2nd Apr 2007 11:17
Great Portland Estates PLC02 April 2007 Business Update for GPE's fourth quarter 2 April 2007 Great Portland Estates plc ("GPE" or the "Group") announces an encouraging startto 2007, encompassing the last quarter of its financial year: 1. The execution of the Group's development programme is on track with several important milestones reached. 2. Sustained tenant demand is being converted into new lettings at the Group's redeveloped and refurbished buildings. 3. GPE has continued to recycle capital out of mature assets and into new opportunities for significant potential for valuation growth. 4. Several financing transactions have been implemented to optimize the Group's cost of capital and support future growth initiatives. 1. Development progress The Group's development business continues to make good progress across the 25schemes in the programme. Of these, 14 are in the near-term programmerepresenting a completed area of 1.1 million sq ft. Key points during thequarter include: • Practical completion was successfully taken at four schemes totaling 213,000 sq ft being 180 Great Portland Street, 60/62 Margaret Street, phase 1 of 222 Regent Street and at Kent House, Market Place, all in the West End. • Construction work progressed well at the Titchmor scheme on Mortimer Street, W1 (110,000 sq ft), 60 Great Portland Street, W1 (87,000 sq ft), Foley Street, W1 (21,000 sq ft), all in the West End and at Tooley Street, SE1 (198,000 sq ft). • Margaret Street and Tooley Street are being managed on behalf of third parties and GPE will recognise revenue from these projects for the year to March 2007 in-line with managements' expectations. • Resolution to grant planning permission was obtained during March at Bermondsey Street and Blackfriars Road, both in SE1, for a total of 238,000 sq ft of commercial space, up from the existing area of 64,000 sq ft. 2. Occupational Market and recent lettings The central London office markets are performing strongly. Good interest from adiverse range of potential tenants is coming up against a falling supply of newhigh quality space, particularly in the West End. As a result, the trends seenin rental value growth during the last quarter of 2006 are continuing into 2007. During its fourth quarter, GPE has signed 14 new leases (5 of which were in theGroup's joint ventures), over 99,000 square feet, with an annual rental value ofover £5.9 million (GPE economic interest of £4.0 million). Specific highlightsinclude: • Elsley House, Great Titchfield Street, W1: The ground, first and second floors were let prior to practical completion of the refurbishment at an average rent of £47.50 sq ft, 10% ahead of the rental value as at 31 December 2006. • 180 Great Portland Street, W1: Following the marketing launch in February, the third floor has been let at £55 per sq ft, 11% ahead of the rental value as at 31 December 2006. • Kent House, Market Place, W1: The first, fifth, sixth and seventh floors have been let in three separate transactions at rents of between £52.50 and £65 per sq ft within weeks of completing the recent refurbishment programme and at an average of 16% ahead of the rental value as at 31 December 2006. 3. Investment activity The Group has continued to find investment opportunities during thequarter, building on the successes of 2006. Three properties have beenacquired for a combined purchase price of £34.4 million, two of whichadd to the Group's Hanover Square Estate which now totals 1.3 acres ofprime Mayfair with numerous asset management and developmentopportunities. The Group sold two properties during the quarter. A 20,500 sq ft officebuilding on New Cavendish Street, W1 was sold for £14.2 million at a yieldof 4.3%, whilst the Group's joint venture with Liverpool Victoria sold itsinterest in Verulam Gardens, Gray's Inn Road, WC1 for £24.2 million, bookinga 54% premium to the March 2006 valuation. REIT status has allowed the Groupto execute these disposals on a tax free basis. On 29 March 2007, the Group announced the creation of a new £460 million 50/50joint venture with Liberty International subsidiary, Capital and Counties Ltd("C&C") to be managed by the Group on similar terms to its existing jointventures. C&C will contribute 16 properties with a starting value of £299million, the majority of which are in the West End, while GPE will put in 4properties worth £162 million and pay a balancing sum of £68 million in cash.Based on 31 December 2006 values, the transaction brings total assets undermanagement to £1.9 billion, up from £1.6 billion, of which the Group's economicinterest is £1.5 billion. 4. Financing transactions A busy period of capital structure management has seen the Group simplify itsdebt portfolio and strengthen the platform to fund future business developmentactivities. A "tap" issue of £50 million nominal of GPE's 2029 5.625% debentureswas successfully placed and the maturity of the Group's £300 million creditfacility was extended by one year to 2012. Following the notice given toholders of the 5.25% Convertible Bonds 2008 (the "Bonds") on 22 February 2007,the Bonds have now been converted to new ordinary shares in GPE. As at 31 March2007 the outstanding issued number of shares in GPE was 181.0 million. Theremaining 2027 7.25% debentures were redeemed on 28 March 2007. Commenting on the three months to 31 March 2007, Toby Courtauld, Chief Executivesaid "we have seen good progress across all areas of the business so far thisyear and we remain on track to deliver against our performance objectives. Weare seeing good levels of tenant demand which has helped rents to grow acrossour near term development schemes. We expect investment markets in centralLondon to remain intensely competitive. However, we are seeing significant dealflow and we remain confident that we will be able to continue our successful runof finding new opportunities for future growth". Contacts: Great Portland Estates plcToby Courtauld Chief Executive 44 (0)20 7647 3042Timon Drakesmith Finance Director 44 (0)20 7647 3034 FinsburyJames Murgatroyd 44 (0)20 7251 3801Gordon Simpson 44 (0)20 7251 3801 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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