When Hugh Grosvenor got married in 2024, the 400-person celebration at England’s Chester Cathedral was the most-watched society event of the summer. Grosvenor, 35, is the Duke of Westminster, godson of King Charles III, and godfather to Prince George, second in line to the throne.

Grosvenor had a reputation as Britain’s “most eligible bachelor (opens in new tab)” as the heir to a fortune built on his family’s property holdings. In 2022, he was elevated to his preordained position as chairman of the Grosvenor Group. 

From a solitary plot of land in modern-day London, the dynastic group has become one of the world’s largest privately owned real estate firms over more than three centuries. 

More recently, the company turned its attention to the Bay Area as the centerpiece of its U.S. expansion. Grosvenor first appeared in San Francisco in the 1970s, assembling a portfolio of five luxury retail buildings around Union Square and, over a span of five decades, purchasing commercial properties and developing homes and shopping centers across Silicon Valley, the North Bay and the East Bay. 

But as the pandemic upended the local real estate market, losses from the U.S. side of the property business stacked up on the company’s balance sheet, and Grosvenor lost its appetite. 

After decades of building up its U.S. footprint, the company is now selling off properties, letting go of top executives, and leaving what one source described as a “skeleton crew” to sweep up the pieces left behind. 

A Grosvenor spokesperson acknowledged those changes but emphasized that the firm remains committed to investing in the U.S. real estate market, albeit in an “indirect model” moving forward. 

The seventh and current Duke of Westminster, known as “Hughie” to friends, inherited the title when his father died in 2016. He was 25.

When he arrived a decade ago at the San Francisco headquarters at One California St. to learn about the family business, the firm had pushed into housing and retail development and was even financing other developers’ projects. 

That ambition didn’t last. Within a decade, the firm that had been expanding across the Bay Area started quietly heading for the exit.

In October, Grosvenor sold a six-story building at 251 Post St. that it had owned since the 1970s. It was an inconspicuous transaction, since the property sat on a ritzy block of luxury stores and had trouble finding upstairs office tenants during the pandemic. 

But then the sales started coming at a steady clip. A retail building in Jackson Square sold in December. Another Union Square mid-rise — the longtime home of Gucci on Stockton Street — sold in February.

Grosvenor’s portfolio includes properties in Los Angeles, Seattle, and Washington, D.C., but the Bay Area makes up a majority of its U.S. holdings. 

What was initially viewed as a trim is actually part of a much larger pullback that includes the dissolution of Grosvenor’s U.S. development businesses altogether, sources say. 

The British company has listed its three other Union Square buildings for sale and is preparing to market two large San Jose office properties in an effort to move away from directly owning real estate in the U.S. so that it can invest those funds differently, the sources say.

Grosvenor is also struggling with two housing developments it recently completed: the Crescent condos in Nob Hill and the ACE apartments in Berkeley. Tepid demand and high costs for construction and management have contributed to the firm reconsidering its role as principal developer of an entitled housing project it has yet to build in Los Gatos and selling an Oakland housing development site it purchased in 2022.

In addition to liquidating its U.S. real estate holdings, the company has departed with three executives who led the acquisitions side of its North American arm: Angela Biggs, managing director of investments; Steve Buster, senior VP of development; and Jennifer Eskildsen, VP of investment. Steve O’Connell, chief executive of Americas, was moved into a non-executive advisory role. Jonathan Carr, who was promoted to managing director of development in 2023, left the company on his own accord a year later.

All were based in San Francisco. 

The spokesperson said the change in the firm’s investment strategy meant “reshaping” its portfolio and “adapting the size” of the local team to “match the needs of the new model.”   

The retreat of Grosvenor illustrates just how far the San Francisco commercial real estate market plunged during the pandemic — a multi-year crash that created large-scale vacancies, traumatized lenders, and scared developers into pausing projects out of fear of financial ruin. 

For a firm that built a fortune by thinking in centuries rather than cycles, leaving San Francisco may be the clearest signal yet that the city’s downturn has tested even the longest-held convictions.

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Getting out of the landlord business

In 1677, Thomas Grosvenor married the heir to 500 acres of swampy land in central London. That land, which neighbors Buckingham Palace, would later be developed into Mayfair and Belgravia — two of the city’s highest-end neighborhoods.

Two hundred years later, Queen Victoria named the first Hugh Grosvenor the Duke of Westminster, raising the family to the highest echelon of British society. Grosvenor Group went on to expand its real estate empire to continental Europe, Canada, Asia, and the U.S. 

Today, its real estate business also fuels a food and agricultural-tech investment arm and philanthropy. 

The firm staked some of its most ambitious growth plans in the Bay Area.

“They were maybe not as much of a household name as Morgan Stanley, but they were well known and respected within real estate,” said a person familiar with the firm’s business dealings. “They always wanted [portfolio] exposure to the Bay Area and had a reasonably sized operation finding and underwriting deals.” 

Individuals who have been involved with Grosvenor Group over the decades described the firm as “patient capital” and pleasant to deal with. Even during the recent sell-off, the company has not lost any properties to foreclosure, the sources emphasized. 

In hindsight, the first domino that led to Grosvenor’s pullback from the U.S. was the 2012 launch of Grosvenor Diversified Property Investments, or GDPI. The division focused on providing capital to third-party developers, rather than directly owning equity or undertaking construction. 

What was initially designed as a complement to the firm’s portfolio gradually took on a bigger role as the pandemic continued and interest rates spiked — especially in the U.S., where losses were more pronounced. 

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“As part of our revised strategy, GDPI will lead new investments in the U.S. … as we shift from direct management to local third-party specialists,” James Raynor, chief executive of Grosvenor’s global real estate business, said in January. (opens in new tab)

The Grosvenor spokesperson said the company will instead focus its direct investment in London and Vancouver, where “scale supports resilient income … and stronger social and environmental outcomes.”

The spokesperson said Grosvenor is still considering “ideal sale timing over the coming years” in the U.S., and remaining properties will continue to be managed by the firm’s local asset managers. 

Building elsewhere 

In February, a Texas investment group purchased Grosvenor’s five-story building at 240 Stockton St. for $44 million. The company had paid $80 million for it a decade earlier.

Selling off underperforming properties during a downturn makes sense for companies that are forced to do so. But Grosvenor is going further. Two fully-leased buildings on Grant Street that recently signed Yadav Diamonds and Bulgari as anchor tenants are also on the auction block.

“This is not a well-timed exit,” said one veteran developer who has known Grosvenor for decades. “The capital markets are still too fractured for sellers to expect [any profit].” 

To free up capital, Grosvenor recently sold a minority stake in a mixed-use portfolio within its Mayfair estate in London and its remaining interest in Liverpool ONE, the 1.65-million-square-foot shopping center the company developed in 2008. 

With that injection of cash, Grosvenor is ramping up its 8-acre mixed-use development in Vancouver, where the firm has invested since 1950. 

“If we go to New York, we’re a tiny player,” Raynor told The Globe and Mail (opens in new tab) in January. “But in this scale of market, I feel … we can have an impact.”

In San Francisco, the company has retained a small asset management team to oversee properties until they are sold. 

Regarding the mixed-use project in Los Gatos, which was recently entitled (opens in new tab) for 450 homes, the spokesperson said Grosvenor is “assessing options for evolving [the] high-quality community.” 

As for the site in Oakland, which Grosvenor bought pre-entitled for 225 homes: It’s for sale, the company said.

Someone else will have to build it.