TIDMGPOR
RNS Number : 2531K
Great Portland Estates PLC
06 July 2017
6 July 2017
Great Portland Estates Trading Update - Strong Operational
Performance
Great Portland Estates plc ("GPE") today publishes its trading
update for the quarter to 30 June 2017.
Continued successful leasing ahead of ERV and capturing
reversion
-- 20 new lettings (94,500 sq ft) signed generating annual rent
of GBP6.0 million (our share: GBP5.2 million), including GBP1.2
million pre-letting at 84/86 Great Portland Street, W1; 2.3% ahead
of March 2017 ERV
-- Ten rent reviews settled securing GBP3.8 million per annum;
62% above previous passing rent, 3.4% ahead of ERV; remaining
reversionary potential of 17.6% (GBP20.5 million)
-- 26 lettings under offer totalling GBP13.1 million p.a. of
rent (our share: GBP10.4 million); 1.3% ahead of March 2017 ERV
-- Rent roll of GBP115.9 million, up 5.7% over three months
-- Vacancy rate of 6.5% (falling to 4.5% if we convert all investment lettings under offer)
-- 99.8% of rent collected within seven working days
Selective acquisitions; increasing Crossrail exposure
-- Purchase of freehold of Cityside and Challenger House, 40/42
Adler Street and 2/8 Whitechapel Road, London E1 for GBP49.6
million, or GBP320 per sq ft on the consented net internal area;
angles to exploit and adding to the development pipeline
Committed programme de-risked; flexible pipeline covering 40% of
existing portfolio
-- Three committed schemes (350,000 sq ft), all expected to
complete in next eight months; capital expenditure to come of
GBP28.6 million, 67% pre-let or pre-sold (with a further 10% under
offer)
-- Good progress across two existing near-term uncommitted
schemes (309,300 sq ft), including phased access agreement signed
with Crossrail at Hanover Square,W1; potential capital expenditure
of GBP152.0 million
-- Further development opportunity acquired at Cityside House, Whitechapel E1 (76,500 sq ft)
-- Exceptional and flexible medium-term development pipeline of
12 schemes (1.3 million sq ft), all income producing, with 4.0
years average lease length, 19.2% reversionary(1)
Strong financial position; low LTV of 14.1%(2) and significant
liquidity
-- GBP110.0 million special dividend paid on 31 May 2017
-- Pro forma LTV of 14.1%(2) , weighted average interest rate of
2.7%, drawn debt 96% fixed or capped
-- Pro forma cash and undrawn committed facilities of GBP552.9
million(2) , low marginal cost of debt of 1.4%
Toby Courtauld, Chief Executive, said:
"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. 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 GBP13.1 million of lettings currently
under offer at a 1.3% premium to March 2017 ERVs.
GPE is in great shape with exceptional long-term potential: 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; 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."
1. Existing use of development pipeline at 31 March 2017
2. Based on property values at 31 March 2017 pro forma for
remaining net deferred sales proceeds of GBP112 million from the
commercial sales of 73/89 Oxford Street, W1 and Rathbone Square,
W1
Asset management
Tenant interest in the limited amount of available space across
our properties has continued to be healthy; key leasing highlights
for the quarter included:
-- 20 new leases and renewals signed generating annual rent of
GBP6.0 million (our share: GBP5.2 million); market lettings 2.3%
ahead of March 2017 ERV;
-- Ten rent reviews securing GBP3.8 million of annual rent (our
share: GBP3.8 million) were settled at an increase of 62% over the
previous rent;
-- Total space covered by new lettings, reviews and renewals was 162,400 sq ft;
-- Group rent roll increased to GBP115.9 million, up 5.7% over
the three months to 30 June 2017; and
-- Investment portfolio vacancy rate fell from 6.8% at 31 March 2017 to 6.5% at 30 June 2017.
