TIDMGPE
RNS Number : 5229A
Great Portland Estates PLC
23 January 2024
23 January 2024
GPE Business Update
Great Portland Estates plc (GPE) publishes a business update for
the quarter to 31 December 2023.
Strong leasing continued, 10.4% ahead of ERV
-- GBP16.1 million of leases signed (9 months to 31 December
2023); 10.4%> March 2023 ERV, including in the last quarter:
o 12 new leases and renewals signed (including eight Fully
Managed deals) generating annual rent of GBP5.0 million (our share:
GBP4.1 million), with market lettings on average 6.5% ahead of
March 2023 ERV; and
o a further GBP6.0 million of rent currently under offer; market
lettings 5.0%> March 2023 ERV
Two committed HQ developments; progressing well
-- Good progress at our pre-let net-zero carbon 2 Aldermanbury
Square, EC2; basement under construction; anticipated completion Q1
2026
-- Vacant possession obtained ahead of major office-led
redevelopment of French Railways House, SW1, to provide 67,600 sq
ft (up from 54,700 sq ft) of new Grade A space; scheme anticipated
to deliver profit on cost of 24.9% and development yield of
6.5%
Preparation ongoing for two profitable near-term HQ schemes
-- Commencement of Minerva House, SE1 extensive refurbishment
anticipated this quarter to deliver 143,100 sq ft of new Grade A
offices with river frontage
-- Planning permission to be refined at 91,000 sq ft new build
redevelopment of Soho Square Estate, W1 ahead of potential start in
Q1 2025
-- Combined healthy returns expected: anticipated profit on cost >18%; development yield >6.0%
Further Flex expansion
-- Commitment to refurbishment of 141 Wardour Street, W1 for
29,900 sq ft of new Fully Managed space; anticipated profit on cost
>19.0%; yield on cost >6.5%
-- Deeper dive into our Flex activities to be held for investors
on Zoom on 2 February 2024 at 3pm
Toby Courtauld, Chief Executive, said: "Operationally, we are
pleased, once again, to have delivered a strong leasing quarter
with GBP5.0 million of new leasing deals, bringing the total deals
for the financial year to date to GBP16.1 million, 10.4% ahead of
the valuer's ERV. This success reaffirms our confidence in our
portfolio rental value guidance of +2.5% to +5% growth for the
financial year, with the best space potentially higher still.
Despite a recent improvement in the outlook for interest rates,
the macro-economic backdrop in which we operate remains
challenging, limiting activity in our investment markets and
placing selective upward pressure on yields, particularly for
non-prime spaces. However, as we start the new year, we are
encouraged by early indications that acquisition opportunities are
starting to emerge.
In this context, GPE is well placed. Despite rising barriers to
entry in our markets, including a more challenging planning regime,
our substantial capex programme is set to deliver the very best,
sustainable spaces into a market starved of such supply; our focus
on HQ development and our Flex offer is meeting customer demand
that is increasingly discerning; and with our strong balance sheet,
plentiful liquidity and recycling opportunities, we remain well
placed to capitalise on opportunities as they arise."
Strong leasing performance continued, 10.4% ahead of March 2023
ERV year to date
-- 12 new leases and renewals signed in the quarter generating
annual rent of GBP5.0 million (our share: GBP4.1 million), with
market lettings on average 6.5% ahead of March 2023 ERV,
including:
o eight Fully Managed leases signed at an average GBP197 per sq
ft, 9.7% ahead of March 2023 Fully Managed ERV;
o two fitted leases signed at an average GBP85 per sq ft, 15.6%
above March 2023 Fitted ERV.
-- Six rent reviews securing GBP2.2 million of rent (our share:
GBP2.2 million) were settled at an increase of 2.1% over the
previous rent and 8.5% ahead of ERV at review date; and
-- A further GBP6.0 million of rent is currently under offer;
market lettings 5.0% ahead of March 2023 ERV.
During a period of strong lettings, we have seen the majority of
activity from our Flex office offer. At 16 Dufour's Place, W1, we
re-let the 4th floor (2,200 sq ft) on a Fully Managed basis. The
new customer has taken a two year lease, paying a rent of GBP258
per sq ft, an increase of 28% on the previous lease with only two
months void and 21.8% ahead of March 2023 ERV.
At Woolyard, SE1, we have completed four new leases all on a
Fully Managed basis. They will generate additional rent roll of
GBP1.8 million pa, at an average rent of GBP163 per sq ft and 3.5%
ahead of the March 2023 ERV.
