Great Portland Virtually Eliminates Debt

Great Portland Estates (GPOR) provided a classic example of what an exceptionally well-managed company can achieve in a lackluster market. Despite uncertainty in the London office market, rent rose 7% in the year to March 2018, and supply in the West End remained tight, with the £136.9 million drop Brexit-induced sterling the previous year in the valuation of the portfolio was replaced by an increase of £35.5 million.

As managing director Toby Courtauld has pointed out: “As the London investment market remains competitive, we have no need to buy, preferring the relative returns offered to investing in our portfolio.” However, that hasn’t stopped the company from unlocking some of the value within the portfolio through divestitures, which totaled £329m at a 5.4% premium to book value. which resulted in a reduction of net debt from £576.8 million to £67.5 million, all of which was contained in joint ventures.

Rental income should grow as the reversion element crystallizes as rents renew. There were 34 rent reviews during the year, and these were secured on average with a premium of 29.6% over previous rents and 3.2% ahead of the estimated rental value .

Peel Hunt analysts forecast an adjusted net asset value at the end of March 2019 of 841.2p, down from 845p in 2018.

GREAT PROPERTIES OF PORTLAND (GPOR)
ORDER PRICE: 669.2p MARKET VALUE: £1.89 billion
TOUCH: 668.1-669.3p TOP OF 12 MONTHS: 709p LOW: 580p
DIVIDEND YIELD: 1.7% TRADING ACTIONS: £19.5m
REDUCTION TO NAV: 20%
INVESTING PROPERTIES: £2.73 billion* NET DEBT: 3%
Year as of March 31 Revalued net assets (p) Profit before tax (£m) Earnings per share (p) Dividend per share (p)
2014 564 422 123 8.8
2015 695 507 148 9
2016 847 555 163 9.2
2017 796 -140 -40.8 10.1
2018 840 76.7 21.5 11.3**
% cash +6 +12
ex div May 31st
Payment: 09 Jul
*Including joint ventures **Excluding exceptional dividend of 32.15pa per share

Carol M. Barragan