Source - RNS
RNS Number : 6002S
Great Portland Estates PLC
10 July 2020
 

 

 

10 July 2020  

 

Great Portland Estates Trading Update

Great Portland Estates plc ("GPE") today publishes its trading update for the quarter to 30 June 2020.

 

Toby Courtauld, Chief Executive, said:

"Whilst the lockdown has started to ease and our office pre-letting momentum remains healthy, COVID-19 is disrupting the activities of many of our existing occupiers, which in some instances is impacting their ability to meet their rental payments. We continue to actively engage with all our stakeholders, in particular offering assistance to our occupiers, on a case by case basis to support them through this unprecedented time, and helping the communities in which we work through the deployment of our new community fund.

 

Despite these challenging conditions, we are well positioned. Our leverage is low providing strength in these difficult markets with significant capacity for growth should opportunities emerge; our portfolio is almost fully let and our extensive development pipeline is set to deliver high quality, sustainable spaces that remain in high demand; this, combined with the talents of our experienced team and strong culture, means that we have the ability to choose our path to deliver on all our ambitions."

 

Extensive engagement with our occupiers, providing support on a case by case basis

· 69% of June rent collected to date including amounts covered by rent deposits; 58% excluding deposits (74% from offices; 28% from retail/hospitality/leisure sectors)

· 82% of March rent now collected including drawn deposits; 70% excluding deposits

· £21.6 million of rent deposits/bank guarantees, of which £2.5 million anticipated to be utilised against outstanding June rent

· All offices open and operating with COVID-19 Secure status

· Bespoke Return to the Workplace playbook issued to all occupiers

· GPE Community Fund raised more than £310,000 to support some of London's most vulnerable

 

Operating well; strong leasing

· £4.3 million of new rent signed in quarter. Market lettings 4.4% ahead of March 2020 ERV, including 39,970 sq ft to Exane at 1 Newman Street on 15 year term (no break) at £100 per sq ft with 33 months rent free

· 11 lettings under offer for £12.1 million (our share: £7.0 million), 4.3% ahead of March 2020 ERV including one office pre-let

· Sustainability statement of intent (The Time is Now) launched

· National Equality Standard accreditation achieved

 

Good progress across our development programme during lockdown; covers 56%1 of existing portfolio

· Committed: three projects covering 414,600 sq ft

o 42% pre-let or under offer; 14.7% forecast profit on cost

o All sites open with £47.5 million capital expenditure to come and two completing in next four months, third in Q3 2021

· Near-term: three schemes (821,600 sq ft); strong occupier interest ahead of earliest starts in 2021

· Total pipeline: ten schemes (1.4 million sq ft), all income producing, 2.6 years WAULT, 9.5% reversionary2

 

Strong financial position; total liquidity of £390 million

· Property LTV1 of 15.0%, weighted average interest rate of 2.2%

· Substantial headroom above Group debt covenants (values could fall 68% before breach)

· Cash of £90 million; undrawn facilities of £300 million

 

1.  Based on property values at 31 March 2020

2.  Existing use of development pipeline at 30 June 2020

 

 

 

Contacts:

 

 

 

 

 

 

Great Portland Estates plc

+44

(0)

20

7647

3000

 

Toby Courtauld, Chief Executive

 

 

 

 

 

Nick Sanderson, Finance and Operations Director

 

 

 

 

 

Stephen Burrows, Director of Financial Reporting and Investor Relations

 

 

 

 

 

 

 

 

 

 

 

Finsbury Group

+44

(0)

20

7251

3801

 

James Murgatroyd

 

 

 

 

 

 

Gordon Simpson

 

 

 

 

 

 

            

 

Forward Looking Statements

This document may contain certain 'forward-looking statements'. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes of results expressed or implied by such forward-looking statements.

 

Any forward-looking statements made by or on behalf of GPE speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. GPE does not undertake to update forward-looking statements to reflect any changes in GPE's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

 

Information contained in this document relating to GPE or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance.

 

 

Working with our occupiers

57% of quarterly rents (which represent 70% of this quarter's rent roll) were secured within seven working days of the 24 June quarter day (March 2020: 63%), which has now risen to 59%. Of the further 30% of our rent roll on monthly payment terms (March 2020: 9%), 51% was collected within seven working days of the due date. Together, we have so far collected 58% of all rent due. Based on building use, we have collected 74% of all rents on our offices and 20% on retail units. At 30 June 2020, we held rent deposits and bank guarantees totalling £21.6 million (March 2020: £25.8 million), of which we anticipate that we will be able to utilise £2.5 million against our outstanding June rent, taking our collection rate to 69%.

Collection performance to date

Retail, Hospitality & Leisure

Other sectors

Total

Total (after rent deposits)

Quarterly rent

22%

78%

59%

69%

Monthly rent

62%

43%

51%

66%

Received

28%

75%

58%

69%

 

For those occupiers who have been unable to pay their rent, we are continuing to implement measures to help support them through these unprecedented times. Accordingly, on a case by case basis, we are currently offering occupiers facing cash flow difficulties monthly payment terms, deferral of rental payments or rental holidays, as appropriate. During the quarter, two of our occupiers went into administration (March 2020: four), representing only 0.9% of our rent roll.

