RNS Number : 0560M
Great Portland Estates PLC
22 January 2009

2January 2009                                 

Third quarter valuation and business update

In today's Interim Management Statement, the Directors of Great Portland Estates plc ("GPE" or "Group") announce an update on trading, as well as the quarterly valuation of the Group's properties as at 31 December 2008.  Details of the Group's recent valuation and rental value performance are set out in the appendices. To view these appendices, please click on the following link. 



Key points from the quarter:

Toby Courtauld, Chief Executive of GPE said, 

"As we warned at our half-year results in November, deepening problems in the credit markets and heightened fears of a prolonged recession have served to push up investment yields and dampen occupational demand for office and retail space in central London. As a result, the rate of decline in property valuations accelerated across all UK sectors during the last quarter of 2008.

Despite this, our portfolio continues to outperform the relevant indices, due in part to its defensively low average rent concentrated in the core of the West End, and the continued good letting progress made during the quarter.

Whilst we expect 2009 to be challenging, our priorities remain capital conservation and cash flow generation, maximising occupancy and crystallising reversions. With our comfortable debt ratios and financial flexibility, we are relatively well placed to take advantage of further investment market weakness as the year progresses."

Portfolio valuation

Real estate valuations fell across all UK sectors during the last quarter of 2008 in response to well reported economic and investment market problems.  The valuation of the Group's properties as at 31 December 2008 was £1,245.5 million including our share of joint venture assets, a fall of £175.5 million or 12.4% since 30 September 2008.  By sector the portfolio value declines in the quarter were - West End offices 13.1%, City & Southwark offices 12.7% and West End retail 9.3%. These rates of decline compare favourably to the Q4 2008 capital reductions in the IPD monthly West End office, City office and London retail sub sectors of 16.1%, 16.9% and 12.4% respectively.  Further details on valuation trends by ownership and sectors are set out in appendix 1.  The wholly owned portfolio was valued at £872.1 million at December (down 12.8% on the quarter) and the joint venture properties (our share) at £373.4 million (down 11.2% on the quarter).  The net impact of the movement in yields and rental values on the portfolio valuation is set out in appendix 2.  

The portfolio true equivalent yield increased by 31 basis points over the quarter and now stands at 6.4%. The investment portfolio's adjusted initial yield (including contracted income still in rent free periods) was 5.4% at December 2008, up 40 basis points from September 2008 and 110 basis points higher than this time last year. A reconciliation of various yield measures is set out in appendix 2.

Occupational demand in central London was weak in the last quarter of 2008 as businesses maintained a cautious stance.  Across our portfolio rental values fell by 9.4% during the quarter, compared to 2.7% decline recorded for the three months to September 2008.  West End office rental values were 13.8lower whilst City and Southwark rental values fell by 5.3%. Retail rental values in the West End portfolio declined by 2.1% in the quarter. The Group's average office rental value remains defensively low at approximately £40.10 per sq ft, some £4.30 per sq ft higher than the average office rent passing (£35.80 sq ft)with the portfolio being 15.9% reversionary at the quarter end.  Rental value trends are highlighted in appendix 3. 

The portfolio valuation, provided by our external valuer CB Richard Ellis, is likely to come under further negative pressure during 2009 until there is some stability in the wider capital markets and sentiment towards the property sector improves. It is very difficult to predict when these and other positive factors will emerge.  

Estimated NAV per share and financing

The key driver of net asset value change for the quarter was the significant reduction in portfolio valuation of £175.5 million due to adverse market movements. NAV per share was also reduced by the interim 2008/09 dividend of £7.2 million or 4 pence per share.  As set out in the table below, the estimated NAV per share fell 20.5% from 493p at 30 September 2008 to 392p at 31 December 2008.