Leasing Transactions Three months ended
-------------------------------
30 June 31 March 30 June
2017 2017 2016
New leases and renewals
completed
Number 20 15 10
GPE share of rent GBP5.2 GBP3.3 GBP3.2
p.a. million million million
Area (sq ft) 94,500 48,900 66,100
Rent per sq ft GBP63 GBP70 GBP54
Rent reviews settled
Number 10 11 4
GPE share of rent GBP3.8 GBP1.8 GBP2.1
p.a. million million million
Area (sq ft) 67,900 31,100 31,900
Rent per sq ft GBP56 GBP71 GBP109
----------------------- --------- --------- ---------
Note: Includes joint ventures at our share
Significant transactions included:
-- At our recently completed development, 84/86 Great Portland
Street, W1, we let all the 18,000 sq ft self-contained office space
at an annual rent of GBP1.2 million on a ten-year term (no breaks),
5.5% ahead of the March 2017 ERV;
-- At 200 Gray's Inn Road, WC1, where our refurbishment works on
the ground and first floor continue, we let part of the 5(th) floor
and 7(th) floor (23,400 sq ft) to Carlton Communications for a
combined annual rent of GBP1.4 million (our share GBP0.7 million),
in line with March 2017 ERV; and
-- At 24/25 Britton Street, WC1, we settled a rent review with
Kurt Geiger, capturing significant reversion, increasing the annual
rent by GBP1.0 million to GBP2.5 million, an increase of 64% on the
previous rent and 2.4% above ERV.
We have a further 26 lettings currently under offer accounting
for GBP13.1 million p.a. of rent (our share: GBP10.4 million), 1.3%
ahead of March 2017 ERV. We estimate that for the 12 months to 31
March 2018 rental values will reduce across our office and retail
portfolio by between 0% and 7.5%, although our leasing transactions
since 31 March 2017 would indicate we are more likely to be at the
tighter end of this range.
The quarterly cash collection performance has continued to be
very strong, with 99.8% of rent secured within seven working days
of the quarter day (March 2017: 99.4%). None of our tenants went
into administration during the quarter (March 2017: none); however,
we remain vigilant and continue to monitor the financial position
of all our tenants.
Investment management
In June, we acquired the freehold of land and buildings
including Cityside and Challenger House, 40/42 Adler Street and 2/8
Whitechapel Road, London E1 from Hermes Investment Management for
GBP49.6 million, or GBP320 per sq ft on the consented space.
The 1.1 acre site sits between Aldgate East underground station
to the west and Whitechapel station to the east and is made up
of;
-- Cityside House - a freehold interest in a five-storey, 54,300
sq ft office building. The property is currently unoccupied and has
planning consent for an additional three floors, taking the total
net internal area to 76,500 sq ft, reflecting a capital value of
GBP250 per sq ft on the consented space;
-- Challenger House - a freehold interest in a five-storey
hotel, leased to Qbic Hotels for a further 21 years at a rent of
GBP1.4 million p.a., with CPI linked five yearly reviews, capped
and collared at 2% - 4% p.a.. The hotel trades from 171 bedrooms
with a public restaurant; and
-- Development sites - freehold land to the rear of Cityside
House, part of which has a planning consent for 19,000 sq ft of
development, comprising hotel and residential uses. GPE will seek
to improve the existing consent to deliver more beneficial and
value creating uses for the land including creating amenity space
for the occupiers of Cityside House.
This acquisition represents an exciting opportunity for us to
develop a well-designed, cost effective and prominent, office
building in the heart of Whitechapel, supported by a long-term
income stream from Qbic Hotels, and further development sites. In
addition, Whitechapel is set to benefit from significant further
regeneration, including its new Crossrail station opening in late
2018.
Development management
Committed schemes
We have three committed schemes (350,000 sq ft) with capital
expenditure to come of GBP28.6 million. These schemes are expected
to complete in the next eight months and are already 67% pre-let or
pre-sold.
Committed schemes Anticipated New Cost ERV(1) Office % let
Finish building to complete GBPm ERV(1) / sold
area GBPm avg
sq GBPpsf
ft
------------------- ------------- ---------- ------------- ------- -------- --------
Rathbone Square,
W1(2) Sept 2017 151,700 12.0 n/a n/a 95%
160 Old Street,
EC1 Feb 2018 161,000 12.6 4.3 53.35 -
55 Wells Street,
W1 Oct 2017 37,300 4.0 2.8 83.70 11%
350,000 28.6 7.1 67%
--------------------------------- ---------- ------------- ------- -------- --------
1. ERVs at 31 March 2017 2. Residential
At Rathbone Square, W1, fit-out of the apartments is progressing
well and we expect to achieve practical completion in September. We
have forward sold 140 of the 142 private units with 25% cash
deposits already paid by the majority of buyers. We expect to be
able to start completing the sales and handing over the apartments
to the buyers in stages shortly after completion, with the
remaining 75% of the sales proceeds to be collected by the end of
the year.
