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Great Portland Estates swings to loss as property values decline

24th May 2023 10:20

(Alliance News) - Great Portland Estates PLC on Wednesday said it delivered a strong operating performance in the year ended March 31, with record leasing, positive rental growth and "resilient" financial results despite swinging to a loss.

The property developer posted a pretax loss of GBP164.0 million in the year, from a profit of GBP166.7 million the previous year, as it recorded a GBP145.0 million deficit from investment property compared to a GBP107.9 million surplus the year prior.

It also recorded a GBP33.4 million loss on its share of results of joint ventures, compared to a GBP45.9 million profit the year prior. This was largely as a result of the disposal of 160 Old Street, the company explained.

Great Portland Estates explained that a challenging macro-economic and geopolitical environment put property values in its markets under pressure during the year. Across its portfolio, property values reduced by 6.6% over the year to GBP2.38 billion as at March 31, reflecting the impact of rising interest rates on property yields.

Revenue, meanwhile, rose 8.3% year-on-year to GBP91.2 million from GBP84.2 million, driven by higher gross rental income, increased service charge income and greater income associated with its Fully Managed spaces.

The company delivered a total property return of minus 4.1% for the year, compared with a return of minus 8.1% for the central London MSCI annual index. Great Portland Estates said the outperformance was driven by greater than benchmark weighting to London's West End, along with the company delivering a record leasing year.

The London-based firm signed GBP55.5 million of new leases in the year, a record for the company. 105 new leases and renewals were completed, compared to 65 the year prior.

The company's vacancy rate decreased to 2.5% at year-end compared to 10.8% at the same time the year prior. Its rent roll increased by 2.2% year-on-year.

"During a year marked by elevated political and economic uncertainty, we have delivered a strong operating performance with record leasing, positive rental growth and resilient financial results," said Chief Executive Toby Courtauld.

"From here, whilst macro-economic challenges are likely to persist, we do not expect the recovery to be uniform. For some time, we have witnessed a growing divergence between the prospects of the best spaces versus the rest, and we believe this is set to widen further as customers seek out sustainable and well designed, prime spaces, of which there is a marked shortage, particularly in the West End. Consequently, we have increased our rental growth guidance for our prime offices to be between 3% to 6% for the year."

Separately, the firm announced that Non-Executive Director Alison Rose will step down from the board at the conclusion of the company's annual general meeting in July.

Rose is currently the chief executive of Edinburgh-based bank NatWest Group PLC. She has been in the role since 2019.

Shares in the firm were down 3.0% at 499.00 pence on Wednesday morning in London.

By Heather Rydings, Alliance News senior economics reporter

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