Great Portland Estates confident despite valuation, earnings fall

Great Portland Estates reported a new leasing record in its half-year results on Thursday, 4.4% ahead of its estimated rental value, including its largest-ever letting at 2 Aldermanbury Square, although its valuation fell and its earnings narrowed.

The company reported £16.7m of new annual rent across 205,300 square feet in the six months ended 30 September, with market lettings 4.4% above the March estimated rental value and a further £6.6m of lettings under offer.

It said its ‘Flex’ offer now covered around 15% of its office portfolio, and was targeting 650,000 square feet, or 26%, of the portfolio by 2027.

The firm’s rent roll was up 5.4%, and vacancy down to 7.4% from 10.8%, with rent collection standing at 100%.

GPE said its portfolio valuation was down 3.4% to £2.6bn, however, with the decline driven by yields, while rental values were up 0.7% with a yield expansion of 15 basis points.

The board said it was expecting portfolio rental value growth of between 0% and 2.5% for the full financial year.

IFRS net asset value and EPRA net tangible assets per share were down 4.9% over the six months to 794p, while EPRA earnings totalled £11.4m, down 39% on the first half of 2021.

EPRA earnings per share came in at 4.5p, down 39.2%.

GPE reported an IFRS loss after tax of £86.6m, swinging from a profit of £62.2m a year earlier, as it maintained its interim dividend at 4.7p per share.

“Over the past six months, property values in our markets have come under pressure, given the challenging macroeconomic and geopolitical environment,” said chief executive officer Toby Courtauld.

“However, demand for best in class spaces remains robust, driving strong leasing activity, best illustrated by our own record leasing since March, growing prime office rents and enabling us to continue recycling capital out of mature assets at near cycle-low yields.

“Whilst economic challenges may persist in the near term, our experience is that many customers are looking through the downturn in assessing their real estate needs, seeking to trade up to great spaces that are fit for future working patterns.”

Courtauld said in that context, GPE was “well-placed” adding that the central London office market was “prospectively starved” of new, grade A supply as the firm planned to deliver its £1.1bn capital expenditure programme into the shortage and a recovering economy.

“GPE is in good health and, against this backdrop, we look to our future with confidence.”

At 1053 GMT, shares in Great Portland Estates were down 2.76% at 528p.

Reporting by Josh White for Sharecast.com.