Great Portland Estates plc (“GPE” or “Group”) today publishes its trading update for the quarter to 31 December 2015.
Record leasing and asset management activity; occupier demand healthy
- 15 new lettings (122,600 sq ft) signed generating annual rent of £8.5 million (our share: £7.7 million); 17.9% above March 2015 ERV
- Record lettings in the financial year to date securing annual rent of £29.3 million (412,000 sq ft); further £2.2 million currently under offer, 9.6% ahead of March ERV
- Four rent reviews settled securing £6.2 million (our share: £3.2 million); 61% above previous passing rent
- Vacancy rate at 2.7%, average office rent only £45.70 sq ft, reversionary potential of 33.7%
Largest ever development programme; extensive and flexible pipeline of opportunity
- Nine committed schemes (856,700 sq ft); 59% pre-let or pre-sold; all expected to complete in next 24 months
- Good progress across further two near-term schemes (311,800 sq ft), including planning application submitted at Oxford House,W1 and demolition to commence shortly of the New Bond Street buildings at Hanover Square, W1
- Total capex to come at committed and near-term development schemes of £475.5 million
- Major development opportunity from additional 13 uncommitted pipeline schemes (1.4 million sq ft)
- Total development programme of 2.6 million sq ft covering 59% of the existing portfolio, 77% in West End
- Further 356,000 sq ft in refurbishment programme; four projects currently on-site (177,100 sq ft)
Profitable capital recycling continues
- Since 31 December 2015:
- Sale of 60 Great Portland Street, W1 for £102.2 million; net initial yield of 3.89%
- Sale of 33 Margaret Street, W1 for £216.3 million; net initial yield of 3.30%; reflecting £2,085 per sq ft and crystallising a profit on cost since purchase of 133%
- Purchase of 50 Finsbury Square, EC2 for £119.0 million; net initial yield of 5.3%; further extending the Group’s development pipeline for the next cycle
- Net sales of £222.0 million financial year to date (sales: £436.3 million; acquisitions £214.3 million)
Strong financial position to fund further organic growth
- Loan-to-value of 17.4%1, weighted average interest rate of 3.8%1, drawn debt 100%1 fixed or capped
- Cash and undrawn committed facilities of £506 million1, low marginal cost of debt of 1.6%
"I am delighted to be able to report another quarter of strong activity. The Group is performing well on all fronts: our development properties are leasing ahead of ERV; our asset management activities are capturing the meaningful reversionary potential across the investment portfolio; and our capital recycling is crystallising material profits..."
London’s economy continues to grow. Whilst we expect increasing uncertainty ahead of an anticipated referendum on Britain’s relationship with the EU, today the level of occupier demand remains good for the limited quantity of available office and retail space, particularly in our core West End market. As a result, we can expect further pre-lettings and healthy rates of rental growth. In addition, our exceptional developments will continue to deliver attractive returns for shareholders; and our balance sheet strength will allow us to exploit our many portfolio opportunities to the full."
1Based on property values at 30 September 2015 pro forma for sales and purchases