Given our continued strong leasing performance, our office
rental value growth guidance for the year to 31 March 2024 is
unchanged and remains positive at between +2.5% and +5.0% (+3.0%
and +8.0% for prime). In addition, as previously guided, given our
extensive development and refurbishment activity and the higher
interest rate environment, we continue to anticipate that EPRA
earnings for the second half of the year will be lower than the
first.
Good progress made across two committed projects
Our development works are progressing well at our fully pre-let
2 Aldermanbury Square, EC2, where we are substantially increasing
the size of the building to 322,600 sq ft (up from 176,000 sq ft).
Following the careful deconstruction of the previous building, the
structural steel has been carefully extracted and is being
reconditioned for reuse to form the majority of the structural
elements of Jermyn Street Piccadilly (see below). Clifford Chance
has an option to hand back the first to fourth floors of the
building (up to 89,000 sq ft) which expires on 1 March 2024. Whilst
we do not yet know their intentions, given market conditions the
space is increasingly reversionary, and as such, were the space
handed back, it would likely improve the scheme's returns. Whilst
the development is currently anticipated to deliver a loss on cost
from the commitment date of 12.4%, given market yield expansion
driven valuation declines to date, from the September valuation the
scheme is expected to deliver GBP28.3 million of future profit.
Following our commitment to the redevelopment of French Railways
House in November 2023, we have now obtained vacant possession and
will shortly commence the strip out of the buildings. Our major
office-led redevelopment will provide 67,600 sq ft (up from 54,700
sq ft) of new Grade A space and is expected to complete in
mid-2026. The scheme is anticipated to deliver a profit on cost of
24.9%, an ungeared IRR of 15.8% and a 6.5% development yield.
Preparation underway at our two near-term schemes
At Minerva House, SE1, we are preparing to start on site in the
first quarter of this year. Our plans will take the overall
commercial space to 143,100 sq ft, an increase of approximately 56%
on the existing area. Our activities will reposition this building,
taking full advantage of its river frontage and, by adding
additional storeys, we will be able to create outdoor terraces and
amenity space with commanding views over central London. The
refurbishment will also improve the public realm around the
building, creating new and improved connections through the site as
well as attractive new gardens that will contribute to local
greening and biodiversity and provide space for people to enjoy in
the setting of Southwark Cathedral. Our proposals will retain and
reuse the majority of the existing building's structure (saving
around 3,000 tonnes of CO(2) ) and will have sector leading
sustainability accreditations.
At our recently acquired Soho Square Estate, W1, we continue to
work up our plans to refine the existing planning consent to
deliver around 91,000 sq ft of new Grade A office and prime retail
space. The redevelopment will provide a best-in-class HQ office
building on Soho Square with flagship retail fronting Oxford
Street, with multiple private terraces and a communal roof terrace,
all adjacent to the Tottenham Court Road Elizabeth line station. We
anticipate starting on site in Q1 2025.
Together, we anticipate that our two near-term schemes will
deliver healthy development returns, with an expected combined
profit on cost in excess of 18% and a development yield in excess
of 6.0%.
Commitment to further Flex expansion
We have recently committed to the refurbishment of 141 Wardour
Street, W1 which will provide 29,900 sq ft of new Fully Managed led
space in the heart of Soho. 141 Wardour Street will build on our
success to date at nearby 16 Dufour's Place, W1, delivering
light-filled floorplates of 2,000 to 4,000 sq ft, terraces on the
upper floors and excellent amenity space. The scheme is expected to
complete early 2025, delivering an expected profit on cost in
excess of 19% and a development yield in excess of 6.5%.
IR award success
In addition to being well rated in recent investor surveys, we
were pleased to be awarded 'Best Overall Company IR' (small cap) by
the IR Society in their voted awards.
Forthcoming events
On 2 February 2024 at 3.00 pm, we will be hosting an investor
& analyst session on Zoom to provide a deeper dive on our Flex
activities. Details on how to join the event can be found on our
website www.gpe.co.uk/investors .
A provisional date has been set for GPE to announce its full
year results on 22 May 2024, with the results presentation
available on our website from 8.30am.
Great Portland Estates plc +44 (0) 20 7647 3000
Toby Courtauld, Chief Executive
Nick Sanderson, Chief Financial & Operating
Officer
Stephen Burrows, Director of Investor
Relations and Joint Director of Finance
FGS Global +44 (0) 20 7251 3801
James Murgatroyd
Gordon Simpson
For further information see www.gpe.co.uk or follow us on
Twitter at @GPE_plc
LEI Number: 213800JMEDD2Q4N1MC42
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