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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 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.
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.
