2021 company statement of financial position due to an error identified in the recognition of dividends received from subsidiary undertakings. The adjustment relates to the restatement of the profit and loss account at 1 January 2021 of £63,112,000 and a reduction in profit for the year ended 31 December 2021 of £30,452,000.

10. Earnings/(loss) per share

The calculation of earnings/(loss) per ordinary share for 2022 is based on the earnings/(deficit) attributable to ordinary shareholders of £261,187,000 (2021 – deficit of £114,825,000) and on 120,000,000 ordinary shares (2021 –120,000,000 ordinary shares) being the effective number of such shares in issue during the year. This calculation relates to both the basic and diluted loss per share as there is no potential future shares or share options in the company

11. Tangible fixed assets

The valuation of the Group’s freehold properties at 31 December 2022 was carried out by CBRE and Knight Frank (commercial properties) and Cluttons (residential properties), the firms are independent and regulated by the Royal Institution of Chartered Surveyors (“RICS”), on the basis of fair value, in accordance with the version of the RICS Valuation – Global Standards (incorporating the International Valuation Standards) and the UK supplement (“The Red Book”) as at the Valuation Date. The key assumptions used to determine the fair value of investment property are set out below.

11. Tangible fixed assets (continued)

The historical cost of freehold properties at 31 December 2022 was £2,294,604,000 (2021 – £2,223,991,000).

12. Fixed asset investments

Investment in subsidiary companies at cost

Details of the investments in which the company holds 20% or more of the nominal value of any class of share capital are as follows:

All of the above investments are holdings of ordinary shares. All companies are registered in England.

13. Debtors

The amounts owed by parent undertakings are expected to be recovered after more than one year.

14. Trade and other creditors

15. Borrowings (a) Bank loans and other borrowings

At 31 December 2022 the Group had committed but undrawn credit facilities of £300m (2021 - £265m) under revolving credit facility arrangements expiring in April 2024. On 15 March 2023 the Group extended its revolving credit facilities, amounting to £350m in total, expiring in September 2026.

15. Borrowings (continued)

b) Bank loans and other long-term borrowings

Amounts falling due in two to five years:

Amounts falling due after more than five years:

15. Borrowings (continued)

b) Bank loans and other long-term borrowings (continued)

The commercial mortgage loan is secured by fixed charges over specific freehold investment properties of the Group. £968,059,000 (2021 – £858,145,000) of the total bank loans and long-term borrowings is subject to fixed rates of interest to maturity which average 4.19% (2021 – 4.44%).

All the interest payments and principal repayments relating to the loan notes issued in US dollars were swapped into sterling at fixed exchange rates. This currency swap has the effect of reducing the effective interest rate on the US dollar loans from the rates shown above to an average effective rate of 5.72% (2021 – 5.72%). This, combined with the fixed interest rates payable on the sterling loans gives an overall effective interest rate across all the series of notes, fixed until maturity, of 4.02% (2021 – 4.26%).

16. Called up share capital

17. Reserves

In the current year the non-distributable reserve and the profit and loss reserve have been combined into a single reserve account. This reserve is used to record:

Increases in fair value of freehold and leasehold investment properties and decreases to the extent that such decreases relate to the increase on the same asset. These figures are stated net of the associated deferred tax asset or liability;

Increases and decreases in fair value of freehold land and building;

– Increases and decreases in the net fair value of derivative financial instruments. The figure is stated net of the associated deferred tax release or charge; and

– Distributable profits

18. Notes to the statement of cash flows

(a) Reconciliation of profit to net cash inflow from operating activities

(b) Net debt reconciliation

19. Pension arrangements

The Group operates both defined benefit and defined contribution funded pension schemes for its employees. The assets of these schemes are held separately from those of the Group in independently administered funds.

Defined benefit scheme

The Group’s defined benefit pension scheme, which is closed to new members in 1994 and was closed to future accrual for active members on 31 March 2014, is called the Cadogan Pension & Assurance Scheme (“the Scheme”). The following disclosures exclude any allowance for defined contribution schemes operated by the Group. The liability value does not include allowance for any discretionary benefits.

The Scheme is subject to the Statutory Funding Objective under the Pensions Act 2004. A valuation of the Scheme is carried out at least once every three years to determine whether the Statutory Funding Objective is met. As part of the process the Group must agree with the Trustees of the scheme the contributions to be paid to address any shortfall against the Statutory Funding Objective.

The most recent comprehensive actuarial valuation of the Scheme was carried out as at 25 December 2019 and the next valuation of the Scheme as at 31 December 2022 is ongoing. In the event that the valuation reveals a larger deficit than expected the Group may be required to increase contributions above these set out in the existing Schedule of Conditions. Conversely, if the position is better than expected, it is possible that contributions may be reduced.

Under the current Schedule of Contributions, no contributions are required from the Group to be paid into the Scheme in the year to 31 December 2023 (2022 – no contributions).

