The Directors of Great Portland Estates plc announce the results for the Group for the six months ended 30 September 2020.
Highlights include:1
Valuation lower driven by retail rental value declines
- Portfolio valuation of £2.5 billion, down 6.6%2 (-2.4% offices and -18.0% retail)
- Rental values down by 3.9%2 (-0.7% offices and -13.0% retail); yield expansion of 5 bps
- Total property return of -5.1%, with capital return of -6.4% v MSCI Central London (quarterly index) of -3.2%
- Portfolio rental value guidance range for the financial year at -5% to -10%
Interim dividend maintained against challenging market backdrop
- IFRS and EPRA3 NTA per share of 800 pence, down 7.8% over six months
- EPRA3 earnings of £20.6 million, down 26.7% on H1 2019. EPRA3 EPS of 8.2 pence, down 22.6%
- After revaluation deficit, IFRS loss after tax of £154.8 million (2019: £44.1 million profit)
- Total accounting return4 of minus 6.9% over six months; interim dividend per share maintained at 4.7 pence
Improving cash collection; providing support to occupiers on a case by case basis
- 80% of September rent collected to date including amounts covered by rent deposits (June equivalent 72%); 72% excluding deposits (86% from offices; 39% from retail/hospitality/leisure sectors)
- 83% of March and June rent now collected including rent deposit cover
- All offices remain open and operating with COVID-19 Secure status
Leasing 4.6% ahead of ERV; continuing to grow our flex space offer
- £6.6 million p.a. let, 77,300 sq ft, market lettings 4.6% above March 2020 ERV
- Flex space now c.13% of office portfolio, completion of first Flex+ offer at Dufours Place, W1, appraising further 140,900 sq ft
- Five rent reviews secured £3.7 million p.a., 7.8% ahead of passing rent, 2.5% ahead of ERV at review date
- Underlying vacancy rate of 2.6% (31 March 2020: 2.0%), 8.3% including the recently completed developments; average office rent of £54.80 per sq ft; reversionary potential of 5.2% (£5.0 million)
- 73% retention rate in year to Sept, in line with long-run average, with further 16% let within 12 months
- Like-for-like rent roll down 4.4% to £96.4 million, with total potential future growth of 88% to £181 million5
- £6.8 million of lettings under offer, 13.9% ahead of September 2020 ERV; further c.£30 million in negotiation
Two schemes successfully completed; total development programme covering 40% of portfolio
- The Hickman, E1 (75,300 sq ft) completed in September, 28% under offer; 13.0% profit on cost
- Hanover Square, W1 (221,500 sq ft) completed in November, 55% let, 10.3% profit on cost
- 1 Newman Street & 70/88 Oxford Street, W1 construction progressing well, capex to come £23.9 million, 31% pre let
- Three near-term office schemes (821,900 sq ft); strong occupier interest ahead of earliest start in 2021, aiming for annual rental uplift of 160%
- Total pipeline of ten schemes (1.4 million sq ft), currently income producing, with 2.3 years average lease length, 11% reversionary (existing use)
Strong financial position; pro forma liquidity increased to £465 million
- Property LTV of 17.2%, weighted average interest rate of 2.3%
- Substantial headroom above Group debt covenants (values could fall 63% before breach)
- New £150 million USPP; weighted average coupon of 2.77%, average term 14.5 years
- Pro forma cash and undrawn facilities of £465 million
Market leading sustainability, supporting our communities and our people
- Roadmap to Net Zero Carbon by 2030 launched, see separate announcement
- Strong employee engagement, 96% of employees recommend GPE as a great place to work
- GPE Community Fund raised £325,000; now fully deployed to support some of London’s most vulnerable
"We have delivered a resilient first half performance in perhaps some of the most challenging trading conditions we have experienced. Despite this context, Great Portland is in robust health, with one of the strongest balance sheets in the sector given our low leverage and high liquidity, both protecting us on the downside and providing us with capacity for growth when we deem the time to be right. It is clear that the impact of the COVID crisis will persist for longer than we had hoped and we are engaging extensively with our occupiers and communities, providing assistance where it is most needed. With unemployment rising, albeit from a low level, we should expect rents and capital values in London to fall further. However, we are encouraged by the level of new enquiries we continue to receive from prospective occupiers, particularly for our developments and our flex space product, along with increasing activity in the central London investment market. As we look beyond COVID, it is likely that the evolution in the patterns of work and shopping we have experienced over recent years will have accelerated – for example, the demands of office occupiers for greater wellbeing provision in smaller scale, more flexible buildings with higher sustainability credentials. We are addressing these and other themes through, for instance, growing our flex office offer and the launch today of our Roadmap to decarbonise our business to Net Zero by 2030. And, we are doing so firm in our belief that, however occupiers’ demands evolve, our human desire to congregate and create will underpin London’s magnetic appeal as a global business capital for the long term; plus, our financial strength, extensive pipeline of opportunity across our portfolio and our talented team with its deep market knowledge will give us the ability to choose our path to deliver on all our ambitions."
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 We prepare our financial statements using IFRS, however we also use a number of adjusted measures in assessing and managing the performance of the business. These include like-for-like figures to aid in the comparability of the underlying business and proportionately consolidated measures, which represent the Group’s gross share of joint ventures rather than the net equity accounted presentation included in the IFRS financial statements. These metrics have been disclosed as management review and monitor performance of the business on this basis. We have also included a number of measures defined by EPRA, which are designed to enhance transparency and comparability across the European Real Estate sector, see note 8 to the financial statements. In October 2019, EPRA issued new Best Practice Recommendations for Net Asset Value (NAV) metrics, these recommendations are effective for accounting periods starting on 1 January 2020 and have been adopted by the Group. Our primary NAV metric is EPRA NTA which we consider to be the most relevant measure for the Group (as it most closely mirrors EPRA NAV) 5 Gross contracted rent excluding impact of tenant incentives, including share of JVs and CBRE rental estimates at September 20
