Great Portland Estates pleased with lettings progress

Great Portland Estates saw 20 new lettings in in the quarter to 30 June, it reported in a trading update on Thursday, generating annual rent of £6m - its share being £5.2m - which was 2.3% ahead of its March estimated recovery value.

The FTSE 250 company also settled ten rent reviews, securing £3.8m per annum which was 62% above its previous passing rent and 3.4% ahead of ERV, with a remaining reversionary potential of 17.6% or £20.5m.

A total of 26 lettings were under offer, the board reported, totalling £13.1m per annum of rent - the company’s share being £10.4m - which was 1.3% ahead of the March ERV.

Great Portland’s rent roll was £115.9m at the end of the quarter, a rise of 5.7% over three months, while its vacancy rate stood at 6.5%, with the potential to fall to 4.5% if it managed to convert all investment lettings under offer.

The proportion of rent collected within seven working days was 99.8%.

“I am pleased to report another quarter of strong operational activity with continued leasing successes ahead of ERV and our acquisition in Whitechapel, close to its new Crossrail station, adding to our pipeline of future opportunity,” said chief executive Toby Courtauld.

“Despite the ongoing uncertain economic and political environment, we continue to attract tenants for our brand of high quality, well located, sensibly priced space with £13.1m of lettings currently under offer at a 1.3% premium to March 2017 ERVs.”

During the period, Great Portland said it made a number of “selective acquisitions” in a bid to increase its exposure to the under-construction Elizabeth line, including the purchase of the freehold of Cityside and Challenger House on London’s Whitechapel Road for £49.6m, or £320 per sq ft on the consented net internal area.

The board said there were angles to exploit and add to the development pipeline at that property.

It also described its “committed programme” of a de-risked, flexible pipeline covering 40% of the existing portfolio, with three committed schemes totalling 350,000 sq ft, all expected to complete in next eight months.

The remaining capital expenditure on those three schemes was £28.6m, with 67% pre-let or pre-sold and a further 10% under offer.

Great Portland said it made “good progress” across two existing near-term uncommitted schemes totalling 309,300 sq ft, including a phased access agreement signed with Elizabeth line construction consortium Crossrail at Hanover Square in West London, with potential capital expenditure of £152m.

Further development opportunity was acquired at Cityside House in Whitechapel totalling 76,500 sq ft, and the board said there was still an “exceptional and flexible” medium-term development pipeline of 12 schemes totalling 1.3 million sq ft - all of which were income producing with a four year average lease length.

“GPE is in great shape with exceptional long-term potential,” Courtauld claimed.

Great Portland also claimed a “strong” financial position at the end of the quarter, with a loan-to-value ratio of 14.1% and “significant liquidity”.

A £110m special dividend was paid on 31 May, and the board claimed a pro forma loan-to-value of 14.1%, a weighted average interest rate of 2.7%, and drawn debt as 96% fixed or capped.

Pro forma cash and undrawn committed facilities totalled £552.9m, with a marginal cost of debt of 1.4%.

“Our recent refinancing successes and four years of net sales activity gives us unprecedented financial capacity; our investment portfolio is well let, off low average rents and with significant reversionary potential; our remaining committed development programme is materially de-risked, being 67% pre-let or pre-sold with strong tenant interest in much of the balance,” said Toby Courtauld.

“Our exceptional income-producing development pipeline offers more than 1.7 million sq ft of flexible future growth potential; and we have a first-class team ready to capitalise on this period of uncertainty.”