Great Portland Estates plc · LSE:GPE
Great Portland Estates — H1 2016 Earnings Presentation
48 slides from Great Portland Estates's earnings presentation, November 2015
Slide 1: Interim Results 2015
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Slide 2: Agenda; Strong Results
Agenda Introduction Toby Courtauld, Chief Executive Financial Results Nick Sanderson, Finance Director Market Toby Courtauld, Chief Executive Disposals & Acquisitions Asset Management Neil Thompson, Portfolio Director Development Outlook Toby Courtauld, Chief Executive 2 Strong Results 30 Sept 2015
Slide 3: Outperforming; Successful Strategy is Delivering
Outperforming Capital Return relative to IPD Central London1 (%) 6 months to Sept 2015 Relative 35.0 GPE IPD H1 5 yr 10 yr Total return 13.6% 10.4% +3.2% +14.0% +92.8% GPE entire portfolio +155.0% 30.0 Capital return 11.9% 8.7% +3.2% +21.1% +80.2% 25.0 20.0 Developments, 15.0 Sales & Acquisitions 10
Slide 4: More to come
More to come Execution Phase Supportive market - Rents to grow Well-timed developments - Substantial surpluses Reversionary investment portfolio - Significant growth Disciplined recycling - Crystallise surpluses Investing in our portfolio: Maximising organic growth 6 Agenda Introduction Toby Courtau
Slide 5: Financial Highlights; EPRA NAV per share
Financial Highlights Balance Sheet Sept 15 March 15 Change Portfolio value1 £3,642.9m £3,206.2m +10.5%2 EPRA NAV per share3 808p 709p +14.0% EPRA NNNAV per share3 788p 685p +15.0% Loan-to-property value 20.2% 21.8% -1.6pps Income Statement Sept 15 Sept 14 Change EPRA PBT £24.3m £21.0m +15.7% EPRA EP
Slide 6: EPRA Profit Before Tax
EPRA Profit Before Tax1 Six months to 30 Sept 2015 30 2.3 -0.2 0.8 5.4 -1.5 -1.7 25 +0.8% -1.8 24.3 24.1 4.9 +15.7% £m 1.2 1.5 21.0 Lettings 20 VP3 -2.2 LfL Growth Acquisitions2 Developments 15 Mar-15 Rental income JV fees Development ManagementEPRA ProfitsJV profits Property costs Admin costs Net i
Slide 7: Attractive Debt Profile; Strong Debt Metrics
Attractive Debt Profile1 By Maturity and Diversity of Sources £m 500 RCF2 - Drawn 450 RCF2 - Undrawn Maturity extended by 12 months 361 Marginal debt cost c1.6% JV Bank Debt 400 JV Non-Bank Debt 350 Debenture Bonds Private Placement Notes 300 Convertible Bond In negotiations to refinance 250 (extend
Slide 8: Managing Risk; Capex Forecast
Managing Risk LTV vs Capex £m 40% LTV Committed Capex to come " Pro Forma LTV1 37.7% (RHS) 500.0 35.4% 35% Near Term 400.0 Capex £153.4m 30% " = LTV 30.0% 300.0 " Committed capex fully invested " 25% 25.0% = LTV 27.4% 200.0 20% 20.2% 100.0 Rathbone Sq Residential Sales Expected proceeds to come £242
Slide 9: Potential Additional Rent Roll; Key Financial Messages
Potential Additional Rent Roll1 From completed / committed / near term developments £m, CBRE rental estimates September 2015 18.2 164.2 165 Oxford House, W1 5.4 155 Hanover Square, W1 12.8 24.8 145 148 Old Street, EC1 4.1 Tasman House, W1 2.8 Rathbone Sq, W12 2.6 135 30 Broadwick St, W1 7.5 +63.2% 7
Slide 10: We are in Execution Phase
Agenda Introduction Toby Courtauld, Chief Executive Financial Results Nick Sanderson, Finance Director Market Toby Courtauld, Chief Executive Disposals & Acquisitions Asset Management Neil Thompson, Portfolio Director Development Outlook Toby Courtauld, Chief Executive 18 We are in Execution Phase G
Slide 11: Growth – Despite Macro Concerns; Strong Leasing
Growth – Despite Macro Concerns London Expected to Outperform 3 Year Forward Growth %pa1 London Business Activity2 70 5 London GVA UK GDP 65 4 60 3 55 50 2 50% = growth point 45 1 40 Sep 13 Dec 13 Mar 14 Sep 14 Dec 14 Mar 15 Sep 15 2007 2008 2009 2010 2011 2012 2013 2014 2015 London Economy: Employm
Slide 12: Near Term Supply Tight; Tight Market Balance
Near Term Supply Tight Central London Office Completions, Million sq ft Pre-let West End Core speculative1 Core Grade A vacancy rates Nov 15 2.9m sq ft, c.1% of core stock p.a. City 2.4% Speculative West End 1.5% 14.0 Forecast 12.0 12 month trend2 8.0 ! # # # # 10.0 6.0 8.0 6.0 4.0 4.0 2.0 2.0 0.0 1
