GPE Trading Update – strong operational performance and proposed return of £306 million to shareholders following profitable property sales

25 January 2018

 

Great Portland Estates plc (“GPE”) today publishes its trading update for the quarter to 31 December 2017.

Another strong quarter of leasing; 2.0% ahead of ERV and capturing reversion

  • 21 new lettings (208,600 sq ft) signed generating annual rent of £10.7 million (our share: £7.2 million), including £4.8 million pre-letting at 160 Old Street, EC1; 2.0% ahead of March 2017 ERV
  • Six rent reviews settled securing £2.4 million per annum; 36% above previous passing rent, 2.4% ahead of ERV; remaining reversionary potential of 16.9% (£18.2 million)
  • 11 lettings under offer totalling £9.6 million p.a. of rent (our share: £6.3 million); 1.8% ahead of September 2017 ERV
  • Vacancy rate of 6.3% (falling to 4.5% if we convert all investment lettings under offer)
  • 99.8% of rent collected within seven working days 

Good progress on development schemes; flexible pipeline covering 44% of existing portfolio

  • Rathbone Square, W1 (residential) and 55 Wells Street, W1 completed (together 189,000 sq ft), 93% pre-sold or under offer; 13 of 142 Rathbone private residential units now handed over to buyers
  • 160 Old Street, EC1 (161,700 sq ft) due for completion in April; 57% pre-let, capex to come of £4.5 million
  • Good progress across three near-term uncommitted schemes (414,300 sq ft), including planning permission for new build scheme at Oxford House, W1 and continued handover of land from Crossrail at Hanover Square, W1; potential capital expenditure of £231.1 million
  • Exceptional and flexible medium-term development pipeline of 13 schemes (1.3 million sq ft), currently income producing, with 3.7 years average lease length, 17.7% reversionary1

Crystallising significant surpluses; commercial sales of £319 million (our share) 2.7% ahead of book value

  • Sale of 240 Blackfriars Road, SE1 from GRP JV for £266.0 million (GPE share: £133.0 million, net initial yield of 3.94%, capital value of £1,176 per sq ft), GPE whole life surplus of £69.5 million (87% capital return)
  • Sale of 30 Broadwick Street, W1 for £185.9 million (net initial yield of 4.0%, capital value of £2,015 per sq ft), GPE whole life surplus of £83.32 million (77%2 capital return)

Unprecedented financial strength; proposed return of £3063 million to shareholders

  • LTV (pro forma for commercial sales) of 6.9%4, weighted average interest rate of 2.9%, drawn debt 100% fixed or hedged
  • Net proceeds from commercial property sales of £3063 million proposed to be returned to shareholders
    • Expected payment of c.94 pence per share
    • Anticipated to be implemented through the issue and redemption of a new class of redeemable B shares, accompanied by a share consolidation
    • Subject to shareholder approval, which is expected to be sought in March 2018
  • Pro forma LTV after proposed return of 17.2% and cash & undrawn facilities of £491 million
  • Tender offer launched for £142.9 million 5.625% First Mortgage Debenture Stock 2029 – see separate RNS announcement dated 25 January 2018

 

  1. Existing use of development pipeline at 30 September 2017
  2. Pre-tax
  3. Gross proceeds of £319 million less anticipated tax of approximately £13 million; expected to be received by the end of January 2018
  4. Based on property values at 30 September 2017 pro forma for remaining GPE share of net proceeds of £306 million from the sales of 240 Blackfriars Road, SE1 and 30 Broadwick Street, W1

We are pleased to report another very active quarter, maintaining our leasing momentum ahead of ERV and successfully progressing our developments. We have also continued to recycle capital profitably with the sale of two long-let properties, crystallising the significant value that we created through their redevelopment. With pro forma LTV of only 7% following these sales, we are proposing to return the net proceeds of £306 million to shareholders, reflecting our ongoing commitment to balance sheet discipline, whilst also ensuring that we retain significant financial flexibility for both the next programme of developments and acquisitions. Today, in spite of the macro-economic and political uncertainties, tenant interest remains healthy across our portfolio with £9.6 million of lettings currently under offer. Moreover, GPE is in great shape with attractive long-term potential: 89% of our portfolio is located near to central London Crossrail stations which open in late 2018; our investment portfolio is well-let off low average rents with significant near-term reversion to capture; our future development opportunities now cover 44% of our portfolio, including three potential starts in the next six months; we have the financial strength to fund this exciting development programme and also exploit any future market weakness, and our first class team is ready to capitalise on opportunities as we unearth them.

Toby Courtauld Chief Executive
  • Stephen Burrows

    Director of Financial Reporting & Investor Relations

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  • Finsbury

    Gordon Simpson

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    T: 020 7251 3801