All of our office buildings remain open for business, with levels of occupier utilisation currently around 14% of full occupancy and, following the recent easing of the lockdown rules, around two-thirds of our retail units have reopened. Our team has ensured that all of our portfolio buildings are 'COVID-19 Secure' and we have issued bespoke 'Return to the Workplace' playbooks to all occupiers to assist them in managing the phased re-population of their offices as the lockdown eases. To date, the feedback on the assistance we have been providing to our occupiers has been very positive.

Working with our communities

Given the impact of the COVID-19 crisis on our communities, in May we established a Community Fund to support some of the most vulnerable people in London at this unprecedented time. The Fund has to date raised more than £310,000 through a combination of Board Director bonus reductions and fee waivers along with significant contributions from GPE Executive Committee members and employees, and Group matching.

Our Communities and Charities Committee have now allocated the first phase of donations totalling £110,000, to eight charities specifically identified to help support the emergency response to COVID in London. These include Bankside Open Spaces Trust, the National Literacy Trust and the Respite Association, along with two mental health charities.

Separately, through our relationship with Groundwork London, we have provided funds to support a number of London borough command hubs which are co-ordinating volunteers through the COVID-19 lockdown and providing reconditioned electrical white goods for emergency hostels, refugee communities, the disabled and the elderly.

 

 

 

Strong leasing

We delivered another quarter of healthy new income generation, the highlight being a significant pre-letting, including:

· four new leases and renewals signed generating annual rent of £4.3 million (our share: £4.3 million), with market lettings 4.4% ahead of March 2020 ERV;

· two rent reviews securing £0.6 million of annual rent (our share: £0.6 million), 18.3% ahead of both the previous passing rent and ERV;

· total space covered by new lettings, reviews and renewals was 59,500 sq ft; and

· our vacancy rate remains low at 3.3% (31 March 2020: 2.0%).

We expect to benefit from an acceleration of demand for our brand of flexible office space once the immediate impact of COVID-19 has passed. Our flexible offerings currently comprise 11% of our office portfolio, across our own fully-fitted flex space (90,150 sq ft) and two revenue share partnerships (130,700 sq ft) operated by Knotel and Runway East. Our flex space remains 82% let, whilst occupancy across the partnerships space has now settled at around 78%, a marginal reduction from 81% prior to lockdown.

Leasing Transactions

 

Three months ended

 

 

30 June 2020

 

31 March 2020

 

30 June 2019

 

 

 

 

 

 

 

New leases and renewals completed

 

 

 

 

Number

 

4

 

4

 

9

GPE share of rent p.a.

 

£4.3 million

 

£0.7 million

 

£1.9 million

Area (sq ft)

 

44,500

 

10,900

 

35,400

Rent per sq ft

 

£96

 

£69

 

£62

 

 

 

 

 

 

 

Rent reviews settled

 

 

 

 

 

 

Number

 

2

 

4

 

7

GPE share of rent p.a.

 

£0.6 million

 

£1.1 million

 

£2.1 million

Area (sq ft)

 

15,000

 

18,100

 

30,400

Rent per sq ft

 

£42

 

£63

 

£77

 

Note: Includes joint ventures at our share

 

Our development activities; committed schemes progressing well

At 1 Newman Street & 70/88 Oxford Street, W1, construction of the new building is progressing well with the development expected to top out in the next few weeks. The building will deliver 81,200 sq ft of new offices and 37,900 sq ft of retail space directly opposite the Dean Street entrance to the Tottenham Court Road Crossrail station and completion is targeted for Q3 2021. Following the pre-let of the upper three floors to Exane, the building is now 30% pre-leased and interest in the remaining office floors remains encouraging. However, we expect the pre-leasing of the retail space to be more challenging in the near term given the impact of COVID-19 on the wider UK retail environment.

 

Total development programme of 1.8 million sq ft

Strong financial position; significant headroom above group debt covenants

At 30 June 2020, Group consolidated net debt was £368 million, up from £349 million at 31 March 2020. The increase was largely due to on-going development capital expenditure across the Group. Group gearing increased to 16.9% at 30 June 2020 from 16.2% at 31 March 2020. We continue to operate with substantial headroom above our Group debt covenants and values could fall by 68% before a breach.

Looking ahead, we expect that a combination of rental concessions and potential occupier delinquencies will have a negative impact on EPRA EPS for the year ending March 2021, although at this stage it is too early to quantify further. However, consistent with the last four financial years, we anticipate that our Group interest cover ratio will remain unmeasurable given our expected low financial leverage.

Including the non-recourse debt in the joint ventures, total net debt was £395 million at 30 June 2020 (31 March 2020: £373 million) equivalent to a loan to property value of 15.0%2 (31 March 2020: 14.2%). At 30 June 2020, the Group, including our share of joint ventures, had cash and undrawn committed credit facilities of £390 million.

 

30 June 2020

31 March 2020

GPE net debt

£368.2m

£349.4m

GPE gearing1

16.9%

16.2%

Value falls before breach2

68%

70%

Total net debt including JVs

£394.6m

£373.3m

LTV2

15.0%

14.2%

1.  Based on net asset value at 31 March 2020

2.  Based on property values at 31 March 2020

Given the ongoing cash flow challenges COVID-19 is placing on the UK retail sector, we have obtained an interest cover ratio covenant waiver for the quarters to July 2020 and October 2020 for our non-recourse debt facility in the Great Victoria Partnership. The £80.0 million facility (our share: £40.0 million) is secured over Mount Royal, W1 and matures in July 2022.


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