23rd Jan 2008 07:01
Great Portland Estates PLC23 January 2008 Great Portland sees continued rental growth in fiscal Q3 In today's Interim Management Statement, the Directors of Great Portland Estatesplc ("GPE") announce an update on trading, as well as the quarterly valuation ofthe Group's properties as at 31 December 2007. A summary of the Group's recent valuations, rental value and NAV performance is set out in appendix 1 and detailed valuation statistics can be found in the tables attached at appendix 2 and 3. To view the accompanying appendices please cut and paste the below link into your web browser: http://www.rns-pdf.londonstockexchange.com/rns/3355m_-2008-1-22.pdf Highlights of the quarter: • Portfolio valuation down 4.1% due to 36 basis points outward market yield shift• NAV per share of 617p down 6.5% since September, up 12.2% since December 2006• NNNAV per share of 619p down 6.6% since September, up 16.8% since December 2006• Rental value growth of 2.6%, 3.7% in West End offices. Portfolio 45% reversionary• New leases generating £2.3 million p.a. signed since September with £1.6 million p.a. under offer• Void rate down to 3.6% from 4.6% in September. More than half of void space under offer• Practical completion achieved at the pre-let 60 Great Portland Street development• 180 Great Portland Street office development substantially let, with final space under offer at £67.50 per sq ft, up from November's record of £65 per sq ft• Planning approval granted for 135,000 sq ft Wigmore Street redevelopment• Property sales totalling £16.1 million in quarter at a 24% premium, net of costs, to September 2007 valuation Toby Courtauld, Chief Executive of GPE said, "We highlighted at our interim results in November that rising yields would havea negative impact on property valuations. This has proved to be the case asinvestors reappraised risk and sentiment deteriorated, particularly in the lastfew months of 2007. Central London's occupational markets, by comparison, remainwell balanced with solid demand for the limited quantity of available officespace. In the West End where 81% of our portfolio is located, vacancy ratesremain at, or near, record lows. Against this backdrop, the Group has made good operational progress since thehalf year. Numerous new leases have been signed, helping to push rental valuesup by 2.6% over the quarter and bringing our void rate down to 3.6%. More thanhalf of our void space is currently under offer at rents ahead of their December2007 rental values. Looking forward, investment market turbulence is forecast to continue,particularly for poorly located, secondary properties and rental growth ratesare expected to moderate. However, we remain confident that our blend of qualityassets, in under-supplied core locations, with a low average office rent of£33.30 per sq ft and our management focus on asset repositioning will enable usto continue to outperform against our central London benchmarks". Valuation The valuation of the Group's properties as at 31 December 2007 was £1,699.2million including our share of joint venture assets, a fall of £72.9 million or4.1% since 30 September 2007. The difficulties in the credit markets andconsequent slowdown in property investment transactions have caused yields torise and asset values to decline across the UK. The wholly owned portfolio trueequivalent yield increased by 36 basis points over the quarter and now stands at5.3% (5.4% for joint venture properties). Rental values grew by 2.6% during the quarter, building on the 9.0% recorded forthe six months to 30 September 2007. West End office rental values were 3.7%higher whilst City and Southwark rental values rose by 1.8%. The Group's averageoffice rental value remains low at approximately £47.10 per sq ft, some £13.80per sq ft higher than the average office rent passing, whilst the portfolio was45% reversionary at the quarter end. With 81% of our assets located in the under-supplied core of the West End andthe portfolio's low average office rent of £33.30 per sq ft, we remain confidentthat our asset repositioning activities will enable us to continue to generaterelative valuation outperformance. The net impact of the movement in yields andrental values on the portfolio valuation are set out in appendix 3. Estimated NAV per share and financing The main movement in assets for the quarter was the reduction in portfoliovaluation of £72.9 million due to adverse market yield expansion. NAV per sharewas also impacted by the interim dividend of £6.8 million and the purchase ofshares to satisfy future LTIP requirements of £0.8 million. The sale of twoproperties in Whitfield Street, W1 at a profit to their September valuationlifted NAV by £3.1million. As set out in the table below the estimated NAV pershare fell 6.5% from 660p in September to 617p at December 2007. ---------------------------------------------------------------------------Pro Forma Estimated Balance Sheet (unaudited) £m Pence Percentage Adj NAV per share movement At 30 September 2007 1,195.0 660 Valuation reduction (72.9) (41)Sale of Totfield/Whitfield 3.1 2 Purchase of shares in LTIP trust (0.8) -Interim dividend (6.8) (4) ---------------------At 31 December 2007 1,117.6 617 -6.5% REIT NNNAVMarket to market of debt 4.5 2At 31 December 2007 1,122.1 619 -6.6% =====================At 30 September 2007 1,199.9 663 =====================---------------------------------------------------------------------------Note: The pro forma balance sheet does not include retained earnings for thequarter The mark to market of debt of £4.5 million or 2p per share generated a NNNAV pershare of 619p at December, a fall of 6.6% from September. Net debt at December 2007 was £531.0 million, a reduction of £86.0 million from30 September 2007, primarily due to the completion of the sale of the MetBuilding, offset by capital expenditure on developments of £16.3 million andinvestment in joint ventures. Gearing of 48% at December was down from 52% as at30 September 2007. At December, the Group had cash and undrawn, committed creditfacilities of £186 million. Investment activity In December, two buildings located in Whitfield Street, W1 were sold for £16.1million generating a profit of £3.1m or 24% to their September valuation, net oftransaction costs. Within the Great Capital Partnership ("GCP"), during December, we purchased a29,500 sq ft holding fronting Broadwick Street, W1 for £18.4 million (GPE share£9.2 million). The acquisition augments GCP's existing holdings in this primeSoho street, opening up a number of repositioning opportunities. Letting and development Since September, we have signed new leases and relettings worth £2.3 millionp.a., representing 4% of Group rent roll. Across our business demand frompotential tenants for good quality, well located office and retail space remainssolid. Our major refurbishment at 180 Great Portland Street, W1 is almost fullylet with the final half floor under offer at £67.50 psf, a record for thissegment of the West End. At 60 Great Portland Street, W1 the pre-let developmenthas reached practical completion and the lease to The Engine Group is expectedto complete imminently. Resolution to grant planning consent for the 135,000 sq ft redevelopment of ourWigmore Street, W1 holdings was gained in December whilst positive discussionsare continuing with major stakeholders for a possible redevelopment of our 1.3acre Hanover Square, W1 holding. We aim to submit a planning application during2008. At Blackfriars Road, SE1, demolition is progressing to facilitate adevelopment in due course and all our other 11 schemes within the near termdevelopment programme are progressing well. Contacts: Toby Courtauld Chief Executive Great Portland Estates plc 020 7647 3042Timon Drakesmith Finance Director Great Portland Estates plc 020 7647 3034 FinsburyJames Murgatroyd 020 7251 3801Gordon 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 tofuture events and circumstances. Actual outcomes and results may differmaterially from any outcomes of results expressed or implied by suchforward-looking statements. Any forward-looking statements made by or on behalf of GPE speak only as of thedate they are made and no representation or warranty is given in relation tothem, including as to their completeness or accuracy or the basis on which theywere prepared. GPE does not undertake to update forward-looking statements toreflect any changes in GPE's expectations with regard thereto or any changes inevents, conditions or circumstances on which any such statement is based. Information contained in this presentation relating to GPE or its share price,or the yield on its shares, should not be relied upon as an indicator of futureperformance. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
GPOR.L