Great Portland Estates (GPE) may pull out of its agreement to fund a £90m shopping development in High Wycombe and sell some of its shopping centres. But it is also masterplanning a 1m sq ft revamp of Harlow town centre.
The company revealed in this morning’s interim results that it is reviewing the commitment it made last year to the proposed 37,160 sq m (400,000 sq ft) Western Sector extension which Dutch developer MAB is developing in High Wycombe, next to GPE’s Octagon Centre. Managing director Peter Shaw said: “The time-table we discussed in August last year is going too slowly and there are grounds for reviewing it.” He said the compulsory purchase order for the existing Tesco store – which needs to be demolished to build the scheme – had not come through, and Warner Brothers had pulled out as one of the anchor tenants. “It is all going backwards,” he said.
GPE’s finance director, John Whiteley, said: “The problem is it involves a £90m commitment. We can’t have that money hanging about.” Shaw said the council and MAB had until March to get the scheme back on track and that pulling out was “one of a number of possibilities”.
In Harlow, where GPE owns the town’s main shopping mall, The Harvey Centre, and other property totalling 52,024 sq m (560,000 sq ft), Shaw said there are opportunities to create 1m sq ft of integrated retail and leisure. CB Hillier Parker has been appointed to advise on a masterplan and GPE envisages a scheme incorporating the Town Centre South site, on which Wilson Bowden is the council’s chosen developer. “There are opportunities to integrate their scheme with the Harvey Centre. We think the dominant owner in the town has to be the one to drive things forward.”
But the results hint that other shopping centres may be sold. In his chairman’s summary, Richard Peskin says: “Shareholder value will best be realised by our strategy of continued investment and development in London and South East offices.”
In the company’s first ever independent half-yearly valuation, the company reports that the shopping centres’ value fell by 4.7%, despite modest rental growth. The shopping centre portfolio was valued at £340.6m, representing 21.5% of the whole portfolio, which was revalued at £1.58bn, a 2.2% uplift. “As an entity, we think the shopping centres have limited potential for growth,” Shaw said.
Capital values for offices in central London, however, rose by 5.6%, driven mainly by increases in rents. Net assets per share rose 3.7% to 408p. Whiteley said that most of an estimated £14m of reversionary income in the portfolio was in central London offices. The company is also planning at least four significant redevelopments in next three to four years. The largest is in the City where GPE is in talks with two adjoining landowners to redevelop a site incorporating its holdings at 80-88 and 104 Bishopsgate, EC2 and 1-11 Camomile Street. They also include a 22,296 sq m (240,000 sq ft) scheme at Mortimer Street/Great Titchfield Street; 12,541 sq m (135,000 sq ft) at 190 Great Portland Street and 7,525 sq m (81,000 sq ft) at Toshiba’s building in Frimley.
The strategy announced last march, of selling non-core property and returning cash to shareholders, raised £305m by the 30 September half year. In the last 20 months 73 properties have been sold, for £411m. Last month, £285m, or 80p per share, was returned to shareholders. The shares today eased 3.5p, to 267.5p, still a substantial discount to NAV.
The results show a loss of £12m on the sale of investment properties, which Peskin said was “disappointing”. Patrick Hall, the former joint managing director responsible for acquisition of this property and its subsequent sale, resigned last month. This loss and a further £6.9m of costs in connection with the restructuring, reduced profit on ordinary activities of £26.8m to £7.9m (£28.3m). Gearing rose to 79% (60% at 31 March 2000).
EGi News 21/11/00