Slide 13: Investment Market; Positive Market Outlook
Investment Market Investors: More Cautious on Pricing Real Yield Gap1 Yield Gap: Central London Prime vs Secondary2 15.0% 15.0% Yield Gap (RHS) Yield gap (RHS) Prime Yields Secondary yields 4.8 10yr Real Gilt yield 10.0% West End offices avg prime EY 9.0 3.8 5.0% 5.0% 7.0 5.0 2.8 0.0% 1994 1998 2002
Slide 14: Disposals & Acquisitions
Agenda Introduction Toby Courtauld, Chief Executive Financial Results Nick Sanderson, Finance Director Market Toby Courtauld, Chief Executive Disposals & Acquisitions Asset Management Neil Thompson, Portfolio Director Development Outlook Toby Courtauld, Chief Executive 26 Disposals & Acquisitions Si
Slide 15: Investing in Organic Growth
Investing in Organic Growth Portfolio Returns greater than Market Returns Phase 1: Phase 2: Phase 3: Acquisition Execution De-risk 400.0 Forecast Delivering developments 300.0 - £513m capex – committed and near term - Committed: 55% pre-let / pre-sold 200.0 100.0 Crystallising surpluses - c.£215m fo
Slide 16: Asset Management
Asset Management Summary 6 months to September 2015 Reversionary Profile1 ˗ Exceptional leasing period - 29 new leases 77% ˗ £20.8m new rent1; 6.5% above March 2015 ERV2 30% ˗ 129 lease events (12 months to September 15) 20% ˗ 94.5% tenant retained / re-let / refurbishment3 27% 27% 10% 23% ˗ 3.6% in
Slide 17: Development Overview
Agenda Introduction Toby Courtauld, Chief Executive Financial Results Nick Sanderson, Finance Director Market Toby Courtauld, Chief Executive Disposals & Acquisitions Asset Management Neil Thompson, Portfolio Director Development Update Outlook Toby Courtauld, Chief Executive 32 Development Overview
Slide 18: Development Committed
Development Committed projects increased ERV1 Income / GDV pre- New let / building Cost to forward Anticipated area complete Office avg sold % let / Profit on Finish sq ft £m £m £psf £m sold2 cost3 Rathbone Square, W1 Mar 2017 - Commercial 267,000 211.5 19.5 74.45 17.0 87% 25% Jun 2017 - Residential
Slide 19: Committed: Broadwick St; 73/89 Oxford St
Committed 30 Broadwick St, W1 Project Update – Only new building in Soho in 2016 – 92,300 sq ft – Anticipated completion Q3 2016 – Exceptional letting prospects – Tenant approaches – Marketing Q1 2016 GPE profit on cost 34.4% – West End Grade A vacancy ! Ungeared IRR 18.8% – Avg. ERV £82.85 psf Yiel
Slide 20: Committed W1 Projects; 148 Old St
Committed W1 Projects Tasman House, Wells St, W1 84 / 86 Great Portland St, W1 – Demolition started – 23,100 sq ft mixed use – 37,300 sq ft mixed use – Office / residential – Office / restaurant – Anticipated completion – Anticipated completion Nov 2016 Oct 2017 – Avg. office ERV – Avg. office ERV £
Slide 21: Development Near Term and Pipeline
Development Near Term and Pipeline New build area Planning Status Earliest Start Ownership (sq ft) Committed (9 projects) 853,200 Near Term Oxford House, 76 Oxford Street, W1 Application 2015 90,500 2017 100% Hanover Square, W1 Consented 223,600 2017 GHS Near Term Total 314,100 Pipeline 40/48 Broadw
Slide 22: Pipeline; Development Outlook
Pipeline New City Court, SE1 – London Bridge Regeneration Area – Substantial area increase – Positive planning discussions – Possible Applications 2016 – Public realm improvements – Best in class development for next cycle 42 Development Outlook … More performance to come – GPE deals creating superb
Slide 23: Opportunity
Agenda Introduction Toby Courtauld, Chief Executive Financial Results Nick Sanderson, Finance Director Market Toby Courtauld, Chief Executive Disposals & Acquisitions Asset Management Neil Thompson, Portfolio Director Development Outlook Toby Courtauld, Chief Executive 44 Opportunity Long term organ
Slide 24: Opportunity; Outlook