At 160 Old Street, EC1, owned in our 50:50 joint venture with
the BP Pension Fund, the construction works are well underway to
transform the old 97,800 sq ft building into around 161,000 sq ft
of high quality office, retail and restaurant space. We are
targeting completion of the fully consented scheme in early 2018.
Early leasing interest is encouraging, given the low average ERV of
only GBP53.35 per sq ft across the office space, and today we have
56% of the building under offer.
At 55 Wells Street, W1, construction is progressing well to
deliver 37,300 sq ft of well-specified office and restaurant space
into an area that is benefiting from significant local investment,
including our activities at Rathbone Square. The 4,500 sq ft
restaurant unit has recently been pre-let to Ottolenghi and
marketing for the office space has commenced, although we expect it
to let on a floor-by-floor basis after completion, given the size
of the building.
Near-term schemes
Following the recent acquisition of Cityside House, E1, we are
working up our plans to enable us to commence the redevelopment in
the first quarter of 2018. We intend to utilise the existing
planning consent to increase the 54,300 sq ft vacant building to
76,500 sq ft of high quality offices with completion anticipated in
the second half of 2019, targeting average rents across the
building of around GBP47 per sq ft.
At Oxford House, 76 Oxford Street, W1, we continue to explore
whether a more substantial redevelopment would add additional value
over and above our existing planning consent for a refurbishment of
the building. We anticipate that improving both the quality and
scale of the retail space will improve returns from the scheme
given the strong demand for high quality retail units at the
eastern end of Oxford Street ahead of the opening of Crossrail in
2018. We expect to submit a new planning application later in the
year which, if successful, will give us the option to commence on
site in the first half of 2018.
At Hanover Square, W1, we signed a phased access agreement with
Crossrail in June to allow us to access the site to undertake
further enabling works. The agreement also gives us the option,
should the market be supportive, to accelerate the construction
programme such that we could commence the New Bond Street building
in the first half of 2018, with the larger over station development
following later in the year. Although we have not commenced
marketing, we are encouraged by the quantity of enquiries we are
receiving for the office space (totalling 167,200 sq ft), the
earliest possible delivery date for which is 2020.
Financial management
Group consolidated net debt reduced to GBP485.3 million at 30
June 2017, down from GBP502.8 million at 31 March 2017 as deferred
proceeds from property disposals more than offset the payment of
the GBP110 million special dividend, our acquisition in Whitechapel
and capital expenditure on our committed schemes of GBP15.9
million. Group gearing fell to 17.7% at 30 June 2017 from 18.4% at
31 March 2017. Including non-recourse debt in joint ventures, total
net debt was GBP562.0 million (31 March 2017: GBP576.8 million)
equivalent to a low loan-to-property value of 17.6% (31 March 2017:
18.3%). At 30 June 2017, the Group, including its joint ventures,
had cash and undrawn committed credit facilities of GBP440.5
million.
Pro forma for the receipt of remaining net deferred
consideration on property sales, the Group's loan-to-property value
was 14.1%, with cash and undrawn committed credit facilities of
GBP552.9 million.
Pro forma(2) 30 June 2017 31 March
2017
-------------------------- ------------- ------------- ---------
GPE net debt GBP372.9m GBP485.3m GBP502.8m
-------------------------- ------------- ------------- ---------
GPE gearing(1) 13.6% 17.7% 18.4%
-------------------------- ------------- ------------- ---------
Total net debt including GBP449.6m GBP562.0m GBP576.8m
JVs
-------------------------- ------------- ------------- ---------
LTV 14.1% 17.6% 18.3%
-------------------------- ------------- ------------- ---------
1. Based on net asset value at 31 March 2017 2. Based on
property values at 31 March 2017 pro forma for remaining net
deferred sales proceeds of GBP112 million from the commercial sales
of 73/89 Oxford Street, W1 and Rathbone Square, W1.
Our weighted average interest rate has decreased to 2.7% at the
quarter end (31 March 2017: 3.0%) predominantly due to the
repayment in May of GBP128 million US private placement notes (4.6%
fixed rate maturing in 2019 and 2022) and the issue of GBP175
million new 7 year US private placement notes with a fixed rate of
2.15%. At 30 June 2017 our weighted average debt maturity was 6.1
years.
At 30 June 2017, 96% of the Group's total drawn debt was fixed
or capped, up from 82% at 31 March 2017. Our marginal cost of debt
remains low at 1.4% and our GBP450 million revolving credit
facility does not mature until October 2021.
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 2017/2018 interim results on Wednesday
15 November 2017.
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
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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