Richard Peskin, Chairman of Great Portland Estates plc, stated "Great Portland is well positioned to benefit from the strengthening central London occupational market. Following sales of property since March 2004, totalling some £160.2 million, the portfolio is now 100% located in the capital, with almost 77% in the West End."
"This market is showing the early signs of a supply shortage with a limited pipeline of new developments and initial take-up figures for the second quarter of this year suggesting a strong increase over the first. Consequently, we remain optimistic about the prospects for rental growth.
In the City market, the supply of space is falling, but remains higher than in the West End. Second quarter take-up figures were healthy, slightly better than in the first, and we expect rental growth to return during 2006 for the best quality buildings.
We continue to make good progress on our development programme. At Met Building, which is 43% let by rental value at rents well ahead of our initial expectations, I am pleased to report that we have strong interest in much of the remainder. Redevelopment work is progressing well at all our West End projects and since the year end we have received planning permission for the redevelopment of Knighton House, Mortimer Street, where work is anticipated to begin on an 80,000 sq ft scheme early next year.
We have made a number of interesting acquisitions since the year end with purchases in the West End in Foley Street, and the Liberty Island site in Regent Street and Kingly Street, the latter two in a joint venture with Liverpool Victoria. We intend to maintain our disciplined approach to pricing and, with investment yields still compressing under the weight of capital looking for assets to buy, we expect opportunities to be limited in the short term. We are likely to continue to take advantage of this high demand through sales of property where we see limited angles for further value enhancement.
Indeed, since the year end, we have sold two properties for a total of £24.8 million, generating a surplus of £2.5 million on their March 2005 book values.
Asset management activity continues to drive cashflows across the portfolio. Since the year end, leases have been regeared at 160 Great Portland Street, Bond Street House on New Bond Street, the Liberty Island site on Regent Street, 14 Hanover Square and Ellerman House, Camomile Street, EC2, all of which have helped to maintain the group's void rate, including Met Building, at 6.9%, comparing favourably with the central London market rate as a whole of approximately 12%.
Last year was a busy and successful one for Great Portland, during which we achieved most of our immediate strategic goals and generated attractive returns for shareholders. With a strong balance sheet, a development programme growing both in size and prospects and occupational markets appearing to be well set, we look forward with confidence to building on the real progress we have made in the last couple of years."
Source: Great Portland Estates