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Of course, the pandemic has been replaced by new and emerging uncertainties such as the Russian invasion of Ukraine which has led to increases in the cost of energy and food products, exacerbating a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.

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