The Group is committed to supporting the Scheme in the long term on a basis more prudent than the Scheme Funding basis used in the formal actuarial valuation as at 31 December 2019 but wants to avoid overfunding the Scheme, and therefore an Escrow Account has been established to provide additional security to the Scheme. Details regarding the Escrow Account are set out in a separate Framework Agreement. At the Review Date the Escrow Account balance was £1,500,000 (2021 – £435,000) (£1,065,000 was paid in by the Group during the year to 31 December 2022), which has not been included in the disclosures below. If the Escrow Account balance was included in the Scheme’s assets, the deficit in the Scheme would be reduced by the amount of the Escrow Account balance to £4,642,000. There were no plan amendments, curtailments or settlements during the period.

Risk Mitigation Strategies

The Scheme invests a proportion of its assets in LDI funds which are designed to hedge the interest rate risk within the Scheme.

Disclosures

Figures for disclosure in accounts for period ending 31 December under FRS 102 are set out below. Results are shown in pounds, rounded to the nearest £000.

Assumptions

The principal assumptions used to calculate Scheme liabilities include:

Post retirement mortality assumption

80% of the S2NXA tables with CMI 2021 projections using a long-term improvement rate of 1% per annum. The 2020 and 2021 weight parameters are nil.

80% of the S2NXA tables with CMI 2020 projections using a long-term improvement rate of 1% per annum. The 2020 weight parameter is nil.

19. Pension arrangements (continued)

The major categories of assets as a proportion of total assets are as follows:

– 10%)

The actual return on the Scheme’s assets was a decrease of £17,949,000 (2021: decrease of £903,000). The assets do not include any investment in shares or property of the Group.

recognised in the statement of financial position:

The projected charge to the income statement for the next period is £301,000.

19. Pension arrangements (continued)

Recognised in other comprehensive income over the year:

Reconciliation of assets and defined benefit obligation

The change in fair value of assets over the year was:

The change in present value of the defined benefit obligation over the year was:

Defined contribution schemes

The pension charge in respect of defined contribution schemes represents contributions payable by the Group to such schemes and amounted to £679,000 (2021 – £620,000), of which nil (2021 – nil) was unpaid at the balance sheet date.

20. Hedging activities and derivatives

The Group has entered into foreign currency and interest rate swap contracts with notional amounts of $321m (2021 – $321m) whereby it pays a fixed rate of interest of between 5.25% and 7.40%. The swaps are used to hedge the exposure to the variable foreign currency and interest rate payments on the US dollar variable rate unsecured loans (note 15).

The loans and interest rate swaps have the same critical terms and are fully effective. Cash flows are expected to occur between August 2023 and June 2051 and will be recognised through the income statement at that time.

The aggregate fair value of the interest rate swaps at the end of the reporting period was an asset of £117,640,000 (2021 – £86,360,000).

The Group enters into foreign currency and interest rate swap contracts with various counterparties, principally financial institutions with investment grade credit ratings. The valuation techniques applied to fair value these derivatives employ the use of market observable inputs and include swap models which use present value calculations. The model incorporates various inputs including the credit quality of counterparties and forward rates.

As at 31 December 2022, the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment of these derivatives designated in hedge relationships recognised at fair value.

21. Capital and other commitments

Outstanding capital commitments were as follows:

There were no outstanding commitments for capital expenditure in the company at either year end.

The Group had the following future minimum operating lease receivables under non-cancellable operating leases in respect of investment properties at the year end:

22. Related party relationships and transactions

Viscount Chelsea DL, Chairman and director of Cadogan Group Limited, rents residential property owned by the Group. The rent paid by Viscount Chelsea in the year totalled £313,122. At 31 December 2022 the outstanding balance owed to the Group was £2,852 (2021 – £2,600). The annual rental charge is at market rate.

23. Post balance sheet events

Since the year end, the Group has bought three properties in its regional property fund at an aggregate cost of £72m. The Group has also purchased a property investment group whose principal assets are two properties at a cost of £39m. On 15 March 2023 the Group refinanced its revolving credit facilities, increasing them by £50m to £350m in a new syndicated revolving credit facility for a term of 3½ years expiring on 15 September 2026, with two 1-year extension options exercisable from 1½ years and 2½ years of the start date.

24. Ultimate ownership

The ultimate holding company is Cadogan Settled Estates Holdings Limited, which is registered in England and Wales and which is ultimately controlled by The Eighth Earl Cadogan’s 6 December 1961 Settlement. The consolidated financial statements of Cadogan Settled Estates Holdings Limited may be obtained from The Registrar of Companies, Companies House, Crown Way, Cardiff, CF14 3UZ.

Five Year Summary

The audit of the years 2018 – 2021 were undertaken by the previous auditors, Ernst & Young LLP.

Global Reporting Initiative Standard Disclosure References

Material Aspect: Energy (GRI 203:2016)

Material Aspect: Water (GRI 303:2018)

Material Aspect: Biodiversity (GRI 304:2016)

Material Aspect: Emissions (GRI 305:2016)

Material Aspect: Waste (GRI 306:2020)

Material Aspect: Local Communities (GRI 413:2016)