Investment case

 

Our key performance indicators (KPIs) measure the principal metrics that we focus on in running the business and they help determine how we are remunerated. Over the medium term, we aim to outperform our benchmarks through successfully executing our strategic priorities.

Total shareholder return (%) (TSR)

Rationale

TSR is a standard measure of a company’s share performance over time. It measures the movement in a company’s share price plus dividends expressed as an annual percentage movement.

Commentary

TSR of the Group is benchmarked against the TSR of the FTSE 350 Real Estate index (excluding agencies).

The TSR of the Group was –9.3% for the year compared to 0% for the benchmark following a de-rating of the share prices of GPE and other London-focused property companies relative to the benchmark index, in part due to adverse market sentiment resulting from the EU referendum.

Alignment with remuneration

Performance criteria for Executive Directors’ and certain senior managers’ long-term incentives.

 

EPRA net assets per share growth (%) (NAV growth)

Rationale

EPRA NAV growth is the industry standard measure of a real estate company's success at creating value.

Commentary

We compare our EPRA NAV growth with the increase in the retail price index (RPI) plus minimum and maximum hurdles of 9%–27% over three years. For the benchmark, we have used the minimum hurdle. EPRA NAV declined during the year by -5.7% as our property values reduced given the market uncertainty following the EU referendum result. The EPRA NAV decline resulted in 10.6 percentage point relative underperformance for the year. 

Alignment with remuneration

Performance criteria for Executive Directors’ and certain senior managers’ long-term incentives, and for Executive Directors’ and employees’ annual bonus. Given proposed changes to the performance measures, EPRA NAV growth is expected to be replaced by Total Accounting Return (TAR) as a KPI in the year ahead. Our TAR was -4.6% for the 2016/17 financial year.

Total Property Return (%) (TPR)

Rationale

TSR measures a company's performance at driving value from its property portfolio. It is calculated from the net capital growth of the portfolio plus net rental income derived from holding these properties plus profit or loss on disposals expressed as a percentage return on the period's opening value as calculated by IPD. 

Commentary

TPR is compared to a universe of £52.8 billion of similar assets included in the IPD central London benchmark. The Group generated a portfolio TPR of –3.0% in the year whereas the benchmark produced a total return of 3.6%. This relative under- performance resulted from our lower than benchmark exposure to long-dated investment properties, whose valuations proved more resilient in the year and which we have sought to monetise through sales. Our portfolio is focused on the longer term growth opportunities available from our future development pipeline and active asset management properties, where income is necessarily shorter.

Alignment with remuneration

Performance criteria for Executive Directors’ and certain senior managers’ long-term incentives. The capital element of TPR is a performance criteria for Executive Directors’ and employees’ annual bonus.

Five year performance (%)

Commentary 

Over the last five years, our proactive approach and strong performance against our benchmark has delivered a total shareholder return of 95.0% (or 14.3% p.a.), outperforming the comparator group by 13.4 percentage points.