TIDMGPOR
RNS Number : 6553T
Great Portland Estates PLC
05 July 2018
5 July 2018
Great Portland Estates Trading Update
Great Portland Estates plc ("GPE") today publishes its trading
update for the quarter to 30 June 2018.
Leasing successes ahead of March 2018 ERV and capturing
reversion
-- 11 new lettings (41,700 sq ft) signed generating annual rent
of GBP2.5 million (our share: GBP1.6 million); market lettings 1.9%
ahead of March 2018 ERV
-- 9 rent reviews settled securing GBP5.0 million per annum;
20.8% above previous passing rent, 5.1% ahead of ERV; remaining
reversionary potential of 9.2% (GBP9.7 million)
-- 20 lettings under offer totalling GBP4.4 million p.a. of rent
(our share: GBP3.8 million); 4.4% ahead of March 2018 ERV
-- Successfully trialled flex space offering across 12,000 sq
ft, securing rent at 35% premium to net effective rental value;
appraising further c.100,000 sq ft across existing portfolio
-- Vacancy rate of 6.3% (falling to 4.6% if we convert all investment lettings under offer)
-- 99.0% of rent collected within seven working days; no occupier delinquencies
Good progress on development schemes; flexible programme
covering 49% of existing portfolio
-- 160 Old Street, EC1 (161,700 sq ft) completed in April, now
71% let with a further 9% under offer and strong interest in
remaining space; 19.6% profit of cost
-- Good progress across three committed schemes (412,000 sq ft),
including our Hanover Square estate, W1 which is already 25.8%
pre-let; all located near to Crossrail stations, 15.9% forecast
profit on cost, capital expenditure to come of GBP233.0 million.
Encouraging levels of occupier interest
-- Exceptional and flexible development pipeline of 13 schemes
(1.3 million sq ft), currently income producing, with 3.6 years
average lease length, 12.2% reversionary(1)
Continued net sales; commercial sales of GBP49.6 million, 2.4%
ahead of book value
-- Sale of 78/92 Great Portland Street and 15/19 Riding House
Street, W1 for GBP49.6 million, net initial yield of 3.9%, capital
value of GBP1,362 per sq ft; crystallising development profit on
cost of 12.4%
-- Approximately GBP150 million in the market for sale; seeking
to crystallise further surpluses and take advantage of strong
investment markets
Strong financial position; GBP306 million returned to
shareholders
-- GBP306 million (93.65 pence per share) returned to shareholders via a B share scheme
-- LTV(2) of 12.6%, weighted average interest rate of 2.3%, drawn debt 100% fixed or hedged
-- Cash and undrawn committed facilities of GBP636 million, low marginal cost of debt of 1.6%
Toby Courtauld, Chief Executive, said:
"I am pleased to report another quarter of positive operational
activity with healthy leasing, ahead of ERV, and encouraging
occupier interest across our three newly committed development
schemes which are already 11% pre-let. We continue to attract
occupiers for our brand of high quality, well located, sensibly
priced space with GBP4.4 million of lettings currently under offer
at a 4.4% premium to March 2018 ERVs.
Despite the ongoing economic and political uncertainty, GPE is
in great shape with enviable long-term potential: five years of net
sales activity gives us unprecedented financial capacity even after
returning more than GBP400 million to shareholders; our investment
portfolio is well let, off low average rents and we are capturing
its reversionary potential; our committed development programme is
progressing well; our exceptional income-producing development
pipeline offers more than 1.3 million sq ft of flexible future
growth potential; and we have a first-class team ready to
capitalise on our many opportunities."
1. Existing use of development pipeline at 31 March 2018
2. Based on property values at 31 March 2018
Contacts:
Great Portland Estates
Toby Courtauld Chief Executive 020 7647 3042
Nick Sanderson Finance Director 020 7647 3034
Finsbury
James Murgatroyd 020 7251 3801
Gordon Simpson
020 7251 3801
This announcement contains inside information. The person
responsible for arranging the release of this announcement on
behalf of GPE is Desna Martin.
