Great Portland Estates plc · LSE:GPE
Great Portland Estates — H1 2011 Earnings Presentation
50 slides from Great Portland Estates's earnings presentation, Nov 9, 2011
Slide 1: Interim Results Presentation 2011
Interim Results Presentation 2011
Slide 2: Agenda; Strong Operational Results
Agenda Introduction Toby Courtauld Chief Executive Financial Results Nick Sanderson, Finance Director Market Toby Courtauld, Chief Executive Portfolio Positioning Acquisitions & Disposals Asset Management Neil Thompson, Portfolio Director Development Update Outlook Toby Courtauld, Chief Executive 1
Slide 3: Operational & financial flexibility; Headline Results
Operational & financial flexibility Recycling to crystalise profits Development - Rebalancing near-term risk - Enhancing longer-term opportunity Exploiting portfolio angles - Maintaining low void rate Financing firepower - Low gearing - Acquiring opportunistically Central London only - High barriers
Slide 4: Total Property Return
Total Property Return Relative to IPD Central London Total Property Return (% pa) Years to September 40" 50" Relative" 40" GPE" 30" IPD central London" 30" 20" 20" 10" 10" 0" 0" -10" -10" -20" -20" -30" 2002" 2003" 2004" 2005" 2006" 2007" 2008" 2009" 2010" 2011" Source: IPD 5 Agenda Introduction Tob
Slide 5: Financial Highlights; EPRA NAV per share
Financial Highlights Balance Sheet Sept 11 March 11 Change Portfolio value1 £1,825m £1,655m 3.9%2 EPRA NAV per share 378p 360p 5.0% EPRA NNNAV per share 375p 362p 3.6% Net Gearing 40.5% 31.4% 9.1pps Income Statement Sept 11 Sept 10 Change (%) EPRA PBT £10.4m £15.0m -30.7% EPRA EPS 3.4p 4.5p -24.4% D
Slide 6: EPRA Profit Before Tax; Change in Net Debt
EPRA Profit Before Tax1 6 months to Sept 2011 £m 20.0" 0.5 -2.2 2.8 18.0" -1.4 16.0" -3.0 14.0" -30.7% 12.0" -1.3 10.0" 8.0" 15.0" 6.0" 10.4" 4.0" 2.0" 0.0" Sep-10" Rental income" Joint Venture fees" Property costs" Admin costs" Adjusted JV profits" Net interest" Sep-11" 1. Adjusted per EPRA guidanc
Slide 7: Debt Analysis; Conservative Leverage
Debt Analysis Pro Forma1 Sept 2011 March 2011 Net debt excluding JVs (£m) 460.3 473.2 349.1 Net gearing 39.4% 40.5% 31.4% Total net debt including 50% JV 654.2 630.5 514.0 non-recourse debt (£m) Loan-to-property value 35.3% 34.6% 31.1% Total net gearing 56.0% 54.0% 46.2% Pro Forma1 Sept 2011 March 2
Slide 8: High Liquidity: Debt Maturity Profile
High Liquidity Debt Maturity Profile £m 400" Nov ‘15 350" 300" 250" 200" Jan ‘29 150" Jun ‘18 100" Group facilities - Drawn July ‘12 Group facilities - Undrawn Jun ‘21 50" Joint Venture1 New Gray’s Inn Rd debt1 0" 2011" 2013" 2015" 2017" 2019" 2021" 1. GPE share of joint venture debt 13 High Liquidi
Slide 9: High Liquidity; Financial and Operational Flexibility
High Liquidity Debt Maturity Profile £m – New £73m seven year non-recourse loan on 400" Gray’s Inn Road (in GRP) Nov ‘15 350" – Weighted average debt maturity of 7 years1&2 300" – Strong cash collection 250" – more than 98% in 7 days 200" – Low tenant delinquencies – less than 0.1% of rent roll Jan
Slide 10: Key Financial Messages
Key Financial Messages Robust financial results – Improvement in portfolio value and NAV from March 2011 – Reduced earnings outturn as anticipated given development pipeline/refurbishment activity – Operational performance continues to be strong – Dividend level consistent with financial strength an
Slide 11: Market Messages; Investment Market Balance
