Jefferies upgrades Great Portland Estates after rights issue

Jefferies has upgraded its rating for real estate group Great Portland from 'underperform' to 'hold' in the aftermath of the company's £350m rights issue.

The reason for the three-for-five rights issue of 152m shares at 230p is to purchase special opportunities in Great Portland's core areas of headquarters and flexible office space focused in London's West End markets.

"We have updated our forecast assuming the proceeds are held on high yield deposit accounts and then deployed over FY25 and FY26 with a total acquisition target of £600m of deep value buildings below replacement costs already identified," said Jefferies in a research note.

The broker said it "recognises that the business is now better positioned with stronger financial ratios and that the management has a successful track record of flexing its equity base by returning surplus capital and then issuing equity to successfully pursue value add opportunities and not relying on blanket market repricing."

Jefferies has cut its target price for the shares from 310p to 300p, which still suggests some downside to current prices – down 0.6% at 344.5p on Thursday morrning.