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.
Portfolio management
Occupier interest across our properties has continued to be
healthy as we delivered another strong quarter of leasing
performance, including:
-- 11 new leases and renewals signed generating annual rent of
GBP2.5 million (our share: GBP1.6 million), with market lettings
1.9% ahead of March 2018 ERV;
-- 9 rent reviews were settled securing GBP5.0 million of annual
rent (our share: GBP3.6 million) at an increase of 20.8% over the
previous passing rent and 5.1% ahead of ERV;
-- Total space covered by new lettings, reviews and renewals was 97,100 sq ft;
-- Group rent roll reduced to GBP105.7 million, down 1.5% over
the three months to 30 June 2018 given vacant possession achieved
at Oxford House, W1 and the sale of 78/92 Great Portland Street,
W1, although like-for-like rent roll grew by 2.1%; and
-- Investment portfolio vacancy rate increased from 4.9% at 31
March 2018 to 6.3% at 30 June 2018 in part due to the recent
completion of our development at 160 Old Street, EC1. This would
fall to 4.6% if we convert all investment lettings under offer.
Leasing Transactions Three months ended
-------------------------------------------------
30 June 2018 31 March 2018 30 June 2017
New leases and renewals completed
Number 11 10 20
GPE share of rent p.a. GBP1.6 million GBP5.7 million GBP5.2 million
Area (sq ft) 41,700 91,000 94,500
Rent per sq ft GBP60 GBP100 GBP63
Rent reviews settled
Number 9 6 10
GPE share of rent p.a. GBP3.6 million GBP6.8 million GBP3.8 million
Area (sq ft) 55,400 113,400 67,900
Rent per sq ft GBP90 GBP63 GBP56
------------------------- --------------- --------------- ---------------
Note: Includes joint ventures at our share
Significant portfolio management transactions during the quarter
included:
-- At our recently completed development, 160 Old Street, EC1,
Turner Broadcasting exercised their option to lease the whole of
the fourth floor (18,400 sq ft), on a 15 year lease (no breaks), in
addition to the 98,100 sq ft they have already pre-let;
-- Two flex space lettings completed at Elm Yard, WC1 (8,000 sq
ft) at a combined annual rent of GBP0.5 million, 11.9% ahead of
March 2018 ERV, with a further 4,000 sq ft under offer; and
-- At Kingsland House, W1, we settled a rent review with Folli
Follie (UK) Limited, capturing reversion of GBP0.3 million, an
increase of 102% on the previous passing rent and 29% above ERV at
the review date.
We have a further 20 lettings currently under offer which, if
completed, would deliver approximately GBP4.4 million p.a. of rent
(our share: GBP3.8 million), 4.4% ahead of 31 March 2018 ERV.
Our quarterly cash collection performance has continued to be
very strong, with 99.0% of rent secured within seven working days
of the June quarter day. None of our occupiers went into
administration during the quarter (March 2018: none); however, we
remain vigilant and continue to monitor the financial position of
all our occupiers. Although two of our occupiers have entered CVAs
this calendar year, in neither case did these result in any change
to their lease arrangements or occupational requirements with
GPE.
Development management
One scheme completed in quarter
At 160 Old Street, EC1, owned in our Great Ropemaker
Partnership, we completed the 161,700 sq ft of office, retail and
restaurant space in late April. Turner Broadcasting, which has
already pre-let 98,100 sq ft on the lower ground to third floors,
exercised its option to lease the whole of the fourth floor (18,400
sq ft). Together with the letting of two retail units, we have now
secured GBP6.1 million of rent with the building now 71.2% let and
we have the fifth floor under offer with positive leasing interest
in the remaining office space and the remaining retail units.
Three committed schemes
In May, we obtained vacant possession at Oxford House, 76 Oxford
Street, W1. We have now settled all of the neighbourly matters and
the building is currently being stripped out with demolition
commencing later in the year. The new building will deliver 78,100
sq ft of new offices and 37,900 sq ft of retail space directly
opposite the Dean Street entrance to the Tottenham Court Road
Crossrail station and completion is targeted for Q3 2021.