Market Messages Investment market balance: Still supportive – Demand > Supply – Particularly West End – Prime vs Secondary – Flight to quality – Buyers more selective – Prime yields flat; Secondary yields may move out Occupational market balance: Medium-term favours landlord – Demand softened – Low
Slide 12: Investment Market Balance
Investment Market Balance Prime West End yield gap over 10 year gilts1 City West End 6" Nominal Yield Gap" Asset Supply2 £5.7bn £3.5bn Real Yield Gap" Less withdrawn / £(1.9)bn £(2.3)bn 4" under offer 2" Available £3.8bn £1.2bn %> 3 months 72% 13% 0" %> £200m 59% 0% % May 2011 -2" Nov May -4" Asset
Slide 13: Development: Central London Office Completions
Development Central London Office Potential Completions Million sq ft 16 Completed GPE as at May 2011 14 12 10 8 6 4 2 0 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: CB Richard Ellis / GPE 23 Development Central London Office Potential Completions Million s
Slide 14: The London Economy; Active Demand
The London Economy Change in London business activity and employment (50% = growth point) 65 Business activity Employment 60 55 50 45 40 35 Oct 97 Oct 99 Oct 01 Oct 03 Oct 05 Oct 07 Oct 09 Oct 11 Source: PMI London Report 25 Active Demand Central London Offices Sq ft net (000) GDP: Forecast year-on-
Slide 15: Rent Forecasts
Rent Forecasts Central London Office Market Agency1 forecasts for next peak Headline rents (£ per sq ft)2 120" Grade A Headline Rents* PMA (£ per sq ft) forecasts 120.0" May 2011 forecast +23% 100" 100.0" 80" 60" 80.0" 40" +18% GPE current office rent passing 60.0" £33.50 per sq ft 20" PMA Prime Wes
Slide 16: Portfolio Positioning
Portfolio Positioning Total portfolio £1,825m Development on-site £183m cap val £527 psf1 Of total portfolio 10% Net Initial Yield2 4.0% cap val £728 psf Net Initial Yield2 2.7% Total Equivalent Yield 5.3% Investment portfolio £1,219m Of total portfolio 67% Office:Retail 77:23 cap val £702 psf Land3
Slide 17: Acquisitions & Disposals; 200 & 214 Gray's Inn Road
Acquisitions & Disposals Acquisitions Disposals – Disciplined strategy – Recycling repositioned assets – Central London – £106.6m1 since March 2011 – Beneath replacement cost – 4.0 NIY% – Attractive running yields – 6.2% surplus to March 2011 BV – Angles to exploit – >£180m in market – Supplement lo
Slide 18: Rathbone Place Site, W1
Rathbone Place Site, W1 - Acquired Sept 2011 - 2.3 acres, freehold - £120m - Leaseback to Royal Mail to June 2013 - £4.6m total rent - Royal Mail planning application 383,000 sq ft net - £313 per sq ft cap val (£300 per sq ft excluding rent) - 50 yards north of Oxford St and Crossrail 33 Rathbone Pl
Slide 19: Rathbone Place Site, W1
Rathbone Place Site, W1 - Royal Mail application withdrawn - Architectural competition - Consent by June 2013 Rathbone Place Site Oxford 73/89 Oxford St Circus Hanover Sq GPE holdings" 35 Agenda Introduction Toby Courtauld, Chief Executive Financial Results Nick Sanderson, Finance Director Market To
Slide 20: Asset Management
Asset Management Activity 6 months to September 2011 – 35 new leases – 14 market lettings / £6.2m new rent1&2 – 5.3% above ERV1 – 66 lease events, 75% tenant retained / relet3 – Only 7% to let – 3.2% investment portfolio void rate2 – WAULT 5.7 years2 – Reversionary potential 11% – Average office ren
Slide 21: Asset Management: Jermyn Street Estate
