Great Portland Estates plc (LON:GPE) today published its trading update for the quarter to 31 December 2018.
Continued leasing successes ahead of March 2018 ERV and capturing reversion
· 16 new lettings (51,400 sq ft) signed generating annual rent of £4.3 million (our share: £4.1 million); market lettings 5.4% ahead of March 2018 ERV
· Three flex space lettings completed across 12,800 sq ft, securing rent at 37.5% premium to net effective rental value; flex and co-working space now accounts for 90,000 sq ft and appraising further c.100,000 sq ft across existing portfolio
· Five rent reviews settled securing £3.4 million per annum; 18.3% above previous passing rent, 6.7% ahead of ERV; remaining reversionary potential of 8.5% (£8.4 million)
· 22 lettings under offer totalling £10.4 million p.a. of rent (our share: £6.9 million), including 53,900 sq ft at our Hanover Square development; market lettings 7.6% ahead of March 2018 ERV
· Vacancy rate low at 3.7% (Sept 2018: 4.8%)
· 99.2% of rent collected within seven working days; one occupier delinquency (0.1% of rent roll)
Three committed development schemes progressing well; flexible programme is 53% of portfolio
· Good progress on our three committed schemes (412,000 sq ft), including Hanover Square, W1 which is already 48% pre-let or under offer; all located near to Crossrail stations, 16.7% forecast profit on cost, capital expenditure to come of £155.7 million. Encouraging levels of occupier interest
· Exceptional and flexible development pipeline; 11 schemes (1.3 million sq ft), income producing, 3.2 years average lease length, 10.7% reversionary1
· Planning application submitted for a new 370,000 sq ft building at New City Court, SE1, up from 97,900 sq ft existing area
Continued recycling; sales of £74.4 million
· 55 Wells Street, W1 sold for £64.6 million, net initial yield of 3.99% and capital value of £1,674 per sq ft
· £9.8 million of residential sales in the quarter, with further £7.6 million currently under offer and £10.0 million in market for sale
Strong financial position; capital return through share buyback of up to £200 million commenced
· LTV of 7.3%, weighted average interest rate of 2.7%, drawn debt 100% fixed or hedged
· Cash and undrawn committed facilities of £646 million, low marginal cost of debt of 1.7%
· £200 million share buyback commenced on 15 November 2018; £34.4 million (5.0 million shares) purchased to date
Toby Courtauld, Great Portland Estates Chief Executive, said:
“I am pleased to report another quarter of positive operational activity with healthy leasing ahead of ERV, the continued successful rollout of our flexible space offering and excellent progress at our three committed development schemes. Moreover, with £339 million of net sales so far this financial year, we commenced our on-market share buyback programme, maintaining our capital discipline and returning surplus equity to shareholders.
Whilst we are planning for ongoing political and economic uncertainty, GPE is in great shape: we continue to attract occupiers for our brand of high quality, sensibly priced space, with £10.4 million of lettings currently under offer at a 7.6% premium to March 2018 ERVs; our well-located properties, with 92% in close proximity to a Crossrail station, are let off low rents with further reversionary potential; our exceptional income-producing development pipeline offers nearly 1.3 million sq ft of flexible future growth potential; we retain significant financial capacity; and our talented team remains focused on maximising the opportunity we have to generate long-term value across our business”.
