Great Portland Estates enters 2016 in strong position

Great Portland Estates remained in a strong position heading into the new year, with the real estate investment trust updating the market on its activities in the three months to 31 December on Wednesday.

During the period, the FTSE 250 company signed 15 new lettings totalling 122,600 square feet, generating total annual rent of £8.5m, with Great Portland Estates' share being £7.7m.

That was 17.9% above the estimated rental value in March 2015.

Great Portland Estates also saw a record number of lettings in the financial year to date, securing annual rent of £29.3m over 412,000 square feet, with a further £2.2m currently under offer, for a total that was 9.6% of the March estimated rental value.

The company also settled four rent reviews securing a total of £6.2m, with Great Portland's share £3.2m, which was 61% above the previous passing rent.

Its vacancy rate was at 2.7%, average office rent was £45.70 per square foot, with a reversionary potential of 33.7%.

"The group is performing well on all fronts: our development properties are leasing ahead of ERV, our asset management activities are capturing the meaningful reversionary potential across the investment portfolio, and our capital recycling is crystallising material profits", said Great Portland chief executive Toby Courtauld.

The company was also amid its largest ever development programme, with nine committed schemes totalling 856,700 square feet, and 59% pre-let or pre-sold.

Great Portland Estates had also submitted a planning application for Oxford House W1 and was about to commence demolition of the New Bond Street buildings at Hanover Square W1.

There was total capital expenditure to come at committed and near-term development schemes of £475.5m, the company confirmed.

In its capital recycling programme, the company sold 60 Great Portland Street W1 for £102.2m - a net initial yield of 3.89%. It also sold 33 Margaret Street W1 for £216.3m, with a net initial yield of 3.3%.

The company purchased 50 Finsbury Square EC2 for £119m, a net initial yield of 5.3%, which the board said extended it pipeline for the next cycle of development.

Great Portland Estates had made net sales of £222m for the period.

"London's economy continues to grow. While we expect increasing uncertainty ahead of an anticipated referendum on Britain's relationship with the EU, today the level of tenant demand remains good for the limited quantity of available office and retail space, particularly in our core West End market", said Cortauld.

"As a result, we expect further pre-lettings and healthy rates of rental growth. In addition, our exceptional developments will continue to deliver attractive returns for shareholders, and our balance sheet strength will allow us to exploit our many portfolio opportunities."

Great Portland Estates' financial position remained strong, with a loan-to-value ratio of 17.4%, a weighted average interest rate of 3.8%, and drawn debt 100% fixed or capped.

It had cash and undrawn committed facilities of £506m, with a low marginal cost of debt of 1.6%.