The Directors of Great Portland Estates plc announce the results for the Group for the year ended 31 March 20231, with highlights including:
- Strong strategic positioning with flight to quality delivering success; £55.5m of leasing, a new record, 3.3% ahead of ERV2; market-leading customer NPS of +44.05
- Expanding our Flex offer, now 414,000 sq ft (c.21% of office portfolio), targeting 1 million sq ft including two recent acquisitions for £53 million with more expected
- Significant capex programme of £0.8 billion; 1.4 million sq ft delivering into Grade A supply drought
- ERVs up 2.1%, with yield driven valuation decline of 6.6%; outperforming MSCI central London benchmark by 4.8 pps; EPRA NTA per share of 757 pence
- Significant financial strength; low LTV of 19.8% and £457m of liquidity
- Sustainability - Statement of Intent 2.0 and Brief for Creating Sustainable Spaces launched
- GPE well positioned to capitalise on opportunities emerging in London’s bifurcating market; customers demanding centrally located, prime sustainable spaces
During a year marked by elevated political and economic uncertainty, we have delivered a strong operating performance with record leasing, positive rental growth and resilient financial results.
Despite the impact of recent interest rate rises, London has continued to recover and is evidently busier than this time last year; centrally located offices are returning to more normal levels of occupation, and the West End is seeing higher numbers of both shoppers and tourists, supported by the opening of the Elizabeth Line.
From here, whilst macro-economic challenges are likely to persist, we do not expect the recovery to be uniform. For some time, we have witnessed a growing divergence between the prospects of the best spaces versus the rest, and we believe this is set to widen further as customers seek out sustainable and well designed, prime spaces, of which there is a marked shortage, particularly in the West End. Consequently, we have increased our rental growth guidance for our prime offices to be between 3% to 6% for the year.
Through our strategic focus on prime HQ and Flex offerings, we are well positioned to benefit, and we are growing our ambition. Our office-led capex programme extends to more than £800 million of best-in-class sustainable spaces and we are targeting growth of our Flex space to more than one million square feet, underpinned by our Customer First service approach which is delivering industry-leading customer satisfaction. So, with exceptionally strong finances and plentiful liquidity, we will continue capitalising on opportunities that are emerging, and with our experienced team, we can look to our future with confidence.
Customer First approach driving record leasing inc. pre-let of all offices at 2 Aldermanbury Square, EC2
- £55.5 million p.a. of new annual rent across 686,700 sq ft (inc. £10.2 million in retail), market lettings 3.3% above March 2022 ERV, including;
- our largest ever pre-let at 2 Aldermanbury Square, EC2; £24.7 million, 20-year term; with all the planning conditions met the agreement for lease with Clifford Chance is now unconditional;
- £11.8 million of Flex lettings, 10.8% ahead of March 2022 ERV inc. 14 Fully Managed leases, achieving on average £181 per sq ft; and
- 35 new retail leases securing £10.2 million of rent with market lettings 9.1% below March 2022 ERV, including leasing all the retail units at 70/88 Oxford Street, W1.
- Outstanding customer satisfaction, NPS score +44.0 v industry average +3.8; ‘Together We Thrive’ service proposition launched
- Rental income growth of 6.5%3; vacancy down to 2.5% (Mar 2022: 10.8%); 7 day rent collection 99.5%; further £5.7 million of lettings under offer at 18.0% premium to March 2023 ERV
Flex expansion, now 414,000 sq ft, targeting one million sq ft including two recent acquisitions
- Our Flex offer now c.21% of office portfolio (up from 15% in Sep 2022), targeting 1 million sq ft or c.41% of office portfolio over next five years
- Two acquisitions (£37.1 million) inc. 6/10 St Andrew Street, EC4 for £30.0 million (£650 per sq ft)
- Since 1 April, two further Flex acquisitions (£53 million) inc. 141 Wardour Street, W1 in core Soho for £39 million (£1,156 per sq ft) and Bramah House, 65/71 Bermondsey Street, SE1 for £14 million (£892 per sq ft)
Total prospective capex of £0.8 billion; commitment to 2 Aldermanbury Square, EC2
- Good progress across 11 schemes, well timed to deliver into supply constrained market; 1.4 million sq ft; c.49% of portfolio
- Following pre-let, commitment to develop net-zero carbon 2 Aldermanbury Square, EC2, good progress, building demolished; anticipated completion Q4 2025
- Three further near-term development schemes, first starting later this year; with significant refurbishment programme to enhance our Fully Managed offer inc. 6/10 St Andrews Street, EC4
ERVs up 2.1%, with valuation down 6.6% driven by yield expansion; EPRA4 NTA per share of 757 pence
- Portfolio valuation of £2.4 billion, down 6.6%3; -7.3% offices (inc. Flex -5.1%) and -4.5% retail
- Rental values up by 2.1%3 (+3.3% offices (inc. Flex +4.0%) and -1.5% retail); yield expansion of 42 bp
- Capital return outperformance of 4.8pp v MSCI Central London (annual index)
- Portfolio rental value growth guidance of 0% to 5% for the new financial year, prime offices 3% to 6%
- IFRS NAV and EPRA4 NTA per share of 757 pence, down 9.3% over twelve months
- EPRA4 earnings of £24.0 million, down 12.4% on 2022. EPRA4 EPS of 9.5 pence, down 12.0%
- IFRS loss after tax of £163.9 million (2022: profit of £167.2 million); total dividend maintained at 12.6 pence
Significant strength; low LTV of 19.8%, £457 million of liquidity
- EPRA LTV of 19.8%, weighted average interest rate of 2.7%, cash and undrawn facilities of £457 million5 ; weighted average debt maturity of 6.4 years
- £217.8 million of sales inc. 50 Finsbury Square, EC2 for £190 million, reflecting a topped up NIY of 3.85%
- Reviewing £0.7 billion of acquisitions and £0.2 billion of sales
Sustainability Strategy updated
- Sustainability Statement of Intent ‘The Time is Now’ updated; greater focus on adapting our whole business to the physical impacts of climate change
- New Brief for Creating Sustainable Spaces; challenging performance requirements for our supply chain to deliver on our commitments as we design, construct, fit out and operate our spaces
1 All values include share of joint ventures unless otherwise stated 2 Leasing in period to 31 March 2023 3 On a like-for-like basis 4 In accordance with EPRA guidance. We prepare our financial statements using IFRS, however we also use a number of adjusted measures in assessing and managing the performance of the business. These include like-for-like figures to aid in the comparability of the underlying business and proportionately consolidated measures, which represent the Group’s gross share of joint ventures rather than the net equity accounted presentation included in the IFRS financial statements. These metrics have been disclosed as management review and monitor performance of the business on this basis. We have also included a number of measures defined by EPRA, which are designed to enhance transparency and comparability across the European Real Estate sector, see note 7 to the financial statements. Our primary NAV metric is EPRA NTA which we consider to be the most relevant measure for the Group. 5 Source: RealService.
