Great Portland Estates plc (“GPE” or “Group”) today publishes its trading update for the quarter to 31 December 2016.
Continued strong leasing activity ahead of ERV; tenant demand healthy
- 16 new lettings (86,600 sq ft) signed generating annual rent of £7.2 million (our share: £6.4 million); 0% above March 2016 ERV
- Two office lettings (25,200 sq ft) at our recently completed development at 30 Broadwick Street, W1, combined rent of £2.4 million p.a., 3.3% above March 2016 ERV
- Further £4.5 million of lettings under offer; 7.8% ahead of March 2016 ERV
- Capturing reversion, eleven rent reviews settled securing £5.5 million (our share: £3.6 million); 40% above previous passing rent and 2.0% ahead of ERV; further reversionary potential now 24.8%
- Vacancy rate increased as expected to 7.3% due to development/refurbishment completions, average office rent only £48.80 sq ft
- Rent roll of £107.7 million, up 7.3% over the three months; diverse tenant base (<1.5% to investment banking/securities trading/insurance)
- Rent collection strong; 99.3% collected within 7 working days
De-risked development programme; extensive and flexible pipeline of opportunity
- One completed scheme (92,300 sq ft), profit on cost of 33.1%, 55% let with a further 6% under offer
- Five committed schemes (659,100 sq ft), 76% West End, 73% pre-let or pre-sold, expected profit on cost 16.8%, all expected to complete in next 13 months; total capex to come £97.7 million
- Two near-term uncommitted consented schemes (311,800 sq ft), both adjacent to West End Crossrail stations, potential starts over next 18 months
- Exceptional development opportunity from long-term flexible pipeline; 14 uncommitted schemes (1.4 million sq ft), 3.9 years average lease length, income producing
Crystallising development profits
- Forward sale of 73/89 Oxford Street, W1 for £276.5 million, crystallising whole life surplus of 75% (£118.5 million)
Exceptionally strong financial position
- Pro forma loan-to-value of 16.9%1, weighted average interest rate of 7%, drawn debt 97% fixed or capped
- Cash and undrawn committed facilities of £445 million, low marginal cost of debt of 1.4%
"I am pleased to report another quarter of strong activity delivering continued leasing successes ahead of ERV and crystallising surpluses through profitable capital recycling. Despite the continuing uncertain economic environment and our expectation that London’s commercial property markets will weaken in the near-term, tenant interest remains healthy for the limited available space across our West End focused portfolio and our profitable forward sale of 73/89 Oxford Street demonstrates that investment pricing for prime assets remains relatively robust. GPE is in great shape: Following more than three years of net property sales, our unprecedented financial strength gives us significant capacity to exploit any market weakness; our investment portfolio is well let, off low average rents and with significant reversionary potential; our committed development programme is materially de-risked, being 73% pre-let or pre-sold; our exceptional income-producing development pipeline offers more than 1.7 million sq ft of flexible future growth potential; and, we have a first class team ready to capitalise on this period of uncertainty."