Asset Management Jermyn Street Estate, W1 - 55,7001 sq. ft office scheduled for major refurb early 2012 - Occupational market conditions have changed Revised strategy - Re-let 5-10 years - capex and market risk reduced - Attractive risk-adjusted returns - 53% of income retained / under offer - 13% a
Slide 22: Agenda; Development Update
Agenda Introduction Toby Courtauld, Chief Executive Financial Results Nick Sanderson, Finance Director Portfolio Positioning Toby Courtauld, Chief Executive Market Acquisitions & Disposals Asset Management Neil Thompson Development Update Portfolio Director Outlook Toby Courtauld, Chief Executive 41
Slide 23: Development: Complete and Committed projects
Development Complete and Committed projects ERV3 Income New Cost to building complete Office avg secured Status area1 £m2 £m £ per sq ft £m Completed 184/190 Oxford St, W1 Complete 26,400 - 1.7 24/25 Britton Street, EC1 Complete 51,300 - 1.6 23/24 Newman Street, W1 Complete 24,900 - 0.2 37.20 - 102,
Slide 24: West End Development; Pipeline
West End Development Marcol House, Regent St, W1 Wigmore St, W1 GPE anticipated profit £42.3m / 60.6% £12.9m / 23.6% Prime office / retail space 102,800 sq ft 111,400 sq ft ERV Sept 2011 £68.50 per sq ft £67.75 per sq ft Completion Oct 2012 June 2013 West End restricted supply: Grade A vacancy 1% 45
Slide 25: Development Pipeline: Short-term
Development Pipeline Short-term City Tower, EC21 - Planning consent imminent - 138,800 sq ft - Sustainable refurbishment - Purchase @ £263 per sq ft - Low break-even rent £39 per sq ft on tower floors - Income maintained throughout - Practical completion June 2013 1. Owned in Great Star Partnership
Slide 26: Development Pipeline: Major Land Holdings
Development Pipeline Major Land Holdings Hanover Square, W1 - Full planning consent achieved - Crossrail agreement unconditional - Development after 2015 - Continuing shortage of Grade A space 49 Development Pipeline Longer-Term 73/89 Oxford St, W1 - +100,000 sq ft office and retail - West End’s lar
Slide 27: Development Summary
Development Summary - Completions delivered meaningful gains – High quality committed projects – Low levels of speculative capex – Flexibility keeps capex in check – Prudent strategy – Pre-letting – Joint ventures – Substantial pipeline Appropriate risk-adjusted returns 51 Agenda Introduction Toby C
Slide 28: Outlook
Outlook Investment market still supportive - Buyers more discerning - Over priced / secondary: correction Occupational market - Subdued demand in near term - Positive 3 to 4 year view GPE in good shape - Central London only - Low rents - Rich with opportunity - Flexible approach to development - App
Slide 29: Disclaimer; Use of Joint Ventures
Disclaimer This presentation contains 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 or results expressed or impli
Slide 30: Balance Sheet; Income Statement
Balance Sheet Proportionally Consolidated for Joint Ventures £m Group JVs Sept 11 March 11 Investment property 1,189.3 635.3 1,824.6 1,654.5 Other assets 21.5 10.5 32.0 28.2 Net debt (473.2) (157.3) (630.5) (514.0) Other liabilities (32.6) (25.6) (58.2) (56.0) Net assets 705.0 462.9 1,167.9 1,112.7
Slide 31: Debt Covenant Levels; Tenant Delinquencies
Debt Covenant Levels Significant headroom over financial covenants Sept 11 Key Covenants2 Covenant Actuals3 Headroom GPE Bank Facilities and Private Placement Notes Net Debt / Net Equity ≤1.25x 0.41x 68% movement in net equity. Equivalent to a 43% valuation fall Inner Borrowing ≥1.66x 2.30x 36% fall
