The Directors of Great Portland Estates plc announce the results for the Group for the six months ended 30 September 20221, with highlights including:
- New leasing record including largest ever letting at 2 Aldermanbury Square, EC2; 4.4% ahead of ERV2
- Significant capex programme of £1.1 billion; 1.5 million sq ft delivering into supply drought
- Yield driven valuation decline of 3.4% (ERVs up 0.7%); EPRA NTA per share of 794 pence
- Significant financial strength; low pro forma LTV of 17.8% and £494m of liquidity
- GPE well positioned to capitalise on opportunities emerging in London
Record leasing inc. pre-let of all offices at 2 Aldermanbury Square, EC2; 4.4% ahead of ERV2
- £16.7 million p.a. of new annual rent across 205,300 sq ft (inc. £4.6 million in retail), market lettings 4.4% above March 2022 ERV (Fully Managed lettings: 10.3%>ERV); further £6.6 million of lettings under offer
- Our Flex offer now c.15% of office portfolio, targeting 650,000 sq ft (c.26%) of office portfolio by 2027
- Rent roll up 5.4%, vacancy down to 7.4% (Mar 2022: 10.8%); 3.3% excl. developments; 100% rent collection
- Since 1 October, further £27.5 million p.a. of new annual rent signed across 346,300 sq ft, market lettings 2.5% above March 2022 ERV, including:
- Our largest ever pre-let at 2 Aldermanbury Square, EC2; £24.7 million, 20 year term
Total prospective capex of £1.1 billion; commitment to 2 Aldermanbury Square, EC2
- Good progress across 13 schemes, well timed to deliver into supply constrained market; 1.5 million sq ft; c.50% of portfolio
- Net Zero Carbon refurbishment at 50 Finsbury Square, EC2 on track for hand over to Inmarsat in December
- Following pre-let, commitment to develop 2 Aldermanbury Square, EC2, anticipated completion Q4 2025
- Three further near-term development schemes, starts from 2023; with significant refurbishment programme to enhance our Fully Managed offer
Valuation down 3.4% driven by yield expansion; EPRA4 NTA per share of 794 pence
- Portfolio valuation of £2.6 billion, down 3.4%3; -3.9% offices (inc. Flex -1.4%) and -1.5% retail
- Rental values up by 0.7%3 (+1.0% offices (inc. Flex +3.3%) and -0.5% retail); yield expansion of 15 bp
- Portfolio rental value growth guidance of 0% to +2.5% for the financial year
- IFRS NAV and EPRA4 NTA per share of 794 pence, down 4.9% over six months
- EPRA4 earnings of £11.4 million, down 39.0% on H1 2021. EPRA4 EPS of 4.5 pence, down 39.2%
- IFRS loss after tax of £86.6 million (2021: profit of £62.2 million); interim dividend maintained at 4.7 pence per share
Significant strength; profitable capital recycling, pro forma LTV of 17.8%
- Two sales (£217.8 million) inc. exchange of 50 Finsbury Square, EC2 for £190 million in October, reflecting a topped up net initial yield of 3.85% and capital value of £1,471 per sq ft, completion Q1 2023
- Two acquisitions (£37.1 million) inc. 6/10 St Andrew Street, EC4 for £30.0 million (£650 per sq ft), growing our Fully Managed offer
- Pro forma5 EPRA LTV of 17.8%, weighted average interest rate of 2.7%, cash and undrawn facilities of £494 million5 ; weighted average debt maturity of 6.85 years; no maturities in next 18 months
- Reviewing £0.9 billion of acquisitions and £100 million of sales
- Team reorganisation and promoting from within to deliver Customer First approach and position business to take advantage of changing market conditions
Over the past six months, property values in our markets have come under pressure, given the challenging macro-economic and geopolitical environment. However, demand for best in class spaces remains robust, driving strong leasing activity, best illustrated by our own record leasing since March, growing prime office rents and enabling us to continue recycling capital out of mature assets at near cycle-low yields.
Whilst economic challenges may persist in the near term, our experience is that many customers are looking through the downturn in assessing their real estate needs, seeking to trade up to great spaces that are fit for future working patterns. In that context, GPE is well placed; the central London office market is prospectively starved of new, Grade A supply and we plan to deliver our £1.1 billion capex programme into this shortage and a recovering economy; our flex office offer is growing well, delivering our highest rental growth through providing great service to customers; and our strong balance sheet, low leverage and plentiful liquidity combined with our long track record of creating opportunities in volatile market conditions means that we are well positioned to capitalise. GPE is in good health and, against this backdrop, we look to our future with confidence.
1. All values include share of joint ventures unless otherwise stated 2. Leasing in period to 30 September 2022 3. On a like-for-like basis 4. In accordance with EPRA guidance. 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 7 to the financial statements. Our primary NAV metric is EPRA NTA which we consider to be the most relevant measure for the Group. 5 Pro forma for the expected proceeds from the sale of 50 Finsbury Square, EC2 (£190 million), after deducting expected capex to complete (£11.3 million).