Opportunity Strategy: Consistent and clear - Repositioning: rental and capital growth - Central London only: West End bias (79% today) - Recycling in tune with the cycle Delivering the strategy - Execution phase - Leasing at record levels - Strong returns across portfolio Market supporting strategy
Slide 25: Disclaimer
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 26: Balance Sheet; Income Statement
Balance Sheet Proportionally Consolidated for Joint Ventures £m Group JVs Total March 15 Investment property 2,872.4 604.9 3,477.3 3,068.8 Trading property 142.0 - 142.0 115.9 Other assets 28.1 0.4 28.5 29.9 Net debt at book value (666.0) (69.2) (735.2) (731.8) Other liabilities (158.0) (7.9) (165.9
Slide 27: Joint Ventures; Sources of Debt
Joint Ventures Contribution to Group % of net assets held in JV Net assets held in JV1 50 Access to new property Risk sharing Bank work out 45 £275.6m 40 35 £126.6m 30 25 £107.8m 20 £18.1m 15 Total £528.1m 10 As % of 19.2% 5 Group net assets 0 Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 1. Active join
Slide 28: Tenant Delinquencies; EPRA Performance Measures
Tenant Delinquencies Six month periods Number of delinquencies 10 Retail Media Professional Services 8 6 0.27%1 4 0.85%1 0.06%1 0.14%1 0.60%1 2 0.02%1 0.40%1 0.30%1 0 H2 2011/12 H1 2012/13 H2 2012/13 H1 2013/14 H2 2013/14 H1 2014/15 H2 2014/15 H1 2015/16 1. Value of delinquencies as % of Rent Roll (
Slide 29: The Valuation
The Valuation Including share of Joint Ventures Biannual Valuation Movement for Total Portfolio Movement % 11.1 To 30 September 2015 £m 6 months 10.5 North of Oxford St 1,499.6 9.0% 8.9 8.5 Rest of West End 633.4 7.9% Total West End 2,133.0 8.6% Total City, Midtown & 506.4 7.4% Southwark Investment
Slide 30: The Valuation
The Valuation Including share of Joint Ventures Initial yield Equivalent Yield Basis point +/- % % 6 month 12 month North of Oxford Street Offices 3.1% 4.2% -21 -32 Retail 3.4% 3.9% -28 -37 Rest of West End Offices 2.2% 4.2% -14 -30 Retail 2.9% 4.0% -13 -24 Total West End 3.0% 4.1% -20 -32 City, Mid
Slide 31: The Valuation
The Valuation Wholly Owned 6 months to Value Sept 2015 Change 12 months £m £m % % North of Oxford St 1,361.0 114.2 9.2% 17.9% Rest of West End 443.8 28.4 6.8% 19.5% Total West End 1,804.8 142.6 8.6% 18.3% City, Midtown and Southwark 256.4 21.8 9.3% 22.1% Investment portfolio 2,061.2 164.4 8.7% 18.8%
Slide 32: The Valuation; The Cycles So Far
The Valuation1 ERV and Reversionary Potential Average Office Average Reversionary Movement in ERV Rent Passing Office ERV Potential 6 months To 30 September 2015 12 months % £m % £ per sq ft £ per sq ft % North of Oxford St Offices 7.0% 4.6 13.0% 56.50 72.00 26.5% Retail 4.4% 0.9 9.9% 28.3% Rest of
Slide 33: The Cycles So Far
The Cycles So Far Annual Capital Growth & Attribution; Midtown & West End IPD Yield Impact Rental Value Growth Capital Growth 30% 20% 10% 0% -10% -20% -30% -40% -50% Sept 89 Sept 91 Sept 93 Sept 95 Sept 97 Sept 99 Sept 01 Sept 03 Sept 05 Sept 07 Sept 09 Sept 11 Sept 13 Sept 15 Source: MSCI: IPD UK M
Slide 34: History of rental lags to yield moves
History of rental lags to yield moves West End prime yields and rental growth Nominal Rental Value (LHS) Prime Yields £125 £115 6.5% £105 6 qtrs £95 5.5% 2 qtrs £85 7 qtrs £75 4.5% £65 5 qtrs £55 3.5% £45 3 qtrs 4 qtrs £35 £25 2.5% Sep 86 Sep 87 Sep 88 Sep 89 Sep 90 Sep 91 Sep 92 Sep 93 Sep 94 Sep 9
Slide 35: Created Yield Shift
Created Yield Shift GPE EY vs West End prime EY (%) 5.50% GPE Portfolio West End Prime 5.00% 130bp 4.50% 75bp 4.00% 85bp 3.50% GPE Sept 2010 GPE Sept 2014 GPE Sept 2015 7% 27% Completed Completed 25% 3.00% developments developments Completed developments WAULT 5.5 years WAULT 6.8 years WAULT 6.7 yea
Slide 36: Outstanding UK Real Estate Debt
Outstanding UK Real Estate Debt £bn Balance sheet loans CMBS NAMA Insurers / debt funds Private Equity 350 Forecast 300 250 200 150 100 50 0 Source: PMA, BoE, De Montfort, Fitch, NAMA, Company press releases 70 London office pricing indicator 1979 - 2017 PMA Pricing Indicator1 Real total Returns2 St