Pro Forma Estimated Balance Sheet









Adjusted NAV





At 30 September 2008






Valuation deficit




Interim dividend










At 31 December 2008










M2M of debt & derivatives






At 31 December 2008






At 30 September 2008








Note: The pro forma balance sheet is unaudited and does not include retained earnings for the quarter

The positive mark to market of debt of £9.3 million or 5p per share generated a NNNAV per share of 397p at 31 December 2008, a fall of 21.4% from 30 September 2008

Net debt at 31 December 2008 was £374.9 million, an increase of £9.1 million from 30 September 2008, mainly due to capital expenditure on developments at Wells & More, Mortimer Street, W1 and Bermondsey Street, SE1. Gearing was 52.9% and total loan to property value (inc JVs) was 40.8% compared to figures for September 2008 of 41.2% and 35.0% respectively.  At 31 December 2008 the Group had cash and undrawn committed credit facilities of £327.3 million with a current marginal cost of debt of 2.2% (including facility margin).

Investment and asset management activity


The only acquisition made during the quarter was the previously announced addition in the Great Capital Partnership of a small building in Great Castle Street, W1, next to the existing holding at Walmar House, Regent Street, W1. During the period seven recently converted apartments at 79/83 Great Portland Street, W1 were sold for a total of £4.1 million, generating a profit on cost of 17.4% from this project.


Good letting activity continued throughout the quarter, as set out in the table below, where 20 new leases have been completed generating an annual rent of £2.6 million p.a. (Group share £1.8 million p.a.).  These lettings were, in aggregate, 6.1% lower than the valuer'March 2008 estimates partly because several lettings incorporate landlord flexibility to allow possible redevelopment in the next three years.  17 further lettings are currently under offer accounting for a further £4.9 million p.a. in rent (Group share £4.4 million p.a.) Rent reviews totaling £0.6 million p.a. (Group share £0.3 million p.a.) have been settled 2.2% ahead of the valuer's estimates at the relevant review date.

Leasing Transactions


Three months ended


31 December 08

30 September 08

31 December 07



New leases and renewals completed






GPE share of rent p.a.




Area (sq. ft)




Rent per sq ft






Rent reviews settled






GPE share of rent p.a.




Area (sq. ft)




Rent per sq ft











Note: Includes joint ventures

As predicted at the time of our half year results, the Group's void rate has increased to 7.5% (from 3.4% at November 2008) as a result of major lease expiries at buildings where there was previously an intention to develop.  Encouraging discussions are ongoing to lease this vacant space on flexible terms which provide an opportunity to commence development when market conditions allow.

Cash collection and tenant delinquencies

The December quarterly cash collection profile was in line with recent experience. Wsecured 97% of rent after seven working days following the quarter day (September 2008 - 96%). Four of our tenants went into administration in December and January, accounting for around 0.1% of rent roll (September 2008 - three tenants, 0.4% of rent roll), the largest being a retailer occupying 7,000 sq ft in Piccadilly, W1.  Less than 0.5% of our rent roll is subject to monthly payments.  The segmentation of our tenant base is shown in appendix 4.

Development update

The development team's focus is on finalising our two on-site schemes and leasing the new available space.  At our 116,000 sq ft Wells & More, W1 project we expect practical completion later this month and we are negotiating with several potential tenants.  On 12 January we obtained planning permission for the Great Capital Partnership's 140,000 sq ft scheme at Fetter Lane, EC4.  At Hanover Square discussions on our master plan proposals continue and joint Crossrail/GPE project team has been appointed for the detailed design phase.


Toby Courtauld        Chief Executive      Great Portland Estates plc     020 7647 3042

Timon Drakesmith    Finance Director     Great Portland Estates plc     020 7647 3034


James Murgatroyd            020 7251 3801

Gordon Simpson               020 7251 3801

Forward Looking Statements

This document may contain certain 'forward-looking statements'. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes of results expressed or implied by such forward-looking statements.

Any forward-looking statements made by or on behalf of GPE speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. GPE does not undertake to update forward-looking statements to reflect any changes in GPE's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

Information contained in this  document relating to GPE or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance.

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