Bruntwood delivers 'resilient' performance in face of rising interest rates and bond market crisis

Operating profits increased 57 per cent to £48.9m. The group, led by CEO Chris Oglesby, said the numbers highlighted the quality of its portfolio across its Bruntwood business and Bruntwood SciTech joint venture, which enabled it to attract and retain customers in the face of “significant turmoil” in the UK real estate sector and downward pressure on property valuations.

It said that a number of external factors – primarily rising interest rates as the Bank of England tries to control inflation and the bond market crisis – drove a 17 per cent decline in its Bruntwood portfolio valuation, and a 12 per cent decrease for Bruntwood SciTech, and subsequently led to a pre-tax loss of £224.3m. Valuations across its portfolio compared favourably however with those seen in some of the UK’s most prime markets, the statement added.

Bruntwood continued to invest in its portfolio, with £19.1m spent on refurbishment and capital improvement projects. It also invested a further £11.5m - matched by its partner Legal & General - into Bruntwood SciTech to fund growth within this portfolio. Bruntwood SciTech in turn invested £18.2m in refurbishment and capital improvements and £62.1m in new development schemes.

The results cover the period up to October 2 2023, pre-dating a £500m new investment into the Bruntwood SciTech platform, which saw Greater Manchester Pension Fund become a third shareholder partner and inject £150m new investment, alongside a significant increase in investment from existing shareholders, Legal & General and Bruntwood, through cash and asset transfer.

The statement added: “The £500m deal, the first of its kind by a UK local authority pension fund, was one of the largest single real estate investments of 2023. It makes Bruntwood SciTech the largest dedicated property platform serving the UK’s innovation economy, with £1.5bn in assets across nine campus locations and 31 city centre innovation hubs, offering 4.8m sq ft of specialist workspace, support, and like-minded communities for 1,100 high-growth start-ups, scale ups, and global businesses.”

Commenting on the figures, Bruntwood and Bruntwood SciTech CEO Chris Oglesby, said: “These numbers represent our historic business structure prior to the major changes to the size and shape of our respective portfolios created by the £500m investment and welcoming of a new shareholder, and are a snapshot of UK real estate during one of its most difficult years in recent memory. But despite us seeing a paper loss created by some sizable valuation shifts, the performance of our portfolio didn't waver, with our gross profit performance pointing to the continuing appeal of our modern, world-class workspace, retail space, and specialist facilities for tech, life science, and innovation-led companies of all sizes.

“As a long-term, patient capital operator we have never judged the success of our business on the mark to market valuation shift over a 12 month accounting period, but instead the impact of our investments into communities over many years. On that measure, we are pleased to have met a number of significant milestones in 2023.”