This announcement contains inside information
Great Portland Estates plc results for the Group for the year ended 31 March 20241, with key highlights:
- Strong leasing & operational performance, leasing at 9.1% premium to March 2023 ERV
- Vacancy only 1.3% as we meet customer demand for best space & service in supply drought
- Property valuations at or around trough following yield expansion, GPE portfolio down 2.4%3 in H2
- Rental values up 3.8%; ERV growth guidance upgraded, prime offices 5% to 10% for FY’25
- Net buyer for first time since 2013; buying at a discount to replacement cost
- Identified £1.4 billion of attractive, accretive new opportunities; exchanged on first purchase
- Deep experience, expertise and customer focus; GPE well positioned to unlock potential
- Announced fully underwritten £350 million rights issue in line with our raise and return strategy
We are pleased to report on another year of strong operational performance. Our appealing blend of best in class HQ offices and Fully Managed Flex spaces, all in central London’s undersupplied markets, is proving attractive to customers, enabling us to beat the valuer’s ERV estimates by 9.1% on all signed leases, the highest margin since 2012, and by 11.1% across our office lettings. Today, our portfolio is effectively full and, having delivered ERV growth towards the top end of last year’s guidance, we have upgraded our forecast for this year to 5% to 10% for our prime offices.
We remain strong believers in London’s long-term prospects; whilst its occupational markets, particularly for centrally located, Grade A space continue to power ahead with growing demand and shrinking supply, we believe its investment markets are at an inflection point; macro-economic effects ushered in a prolonged period of high inflation and elevated interest rates, triggering capital value declines of 58% in real terms since 2016, to levels we last saw after the GFC in 2009. We believe values are now at or around their cyclical trough and consequently, we turned net buyer during the year for the first time since 2013, acquiring £152 million of opportunities since March 2023 at an average 42% discount to replacement cost.
To capture the exciting growth opportunities and enable us to take further advantage of disrupted investment market pricing, we have today announced a £350 million fully underwritten rights issue and the acquisition of The Courtyard, a core West End Flex conversion opportunity. With an increasing pipeline of potential acquisitions, totalling circa £1.4 billion and a number of encouraging discussions ongoing, we can look forward to adding accretive opportunities to our well-located portfolio. Having completed our asset sales at more opportune points in the cycle, we will return to selling once investment markets recover.
GPE’s prospects are strong; our Flex and HQ development business streams are both growing with supportive market conditions, backed up by our market-leading service to our customers; we expect to add further opportunities, capturing value in disrupted investment markets; our teams’ extensive experience of successful value creation in cyclical markets and our strong balance sheet will all combine to enable us to generate attractive shareholder returns.
Strong leasing 9.1% ahead of ERV2; vacancy only 1.3% with 83% customer retention
- £22.5 million of leases signed in year to 31 March 2024, 9.1% ahead of March 2023 ERV, including;
- £13.7 million of Flex; 29 lettings 12.3% ahead of March 2023 ERV; and
- Offices 11.1% ahead of March 2023 ERV, retail 4.7% ahead
- Our committed Flex offer now 503,000 sq ft, targeting growth to one million sq ft
- Rent roll of £107.5 million; vacancy 1.3% (Mar 2023: 2.5%)
- Further £4.8 million of lettings under offer, 4.0% above March 2024 ERV
- Market leading NPS score of +30.2; 83% customer retention
Committed capex of £0.5 billion, c.£120 million profit to come; embracing circular economy
- Good progress at our pre-let net-zero carbon 2 Aldermanbury Square, EC2; Clifford Chance confirmed pre-let commitment to whole building; anticipated completion Q1 2026
- Started HQ redevelopments of Minerva House, SE1 and French Railways House, SW1 to provide 210,700 sq ft ofnew Grade A space; reusing steel from City Place House, EC2
- Updated plans for New City Court, SE1 and Soho Square, W1 added to the pipeline with vacant possession later this year
- Significant refurb programme to grow our Fully Managed offer, 4 schemes on-site delivering 145,000 sq ft
- In total, 7 best-in-class schemes well timed to deliver into supply constrained market
- Updated Roadmap to Net zero (announced earlier this week)
Net buyer for first time since 2013; with more expected following Courtyard swap deal
- Four acquisitions (£152 million) since March 2023, including:
- Two Flex (£53 million) inc. 141 Wardour Street, W1 in core Soho for £39 million (£1,156 per sq ft) and Bramah House, 65/71 Bermondsey Street, SE1 for £14 million (£892 per sq ft)
- HQ development opportunity on Soho Square, W1 for £70 million (£772 per sq ft on consented NIA)
- The Courtyard, WC1 acquired for £28.6 million (69% discount to replacement cost ) in April in asset swap deal, adding to our flex cluster in Fitzrovia
ERVs up 3.8%3, with valuation down 12.1%3 (-2.4%3 in H2) driven by yield expansion; EPRA4 NTA per share of 624 pence
- Portfolio valuation of £2.3 billion, down 12.1%3; -11.8% offices (inc. Flex -8.2% of which Fully Managed -4.4%) and -13.2% retail; H2 -2.4%
- Rental values up by 3.8%3 (+3.6% offices and +4.4% retail); yield expansion of 56 bps
- Portfolio rental value growth guidance for FY’25 of 3% to 6%, prime offices 5% to 10%
- IFRS NAV and EPRA4 NTA per share of 624 pence, down 17.6% since March 2023 (H2: -4.0%) as expected
- EPRA4 earnings of £17.9 million, as expected, down 25.4% on 2023. EPRA4 EPS of 7.1 pence
- IFRS loss after tax of £307.8 million; loss per share of 121.7 pence; dividend maintained at 12.6 pence
Strong balance sheet with no debt maturities until 2026
- New £250 million term loan arranged in October 2023 to fund near-term development programme and recently matured £175 million USPP Notes
- EPRA LTV 32.6%; cash and undrawn facilities £633 million at 31 March 2024
- No debt maturities until late 2026
Announced fully underwritten £350 million rights issue (see today’s separate announcement)
- Attractive identified acquisition pipeline of £1.4 billion; 74% West End & Midtown
- Developing recent acquisitions; £168 million capex into two prime West End opportunities
- Pro forma liquidity of £594 million and EPRA LTV of 18.2%; once proceeds deployed, expect LTV to return to upper end of through the cycle LTV range of 10-35% with capital recycling discipline maintained
1 All values include share of joint ventures unless otherwise stated 2 Leasing in period to 31 March 2024 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 9 to the financial statements. Our primary NAV metric is EPRA NTA which we consider to be the most relevant investor measure for the Group.
