Great Portland Estates’ chief executive has said the firm must “plan for a recession”, after the landlord posted a fairly resilient performance for the year ending 31 March.
EPRA NAV per share rose by 1.8% to 868p over the 12 months. Net assets stood at £2.2bn, down from £2.3bn in the previous year, mainly owing to a share buyback during the period.
The landlord’s portfolio value dipped by 3% to £2.6bn, as retail rental values declined by 4.3% on a like-for-like basis. Rental values in its office portfolio rose by 3.5%.
GPE outlined expectations that the June quarter day collection rate would be lower than in March, given the “deteriorating economic backdrop combined with the current government moratorium on lease forfeiture”.
Nearly 63% of quarterly rent owed was collected within seven working days of the 25 March quarter deadline, which has since risen to 71%.
The landlord said it had been in discussions with occupiers facing cash flow difficulties to accommodate requests for rental concessions, including monthly payment terms, rent deferrals and in some cases rental holidays.
GPE highlighted that property values would have to fall by a further 70% before it would breach its debt financing covenants, based on March values.
Chief executive Toby Courtauld said: “As we examine the implications for our business, it is clear that we must plan for a recession with an increase in unemployment, leading to reduced occupational demand for space, implying falling rental and capital values.
“Key to our market’s performance will be both the depth of the downturn and the shape of the recovery. Given this uncertainty, we are pausing the provision of guidance on rental value movements until the picture becomes clearer.
“Whatever the outcome, while some working practices might change, our human desire to congregate and create underpins our belief that London’s magnetic appeal as a global business capital will persist for the long term.”
GPE has additionally set out plans to become a net-zero-carbon business by 2030.
Directors reduce salaries by 20%
Great Portland Estates’ directors have also reduced their bonuses and fees to the equivalent of at least 20% of salaries for three months, to contribute to a new community fund.
The fund will be seeded with more than £280,000 raised from the pay cuts, along with significant contributions from all other executive committee members.
The group will also match contributions made by GPE’s employees and board members, up to a maximum of £250,000.
It will be distributed to London-based charities and other non-profit organisations affected by Covid-19, focusing on homelessness and other vulnerable groups; mental health and wellbeing; and educational initiatives.
West End letting
The news comes after the landlord secured a prelet from Exane BNP Paribas’ cash equities business, for its 119,100 sq ft development at 1 Newman Street and 70/88 Oxford Street, W1.
Exane BNP Paribas will occupy the fifth, sixth and seventh floors as well as ancillary basement space, on three separate 15-year leases.
Completion of the leasing deal is conditional on practical completion and obtaining a change of use for around 400 sq ft of basement from A1 retail space to B1 ancillary offices.
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