Slide 32: London Business Activity; Financial and Business Services Employment
London Business Activity London business activity (LHS, 50 = growth point) vs central London core take up (RHS) % stock 65 10 Business Activity CL Core Tup (RHS) 9 60 8 7 55 6 5 50 4 3 45 2 Q3 97 Q3 99 Q3 01 Q3 03 Q3 05 Q3 07 Q3 09 Q3 11 Source: PMA 61 Financial and Business Services Employment 000s
Slide 33: London Gross Value Added; London Exports
London Gross Value Added London GVA per head vs UK total 1.70x" 1.65x" 1.60x" 1.55x" 1.50x" 1.45x" 1990" 1991" 1992" 1993" 1994" 1995" 1998" 2000" 2001" 2002" 2003" 2004" 2005" 2008" 1989" 1996" 1997" 1999" 2006" 2007" 2009" Source: ONS 63 London Exports London exports, by value (LHS) and vs UK tota
Slide 34: Central London Prime Yields
Equity Demand" £bn! May 2010! Nov 2010! May 2011! Nov 2011! Private" 5.0" 5.0" 3.5" 5.0" UK REITs" 3.0" 3.0" 3.0" 2.0" Sovereign" 2.0" 7.0" 7.0" 5.5" UK Funds" 2.0" 2.0" 1.0" 0.8" US Opp Funds" 2.0" 3.0" 4.0" 3.0" German Funds" 1.5" 1.5" 0.5" 0.5" 15.5! 21.5! 19.0! 16.8! Source: CB Richard Ellis" 65
Slide 35: Central London Capital Transactions; Tenant Analysis
Central London Capital Transactions £bn 7.0 Unknown Origin Overseas Purchasers Domestic Purchasers 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2001 Q3 2002 Q1 2002 Q3 2003 Q1 2003 Q3 2004 Q1 2004 Q3 2005 Q1 2005 Q3 2006 Q1 2006 Q3 2007 Q1 2007 Q3 2008 Q1 2008 Q3 2009 Q1 2009 Q3 2010 Q1 2010 Q3 2011 Q1 2011 Q3 8.8 6
Slide 36: Active Office Tenant Demand
Active Office Tenant Demand Q3 2011 Banking & finance West End" Professional City IT & Telecoms Media and marketing 10% Corporates Government 4% 25%" 26%" Misc 4% 2% 41% 4% 7%" 13%" 8%" 35% 7%" 14%" Source: Knight Frank 69 City Active Requirements >10,000 sq ft" Change Nov May Nov May Nov 12 1st 6 2
Slide 37: Total Central London Take-Up; West End Active Requirements
West End Active Requirements >10,000 sq ft" Change Nov May Nov May Nov 12 1st 6 2nd 6 000 sq ft 2009 2010 2010 2011 2011 months months months Professional Services" 85" 77" 100" 100" 165" 65% 0% 65% Financial Services" 272" 402" 283" 198" 331" 17% -30% 67% Manufacturing & Corporates" 260" 124" 262"
Slide 38: City Take-Up; West End Take-Up
City Take-Up Million sq ft Pre-let New Completed Secondhand 10-Year Average 2.5 2.0 1.5 10-year average: 1.0 1.2m sq ft 0.5 0.0 Q3 2001 Q1 2002 Q3 2002 Q1 2003 Q3 2003 Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 4.6
Slide 39: City Take-Up by Sector; West End Take-up by Sector
City Take-Up by Sector 2010 Q3 2011 Banking & finance Professional IT & Telecoms 3%"2%" Business Services 4%" Manufacturing 1% 12% Government 3% Retail & leisure 33% 19%" 16% 55%" 5%" 12%" 15% 20% Source: CBRE 75 West End Take-up by Sector 2010 Q3 2011 Banking & finance Professional IT & Telecoms Bu
Slide 40: City and West End Office Under Offer
0.0 0.5 1.0 1.5 2.0 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 Q3 2001 Q3 2001 Million sq ft Million sq ft Source: CBRE" Source: CBRE" Q1 2002 Q1 2002 1.1m sq ft Q3 2002 0.8m sq ft Q3 2002 Q1 2003 Q1 2003 10-year average: 10-year average: Q3 2003 Q3 2003 Q1 2004 Q1 2004 Q3 2004 Q3 2004 Q1 2005 Q1 2005 City Off
Slide 41: Void Rate; City Office Availability
