The Directors of Great Portland Estates plc announce the results for the Group for the six months ended 30 September 2016.
Highlights1 for the six months:
Valuation lower; driven by yield expansion
- Portfolio valuation down 3.7%2 (developments: down 1.5%2) driven by yield expansion (up 17bp)
- Six month capital return of -3.2% v IPD Central London of -3.2%/-1.3% (Monthly/Quarterly Index), with total property return of -2.2%; five year capital return of 81.8%, 10.4% ahead of IPD Central London
- Rental value decline of 0.5%2 (-0.7% offices, +0.1% retail)
- Rent roll growth of 3.7% over six months; total potential future rent roll growth of 92% (to £192.8 million)
Resilient financial performance; EPRA profit and dividend growth
- EPRA3 NAV per share of 813 pence, down 4.0% over six months
- Net assets of £2,826.8 million (31 March 2016: £2,912.2 million)
- EPRA3 profit before tax of £28.3 million, up 16.5% on H1 2015. EPRA3 EPS of 8.3 pence, up 20.3%
- After revaluation deficit, reported loss after tax of £62.8 million (2015: profit of £371.0 million)
- Interim dividend per share of 3.7 pence, up 2.8%
Continued successful leasing activity in-line with ERV and capturing reversion; high occupancy at 97%
- 26 new lettings (162,550 sq ft) securing annual income of £12.1 million since start of financial year, including three pre-lettings of £4.7 million; market lettings 0.2% above valuers’ March 2016 ERV
- Further £5.9 million of lettings under offer, 4.2% ahead of March 2016 ERV
- 10 rent reviews securing £5.2 million, 53.2% ahead of passing rent, 5.3% ahead of March 2016 ERV
- Vacancy rate remains low at 3.1%, average office rent only £46.20 sq ft, average ERV only £63.60 sq ft
- Reversionary potential of 29.1% (£29.2 million); £3.2 million of reversion captured since March 2016
- 6.9 years average lease length (including pre-lets), diverse occupier base (< 1.5% to investment banks/securities trading/insurance, by rent)
De-risked and flexible development programme; committed schemes 72% pre-let or pre-sold
- Two schemes completed (100,900 sq ft), profit on cost of 31.6%, 25% pre-let (58% inc. space under offer)
- Five committed schemes (659,100 sq ft, 76% West End), profit on cost of 16.8%, all expected to complete in next 15 months, 72% pre-let or pre-sold; total capital expenditure to come of £129.1 million
- Good progress across two near-term uncommitted schemes (311,800 sq ft), including planning permission secured at Oxford House, W1; both adjacent to West End Crossrail stations
- Exceptional and flexible long-term development pipeline of 14 schemes (1.4 million sq ft), income producing, 3.9 years average lease length, 31% reversionary1(existing use)
Net seller; crystallising profit
- £71.0 million of bolt-on acquisitions; £292.5 million of sales since March 2016 at 0.5% surplus to book value; including:
- Forward sale of 73/89 Oxford Street, W1 for £276.55 million, crystallising whole life surplus of 75%
Strongest ever financial position; low LTV of 16.0% and significant liquidity
- Pro forma4 loan-to-value of 16.0% (31 March 2016: 17.4%), weighted average interest rate of 3.3%, weighted average maturity of 5.0 years with £450 million bank facility extended by a year to October 2021
- Pro forma4 cash and undrawn committed facilities of £553 million, low marginal cost of debt of 1.5%
1 All values include share of joint ventures unless otherwise stated
2 On a like-for-like basis
3 In accordance with EPRA guidance
4 See our Financial Results
5 Contract price
"We are pleased to report resilient first half results, despite the more uncertain economic environment following the EU referendum, built around a strong operational performance, our unprecedented financial strength and the enduring appeal of well-designed and managed central London real estate..."
"...We have maintained our leasing momentum across our West End focused portfolio and continued to recycle capital profitably, selling properties where we have created significant value.
The referendum result has had a negative effect on business confidence in London which will likely result in lower economic growth. As a consequence, we can expect London’s commercial property markets to weaken during this period of uncertainty. However, the broad spread and depth of its economic activity and a growing population will, we believe, help to ensure that London maintains its position as a truly global city and Europe’s business capital.
Within this more challenging environment, GPE is well positioned: Our investment portfolio is almost fully occupied, off low average rents and with significant reversionary potential; our committed development programme is largely de-risked, being 72% pre-let or pre-sold and leasing interest in the balance remains robust; our income-producing development pipeline is full of enticing prospects with 1.7 million sq ft of flexible future growth potential; following more than three years of net property sales crystallising material surpluses, our balance sheet has never been stronger and gearing never lower, giving us significant financial capacity to exploit any market weakness, just as we did in 2009; and, we have a first class team ready to capitalise on this period of uncertainty."