At our Hanover Square estate, W1, we have commenced the formal
process to purchase the element of the site that sits directly over
the Crossrail station and we expect this to complete during the
summer. The development scheme will deliver 221,300 sq ft in total,
comprising 167,200 sq ft of offices, 41,900 sq ft of retail and
restaurant space and 12,200 sq ft of residential apartments.
Following the pre-let of 57,200 sq ft of offices in the over
station office building to KKR in March, early leasing interest is
encouraging and we will launch the marketing campaign for the Bond
Street retail over the coming months with the remaining offices and
retail space launched later in the year.
At Cityside House, E1, having improved the design we inherited,
we have now stripped out the building, commenced demolition and
awarded the main construction contract. Our activities will
transform the existing building into 74,700 sq ft of Grade A office
and retail space. We are targeting average office rents across the
building of around GBP51.40 per sq ft, with delivery expected in Q4
2019 following the opening of the nearby Whitechapel Crossrail
station.
At 30 June 2018, the three committed development properties
required GBP233.0 million of capital expenditure to complete, with
75% of the construction costs already fixed.
Investment management
In April, our recycling activities continued with the sale of
the freehold of the recently redeveloped and long let 78/92 Great
Portland Street and 15/19 Riding House Street, W1 to M&G Real
Estate. The headline price of GBP49.6 million, equated to GBP48.3
million after deductions for tenant incentives or 2.4% ahead of the
March 2018 book value, reflected a net initial yield of 3.9% on a
topped up basis and a capital value of GBP1,362 per sq ft.
We are likely to continue to take advantage of strong investment
markets to crystallise surpluses where our business plans are
complete, particularly for long-dated, recently developed assets,
which today comprise 15% of the portfolio. Currently we have
c.GBP150 million of properties in the market to sell.
Financial management
Group consolidated net debt increased to GBP276.2 million at 30
June 2018, up from GBP(5.2) million at 31 March 2018 as proceeds
from property disposals were more than offset by the GBP306.0
million return of capital paid to shareholders in April. Group
gearing rose to 11.7% at 30 June 2018 from 0% at 31 March 2018.
Including non-recourse debt in joint ventures, total net debt was
GBP345.2 million (31 March 2018: GBP67.5 million) equivalent to a
low loan-to-property value of 12.6% (31 March 2018: 2.4%). In June,
we drew down GBP100 million of new unsecured US private placement
notes with 10, 12 and 15 year maturities (weighted average of 12.1
years) and a weighted average fixed rate coupon of 2.80%. At 30
June 2018, the Group, including its joint ventures, had cash and
undrawn committed credit facilities of GBP636 million.
Our weighted average interest rate was 2.3% at the quarter end
(31 March 2018: 2.1%) and our weighted average debt maturity was
5.6 years. At 30 June 2018, 100% of the Group's total drawn debt
was fixed or hedged. Our marginal cost of debt remains low at 1.6%
and our GBP450 million revolving credit facility does not mature
until October 2021.
30 June 2018 31 March 2018
------------- --------------
GPE net debt GBP276.2m GBP(5.2)m
------------------------------ ------------- --------------
GPE gearing(1) 11.7% 0%
------------------------------ ------------- --------------
Total net debt including JVs GBP345.2m GBP67.5m
------------------------------ ------------- --------------
LTV(2) 12.6% 2.4%
------------------------------ ------------- --------------
1. Based on net asset value at 31 March 2018
2. Based on property values at 31 March 2018
Financial calendar
Our Annual General Meeting ("AGM") will take place at 11.30am
today at Chandos House, 2 Queen Anne Street, London W1. GPE will
not be disclosing any new material financial information at the AGM
and the presentation materials will subsequently be published on
the GPE website (www.gpe.co.uk).
We expect to release our 2018/2019 interim results on Thursday
15 November 2018.
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END
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