Annual Results 2016

Annual Results – successful strategy delivers more organic growth

The Directors of Great Portland Estates plc announce the results for the Group for the year to 31 March 2016.

Highlights¹ for the year:

Strong capital value growth driven by rental growth and development profits - outperforming London market

• Portfolio valuation up 14.7%¹ in year (developments: 26.2%¹) and 3.9%¹in H2
• Rental value growth of 9.9%¹ (10.6% offices, 7.7% retail); 2.6%¹ in H2
• 12 month capital return of 16.3% v 13.3% for IPD Central London Index, with Total Property Return of 18.9% v 16.7% for IPD Central London; 5 year capital return of 95.0% v 78.9% for IPD Central London 

Excellent financial performance - increased NAV, earnings and dividend

• EPRA² NAV per share of 847 pence (pre-SDLT increase: 857 pence), up 19.5% in year and 4.8% in H2
• Net assets of £2,912.2 million (March 2015: £2,390.9 million)
• EPRA² profit before tax of £47.8 million, up 6.0% on 2015. EPRA² EPS of 13.5 pence, up 6.3%
• After revaluation surplus, reported profit before tax of £555.1 million (March 2015: £507.4 million)
• Total dividend per share of 9.2 pence (2015: 9.0 pence), up 2.2%

Largest ever development programme delivering surpluses - extensive and flexible pipeline of opportunity

• Eight committed schemes (851,200 sq ft), 61% pre-let or pre-sold, expected profit on cost of 27.1%, 71% at east end of Oxford Street, all schemes due to complete by end of 2017
• Good progress across two near-term schemes (311,800 sq ft), with planning application submitted at Oxford House, W1 and demolition commenced of the New Bond Street buildings at Hanover Square, W1
• Total capex to come at committed and near-term development schemes of £428 million, 52% in next 12 months
• Major development opportunity from 14 additional uncommitted pipeline schemes (1.4 million sq ft)
• Total development programme of 2.6 million sq ft covering 59% of the existing portfolio, 81% in West End
• Six current refurbishment projects (173,650 sq ft); further 318,000 sq ft with potential starts in next 24 months

Record leasing and asset management activity – strong start to new financial year

• 52 new lettings (447,100 sq ft) securing annual income of £31.8 million, including one of largest ever West End office lettings of £17.8 million to Facebook at Rathbone Square; market lettings 10.4% ahead of March 2015 ERV
• 20 rent reviews settled securing £9.5 million; 57% above previous passing rent
• Vacancy rate at 3.1%, average office rent only £45.30 sq ft, reversionary potential of 33.1% (March 2015: 28.4%)
• Since year end, lettings of £2.6 million at 4.2% premium to March 2016 ERV; further £8.0 million under offer, 1.2% above ERV

Profitable capital recycling and selective off-market acquisition activity – net sales of £255.4 million

• Disposals of £469.7 million at an average capital value of £1,943 per sq ft and net initial yield of 3.5%;  10.0% premium to March 2015 book value, crystallising surpluses where business plans complete
• Acquisitions of £214.3 million at an average capital value of £704 per sq ft and net initial yield of 5.1%;all off-market, adding to longer-term development pipeline
• Since year end, sale of Mortimer House, W1 for £27.0 million; purchase of freehold at 73/89 Oxford Street, W1 and 95/96 New Bond Street, W1 for £71.0 million - see separate announcement

Financial position and senior management team – stronger than ever

• Loan-to-value of 17.4%, low weighted average interest rate of 3.7%, drawn debt 100% fixed or capped
• Cash and undrawn committed facilities of £472 million, low marginal cost of debt of 1.6%
• Executive Committee strengthened with 2 promotions and 2 new hires

¹ On a like for like basis, including Joint Ventures

² In accordance with EPRA guidance

Global economic and political uncertainties, including the upcoming EU referendum, are affecting broader business confidence and investor appetite. It is too early to tell what the impact on the London property market will be although an extended political stalemate as the consequences of the referendum result are worked out would be unhelpful.

Despite this more uncertain back drop, London’s commercial property market fundamentals remain supportive: London’s economy is growing, its workforce expanding and demand for quality office space remains robust. With new supply limited and vacancy rates at or near record lows, we expect to secure further pre-lettings and generate attractive rental value growth across our portfolio of around 5% over the next year. In the investment market, as rental growth is captured, we can expect some mild expansion of yields, particularly for some secondary assets where pricing has run ahead of the growth on offer.

Whichever way this summer’s political drama unfolds, we are well positioned to take advantage of opportunities as they arise: We have a clear strategic focus; our opportunity-rich portfolio is let off low rents to a diverse occupier base with significant reversionary potential; our development pipeline has never been longer; our balance sheet has never been stronger; plus we have a first class team to help us continue delivering long-term, market-leading returns for shareholders.