Void Rate: Ready to Occupy Space Q3 2011, % 18.0 Central London 5.2 City 6.9 West End 4.2 15.0 12.0 9.0 6.0 3.0 0.0 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Q3 2011 Source: CBRE" 79 City Office Availability Million sq ft 14.0 Secondhand New Completed New U/C 12.0 10.0 8.0 6.0
Slide 42: West End Office Availability; Top Prime Rents
West End Office Availability Million sq ft 9.0 New U/C New Completed Secondhand 10-Year Average 8.0 7.0 6.0 10-year average: 5.7m sq ft 5.0 4.0 3.0 2.0 1.0 0.0 Q3 2001 Q1 2002 Q3 2002 Q1 2003 Q3 2003 Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2
Slide 43: The Valuation
The Valuation Including share of joint ventures Initial yield Equivalent Yield Basis point +/- % % 3 month 6 month 12 month North of Oxford Street Offices 4.0% 5.2% 8 3 -4 Retail 3.9% 5.1% 1 6 -9 Rest of West End Offices 2.6% 4.9% 0 -11 -6 Retail 3.6% 4.9% -2 -12 -24 Total West End 3.5% 5.1% 4 -2 -8
Slide 44: The Valuation: Drivers of Valuation Movement
The Valuation1 Drivers of Valuation Movement2 % movement Residual Yield shift Rental value movement 12 month" 6 month" 3 month" -4.0%" -2.0%" 0.0%" 2.0%" 4.0%" 6.0%" 8.0%" 10.0%" 12.0%" 14.0%" 1. Including share of Joint Ventures 2. Excludes development properties 85 The Valuation Wholly Owned 6 mon
Slide 45: The Valuation: Joint Ventures; ERV
The Valuation Joint Ventures 6 months to Value Sept 2011 Change 3 months 12 months £m £m % % % North of Oxford St 316.2 8.7 2.8% 0.6% 7.8% Rest of West End 385.0 15.0 4.1% 0.8% 10.8% Total West End 701.2 23.7 3.5% 0.7% 9.5% City and Southwark 142.2 0.5 0.4% (0.3%) 1.4% Investment portfolio 843.4 24.
Slide 46: Asset Management: Movement in Reversions; Void Rate
Asset Management Movement in Reversions" 6 months to! 31 March 2011! 30 Sept 2011! At beginning of period" £3.6m" £6.7m" Asset management" (£0.3m)" (£0.4m)" Disposals / acquisitions" £1.3m" (£0.4m)" ERV movement" £2.1m" £1.6m" At end of period" £6.7m" £7.5m" 89 Asset Management Void rate, % by renta
Slide 47: Asset Management: Tenant Retention; Expiry Profile
Asset Management Tenant retention, 6 months to Sept 2011 Area (000 sq ft) 200" 180" 160" 36% 140" 120" 100" 18% 80" 60" 39% 40" 20" 7% 0" Expiries & breaks" Retained" Refurbishment / Development" Relet / Under offer" Remaining" 91 Asset Management Vacant possession / expiry profile1 % by total renta
Slide 48: Key Disposals; Committed Schemes
Key Disposals Relative to Price Price (£m) Mar 11 NIY (£ psf) 192 / 194 Oxford St, W1 19.1 +0.5% 3.9% 1,911 201 / 207 Kensington High St, W81 6.4 - 5.5% 726 26 / 40 Kensington High St, W81 31.2 +10.6% 4.5% 534 67 / 75 Kingsway, WC21 8.3 +9.2% 3.6% 533 To 30 September 2011 65.0 6.2% 4.3% 700 23 / 24
Slide 49: Development Pipeline: Short-Term; Major Land Holdings
Development Pipeline Short-Term Earliest New build Income retained potential start Ownership area (Sq ft) Planning (% by area) Walmar House, W1 Jun 2013 50%1 59,200 Consented 14.5% Savile Row, W1 Mar 2012 100% 14,500 Consented 21.8% City Tower, EC2 Apr 2012 50%2 138,800 Design 85.3% Buchanan House,
Slide 50: Development Pipeline: Longer-Term; GPE portfolio by area
Development Pipeline Longer-Term Earliest New build Income retained potential start Ownership area (Sq ft) Planning (by area) 90/92 Great Portland St, W1 2015+ 100% 8,400 Consented 50% Park Crescent, W1 2015+ 50% 96,400 Design 100% 73/89 Oxford St, W1 2015+ 100% 121,900 Design 100% 40/48 Broadway, S
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