Slide 37: UK Property Risk Indicator
UK Property Risk Indicator Currently pointing towards a slowdown, not crisis Property Total Returns1 PMA Property Risk Indicator2 25.0 2.0 Low Recession Recession Recession Recession 20.0 Risk 15.0 1.0 10.0 5.0 0.0 0.0 -5.0 -10.0 -1.0 -15.0 -20.0 High Risk -25.0 -2.0 Source: PMA. 1. Property Total R
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 10-year average: 1.5 1.3m sq ft 1.0 0.5 0.0 Q2 2004 Q4 2004 Q2 2005 Q4 2005 Q2 2006 Q4 2006 Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2
Slide 39: 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 Q2 2004 Q2 2004 Source: CBRE Source: CBRE Million sq ft Million sq ft Q4 2004 Q4 2004 Q2 2005 Q2 2005 Q4 2005 Q4 2005 Q2 2006 Q2 2006 Q4 2006 Q4 2006 Q2 2007 Q2 2007 Q4 2007 Q4 2007 Q2 2008 Q2 2008 City Office Under Offer 0.8m sq ft Q4 2008 Q4 2008
Slide 40: Void Rate; Retail Rents to Grow
Void Rate: Ready to Occupy Space % 21.0 City West End 18.0 15.0 12.0 9.0 6.0 3.0 0.0 - 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Q2 2015 Q1 Q2 Q3 2015 Source: CBRE 78 Retail Rents to Grow GPE well placed GPE Portfolio1 Prime London Retail ERV Forecasts (indexed)3 Pri
Slide 41: City and West End Active Requirements
City Active Requirements >10,000 sq ft Change May Nov May Nov May Nov May Nov May Nov 12 1st 6 2nd 6 000 sq ft 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 months months months Professional Services 1,549 1,620 1,073 1,073 838 838 945 841 904 698 -17% 7% -23% Financial Services 1,447 955 1,139
Slide 42: Equity Demand and Supply
Equity Demand and Supply Central London Investment & Development Property Equity Demand1 Asset Supply2 6 12 month month May Nov May Nov May Nov May Nov May Nov May Nov % % £bn 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 May 14 Nov 14 May 15 Nov 15 change change City £0.7bn £1.8bn £1.
Slide 43: National Savings; GPE Portfolio Mix
National Savings as Share of GDP 40% Advanced economies Emerging market economies 35% 30% 25% 20% 15% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: IMF 84 GPE Portfolio Mix1 At 30 September 2015 By Type (By value £m) By Location (By value £m)
Slide 44: GPE Tenants; Asset Management
GPE Tenants1 By Sector 30 Sept 2005 30 Sept 2010 30 Sept 2015 Government Government Government 4% 4% 1% Professional Professional Services Services Professional 9% TMT 19% TMT Services 25% 25% 23% Financial TMT Services 30% 21% Financial Financial Services Services 17% 12% Corporates Retailers & 11%
Slide 45: Asset Management: Tenant Retention
Asset Management Tenant retention, 12 months to September 20151 Area (000 sq ft) 500 450 492 44% 400 350 300 250 28% 200 150 100 22% 50 6% 0 Expiries & Breaks Refurbishment / Development Retained Relet / Under offer Remaining 1. Joint Ventures at 100% 88 Asset Management Expiry profile1 % by total r
Slide 46: Asset Management: Void Rate; Reversion
Asset Management Void rate, % by rental value1 % by rental value 35.0 Investment Portfolio Development / refurbishment Pre-Let 30.0 3.6 25.0 10.8 4.8 5.2 14.7 10.0 20.0 3.0 7.9 15.0 24.4 8.2 22.3 17.6 19.0 16.0 10.0 3.1 11.0 10.0 10.7 13.4 12.5 8.4 8.8 1.7 6.4 5.0 7.9 6.3 2.9 3.7 3.7 3.2 3.3 4.4 3.7
Slide 47: Development Capex
Development Capex1 Committed and near term projects Committed projects Near term projects New New building Capex Capex Total building Capex to area to date to come Capex area come sq ft £m £m £m sq ft £m Rathbone Square, W1 418,700 78.4 211.5 289.9 Hanover Square, W13 223,600 121.9 30 Broadwick St,
Slide 48: Delivering the Developments; Our Integrated Team
Delivering the Developments Managing Construction Costs: Inflation Average Construction Inflation1 130 Forecast 33 Margaret St Walmar House New Fetter Lane 24 Britton St 240 Blackfriars Rd 30 Broadwick St 120 95 Wigmore St City Tower 48 Broadwick St Rathbone Place 73/89 Oxford St 110 84/86 Great Por
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