Great Portland Estates plc (LON:GPOR) today published its trading update for the quarter to 31 December 2019.
Continued leasing successes ahead of March 2019 ERV
· Twelve new lettings (48,900 sq ft) generating annual rent of £3.7 million (our share: £3.5 million); market lettings 1.4% ahead of March 2019 ERV
· Flexible space now c.11% of office portfolio at 35% > ERV1 and appraising further c.149,000 sq ft
· Seven lettings under offer totalling £9.2 million p.a. of rent (our share: £9.2 million), market lettings 6.9% ahead of March 2019 ERV
· Vacancy rate remains low at 2.4%; average office rent only £55.10; reversionary potential 9.2% (£9.5 million)
· 99.3% of rent collected within seven working days; only two occupier delinquencies (0.2% of rent roll)
Committed schemes 50% pre-let or under offer; total programme covers 54%2 of existing portfolio
· Three committed schemes (414,900 sq ft), with two completing in 2020; 50% pre-let or under offer; all located near to Crossrail stations, 18.7% forecast profit on cost, capital expenditure to come of £76.0 million
· Three near-term uncommitted schemes (818,900 sq ft), expected capital expenditure of c.£600 million and expected ERV of c.£55 million
· Total pipeline of 10 schemes (1.4 million sq ft), all income producing, 2.8 years average lease length, 13.6% reversionary3
£64.5 million sale, 6.2% above book value; new PropTech VC investment
· 24/25 Britton Street, EC1 sold in January for £64.5 million, 6.2% above September 2019 book value reflecting net initial yield of 4.07% and capital value of £1,255 per sq ft, crystallising 15.7% p.a. IRR since refurbishment in 2011
· Commitment of up to £5 million to invest in Pi Labs European PropTech venture capital (‘VC’) fund
Strong financial position; new £450 million ESG-linked RCF aligned to ambitious sustainability targets
· LTV2 of 15.8% (or 13.7% pro forma for 24/25 Britton Street, EC1 sale), weighted average interest rate of 2.5%; cash and undrawn committed facilities of £368 million
· £200 million share buyback completed, 27.8 million shares purchased at average price of £7.20
· New innovative £450 million ESG-linked revolving credit facility (‘RCF’), headline margin of 90 bp
Toby Courtauld, Great Portland Estates Chief Executive, said:
“I am pleased to report on another productive quarter, combining healthy leasing ahead of ERV, good progress at our six committed and near-term developments and continued capital discipline, profitably recycling out of mature assets and returning surplus equity to shareholders as we completed our share buyback programme. The final quarter has started well; we have issued an innovative ESG-linked revolving credit facility and demand for our brand of high quality, sustainable space remains robust with £9.2 million of lettings currently under offer at a 6.9% premium to March 2019 ERVs.
The clear outcome of the General Election is encouraging increased transaction activity in our investment markets and, whilst further political and macro-economic turbulence is possible, GPE is in great shape: We are innovating across our portfolio, including the continued rollout of our flexible space offering; our exceptional development pipeline provides us with nearly 1.4 million sq ft of value creating opportunities; and with a talented team, supported by our collaborative culture, deep market knowledge and financial strength, we are well positioned to maximise the opportunity we have to generate long-term value across our business”.
1.Rental value of space prior to conversion, now open and trading as flexible space
2.Based on property values at 30 September 2019
3.Existing use of development pipeline at 31 December 2019
