Great Portland Estates pleased performance in latest quarter
Great Portland Estates updated the market on its trading for the quarter ended 31 December on Thursday, reporting ongoing leasing successes ahead of March 2019 estimated recovery values.
The FTSE 250 company said it completed 12 new lettings totalling 48,900 square feet in the period, generating annual rent of £3.7m of which its share was £3.5 million, with market lettings 1.4% ahead of March 2019 estimated recovery values.
Flexible space now comprised around 11% of its office portfolio at 35% above estimated recovery values, with the firm appraising a further 149,000 square feet.
Seven lettings were under offer, totalling £9.2m of rent per annum of which Great Portland’s share was £9.2m, with those market lettings 6.9% ahead of March 2019 estimated recovery values.
Its vacancy rate remained “low” at 2.4%, with its average office rent £55.10 and reversionary potential standing at 9.2%, or £9.5m.
A total of 99.3% of rent was collected within seven working days, with the company reporting two occupier delinquencies making up 0.2% of its rent roll.
The firm’s committed schemes were 50% pre-let or under offer, with its total programme covering 54% of its existing portfolio.
There were three committed schemes totalling 414,900 square feet, with two completing in 2020 and 50% pre-let or under offer, all of which were located near Crossrail stations.
Its forecast profit on cost at those schemes was 18.7%, with £76m in capital expenditure to come.
There were also three near-term uncommitted schemes totalling 818,900 square feet, with the company reporting expected capital expenditure of around £600m and expected estimated recovery values of £55m.
Great Portland had a total pipeline of 10 schemes, totalling 1.4 million square feet, all of which would be income producing, with an average lease length of 2.8 years, 13.6% reversionary.
The board noted the sale of 24/25 Britton Street, EC1 in January for £64.5m, which was 6.2% above its September 2019 book value, reflecting a net initial yield of 4.07% and a capital value of £1,255 per square foot, crystallising a 15.7% per annum internal rate of return since refurbishment in 2011.
The firm also highlighted the commitment of up to £5m, to invest in Pi Labs European PropTech venture capital fund.
Great Portland said it was in a “strong” financial position, reporting a loan-to-value ratio of 15.8%, or 13.7% pro forma for the Britton Street sale, a weighted average interest rate of 2.5%; and cash and undrawn committed facilities of £368m.
Its £200m share buyback was complete, with 27.8 million shares purchased at an average price of £7.20.
The board also noted its new innovative £450m ESG-linked revolving credit facility, at a headline margin of 90 basis points.
“I am pleased to report on another productive quarter, combining healthy leasing ahead of ERV, good progress at our six committed and near-term developments and continued capital discipline, profitably recycling out of mature assets and returning surplus equity to shareholders as we completed our share buyback programme,” said chief executive officer Toby Courtauld.
“The final quarter has started well - we have issued an innovative ESG-linked revolving credit facility and demand for our brand of high quality, sustainable space remains robust with £9.2m of lettings currently under offer at a 6.9% premium to March 2019 estimated recovery values.”
Courtauld said the “clear outcome” of the general election was encouraging increased transaction activity in the company’s investment markets and, while further political and macro-economic turbulence remained possible, he said the firm was in “great shape”.
“We are innovating across our portfolio, including the continued rollout of our flexible space offering; our exceptional development pipeline provides us with nearly 1.4 million sq ft of value creating opportunities; and with a talented team, supported by our collaborative culture, deep market knowledge and financial strength, we are well positioned to maximise the opportunity we have to generate long-term value across our business.”
At 0943 GMT, shares in Great Portland Estates were up 0.32% at 949.4p.