Grosvenor Australia aims to double asset size

SYDNEY (Reuters) - Grosvenor Australia aims to more than double the size of its Australian assets in the next three to four years and also plans to expand its funds management business, the group's local head said on Monday.

"A lot of assets are on our own balance sheet. So, we have a lot of capacity to grow those assets," Rob Kerr, chief executive for Grosvenor Australia told the Reuters Global Real Estate Summit in Sydney.

Grosvenor Australia, the Australian arm of UK property firm Grosvenor Group GROV.UL, owns about A$800 million ($641 million) of assets, mainly in offices, about 3 percent of the group's total.

That asset base could expand by introducing third party capital, Kerr said.

"That's exactly what we would be doing, growing our A$800 million into the range of A$2 to A$3 billion over the next 3 to 4 years," Kerr said.

Grosvenor Australia is also looking to expand its fund business to utilize its skills and get more revenues from management fees, Kerr said.

"At this stage, our preference would be to grow organically over time," he said. "However, there is always an option to maybe merge or takeover other groups who we feel fit comfortably with Grosvenor and grow our business over time."

AUSTRALIA SEEN A SAFE BET

Kerr said investors' interest in Australia is growing because of the country's relatively strong economy. The economy grew in the last quarter, making it one of the very few developed nations to have avoided a recession.

"A lot of overseas investors see Australia as very much a safe house and with the unusual prospect of growth," he said.

The Australian property sector has been hit hard, but Kerr expects capital values to hit the bottom of the cycle in the last quarter of 2009 or early next year, following an aggregate of 10 to 20 percent drop in the second quarter and third quarter.

Kerr said his company is in no rush to buy property, adding that some Australian real estate investment trusts (REITs) have recently recapitalized themselves to strengthen their balance sheets and that has reduced the likelihood of forced asset sales by those players.

Grosvenor, which is owned by the sixth Duke of Westminster and his family, has been in Australia for more than four decades, but is still in the process of diversifying its portfolio into retail and residential markets, both of which are likely to benefit from low interest rates.

In particular, Grosvenor is looking for development opportunities in the upper end of the residential market.

"Grosvenor's brand around the globe is very much synonymous with upper market residential. So we would replicate that here in Australia," he said.

($1=1.248 Australian Dollar)

(Editing by Dhara Ranasinghe)