Propco chief executives have been calling the market this week as they reflect on full-year and half-year results. EG rounds up the results and market sentiment.
Schroder REIT
Schroder Real Estate Investment Trust warned of a “more uncertain environment” but reported NAV total return of 10.5% and EPRA earnings of £14.1m in the year to 31 March 2018, up from £13.8m for the previous year.
Duncan Owen, global head of Schroder Real Estate, said the REIT’s NAV total return of 10.5% – up from 7.2% the previous year – was higher than expected, a rise he attributed partly to the firm’s “winning cities” strategy to invest in areas with higher-than-UK-average GDP and job growth.
The company said that it no longer owned a single shopping centre or City of London office building – sectors where it saw looming risks from the wave of company voluntary agreements and Brexit. Some 64% of its portfolio now lies in offices and industrial.
However, Owen said he believed there was still “some value in retail”. He said: “The two parts of retail that are going well are those that are really convenient to people, so less vulnerable to home delivery, or where there is a really good experience.”
McKay Securities
McKay Securities said it was noticing a widening price gap between prime and secondary assets in the London and South East industrial and office sectors, which “should present value-add opportunities”.
The REIT has de-risked its development portfolio over the past year through lettings and planning approvals, and is now looking to make acquisitions, with opportunities expected to emerge despite a lack of supply in its target market.
Chief executive Simon Perkins said: “Where leases are becoming shorter and there is money to be spent and letting risk, the risk elements associated with those assets don’t appeal to the same number of investors [as prime assets]. That is enabling a more appealing level of discount between prime and secondary assets.”
The company reported an NAV increase of 6.3% to 322p per share for the year to 31 March 2018. It follows a year of record lettings, with 26 deals signed, contributing £7m pa – a 23.3% increase in contracted rental income to £27.1m per year.
Great Portland Estates
Great Portland Estates chief executive Toby Courtauld said the West End landlord was planning to be a net seller for another two years. The sale of the assets could rake in around £455m for the firm over the next 18 to 24 months.
Courtauld said GPE would also be unlikely to buy any new assets, which he considers to be overpriced at present, but instead would invest in the assets it already holds, which “should create high rates of return”.
The West End property firm has committed to three new schemes from its 16-strong development pipeline, which Courtauld said would require £250m of investment.
Net assets stood at £2.37m, down from £2.70m in 2017.
Shaftesbury
Shaftesbury’s chief executive Brian Bicknell said: “We live in a very uncertain world.” But he added that businesses were still coming to the West End, where it has a substantial retail portfolio.
He said: “Twenty-five percent more tourists are expected here by the 2020s and you’ve got the Elizabeth line opening, which will make the West End more accessible to more people. The area is relatively insulated from wider UK challenges and headwinds.”
The REIT reported a 3.3% NAV growth for the six months to 31 March and vacancies at almost zero.
Helical
Helical chief executive Gerald Kaye said he did not “follow the argument” that we are late cycle as the company completed a radical two-year repositioning of its portfolio, reducing the number of its assets from 75 to 15 as it focuses on London offices and exits the logistics, retail and retirement village sectors.
Kaye predicted there won’t be a significant market downturn before 2023-25 “based on previous cycles lasting around 15 years and downturns resulting from either overlending by the banks or overborrowing by real estate, which we are not currently seeing”.
He said he was confident about the future of London and its employment growth.
The company reported an EPRA NAV per share drop of 1.1% to 468p over the financial year. Kaye said the fall was owing to a write-down on its retirement village portfolio, which was sold to L&G Capital in November at a 13.5% discount to book value, and the early repayment of its retail bond.
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