Great Portland Estates plc (“GPE”) today publishes its trading update for the quarter to 30 June 2016.
"...In the near-term, we expect confidence to reduce and some business investment decisions to be deferred whilst negotiations to establish our trading arrangements with the EU are undertaken.
As a result, we can expect London’s commercial property markets to weaken during this period of uncertainty with the benefits of lower bond yields and weaker sterling offset by reduced rental growth prospects
Within this more challenging economic context, GPE is well positioned: Following three years of net property sales, our balance sheet has never been stronger with gearing at record low levels, giving us significant financial capacity to take advantage of any market weakness; our committed development programme is materially de-risked, being 62% pre-let or pre-sold; our investment portfolio is almost fully occupied, off attractively low rents, with minimal exposure to financial services occupiers, and includes an exceptional future development pipeline with flexible start dates; and we have a first class team ready to capitalise on this period of uncertainty."
Continued successful leasing activity; high occupancy of 97% and diverse occupier base
- Ten new lettings (66,100 sq ft) signed generating annual rent of £3.6 million (our share: £3.2 million), including £0.7 million pre-letting at 30 Broadwick Street, W1; 2.0% ahead of March 2016 rental values
- Four rent reviews settled securing £3.5 million per annum; 46.2% above previous passing rent
- Eleven lettings under offer totalling £6.3 million p.a. of rent (our share: £5.5 million); 1.1% ahead of March 2016 rental values
- Low vacancy rate of 3.1%, low average office rent passing of £45.40 per sq ft, 7.5 years average lease length (including pre-lets), diverse occupier base (31% retail/leisure, 26% TMT, 18% professional services, 12% financial services; less than 1.5% to securities houses/investment banks)
- 99.8% of rent collected within seven working days
De-risked development programme; committed schemes 62% pre-let or pre-sold
- Eight committed schemes (851,200 sq ft, 81% West End), all expected to complete in next 18 months; capital expenditure to come of £210.0 million, 62% pre-let or pre-sold (with further 6% under offer)
- Good progress across further two near-term uncommitted schemes (311,800 sq ft), including planning permission secured at Oxford House ,W1; potential capital expenditure of £155.4 million
- Exceptional and flexible long-term development pipeline of 14 schemes (1.4 million sq ft), all income producing, with 4.1 years average lease length, 31% reversionary1
Selective acquisitions; further recycling
- Purchase of the freehold interest in our prime development at 73/89 Oxford Street, W1 and 95/96 New Bond Street, W1 for £71.0 million
- Completion of the sale of vacant Mortimer House, W1 for £26.95 million, crystallising all refurbishment profit without having to refurbish
Strong financial position; low LTV of 19.4% and significant liquidity
- Loan-to-value of 19.4%2, weighted average interest rate of 3.6%, drawn debt 91% fixed or capped
- Cash and undrawn committed facilities of £377 million, low marginal cost of debt of 1.6%
1 Existing use of development pipeline at 31 March 2016
2Based on property values at 31 March 2016 pro forma for sales, purchases and capex