Great Portland Estates has delivered a 5% rise in NAV in a solid set of interim results and announced the sale of a £27m portfolio to Hermes Real Estate.
The central London REIT’s net asset value rose to £1.2bn or 378p a share over the six months to the end of September, reflecting a 20% rise on the same time last year.
This was driven by 0.5% capital growth over the quarter, and a 3.9% rise to £1.8bn in the half-year period.
Key drivers were rental growth of 2.5% since the start of the financial year, asset management initiatives which added £8.8m to the group’s rent roll, and a 5.3% increase in the value of development properties to £298.7m.
GPE, which has a 50% stake, alongside Canadian developer Brookfield, in the proposed 100 Bishopsgate skyscraper in the City, also said its purchase of the Royal Mail Rathbone Place site increased its half-year portfolio value by £126m.
It said that occupational demand for space fell over the last quarter as the level of expected supply as development finance remains scarce, adding that it was well-placed with a low level of on-site development but a pipeline of opportunity.
GPE reported a £10.4m profit before tax, which was down 30.7% on 2010 but in line with analysts’ expectations and was “anticipated” by GPE because of its development and refurbishment activities.
The company’s 12-month total property return of 17.3% beat the benchmark Investment Property Databank central London index figure of 16.1%.
The group’s gearing remains low at 40.5% and it had cash and undrawn facilities totaling £250m at the end of the period.
It also announced a new £73m seven-year non-recourse banking financing for the Great Ropemaker Partnership to part fun the purchase of 200 & 214 Gray’s Inn Road.
The loan was provided by RBS and Deka – a new lender to GPE, which took a £36.5m share of the debt.
GPE also said it has exchanged contracts to sell the freehold interest in six SE1 buildings to the British Telecom Pension Scheme, which is managed by Hermes.
The purchase price of £27m reflects a yield of 5.2%. GPE has also agreed a two-year overage with the purchasers.
GPE said the sale “continues our strategy of recycling capital out of non-core assets and smaller development situations”.
Chief executive Toby Courtauld said; “Economic conditions and business sentiment have worsened since the summer, with sovereign debt crises dominating the economic landscape. Within this more challenging environment, London’s commercial property markets continue to outperform the rest of the UK, benefiting from an excess of demand for assets over supply, and a vacancy rate of around 1% for West End grade A office space.
“Despite this, we expect secondary and overpriced assets to see a price correction as buyers become more discerning.
“In our occupational markets, unsurprisingly, demand for space has reduced over the last quarter. So too has the level of expected new supply as development finance remains scarce.
“As a result, once sustainable economic growth returns, an impending supply crunch will strongly favour London’s landlords.
“Within this context, GPE is well placed; we have a low level of on-site development risk, but a pipeline of opportunity few can match and all of it in central London; our investment portfolio is almost fully occupied, let off low average rents and rich with opportunities for growth; and our low gearing and financial flexibility will enable us to exploit further investment opportunities as we find them.
“We remain confident that our disciplined, nimble approach and our prudent capital structure will underpin the long term prospects of the group.”
bridget.o’connell@estatesgazette.com
