Great Portland Estates' surprise 8-for-11 rights issue will fund a property bargain hunt for 'fundamentally cheap assets' in its central London heartland, where commercial property values have fallen 42 per cent since their 2007 peak.
The fully underwritten issue, priced at 133p, will raise £166m after expenses. Combined with existing cash, undrawn banking facilities and an equity injection from the BP pension fund, Great Portland will have up to £640m of fire power to expand its portfolio.
The announcement was released in tandem with full-year results, which illustrate today's tough market conditions. The value of Great Portland's portfolio has fallen by 28 per cent in a year and net asset value (NAV) has nearly halved, driven down by steep falls in rents, which have slumped 16.7 per cent since the .
The portfolio's void rate has jumped to 7.8 per cent due to expiring leases at properties where redevelopment has been delayed, but new lettings, lease renewals and rent reviews added £10.3m to rental income, which fell 5 per cent to £42.4m in the 12-month period.
Management does not anticipate any economic upturn until the second half of 2010, meaning that rents have further to fall, but believes that property values will start to recover before occupational markets.
Broker KBC Peel Hunt forecasts adjusted 2010 NAV of 188p, allowing for dilution from the rights issue.
| GREAT PORTLAND (GPOR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 307p | MARKET VALUE: | £556m | |
| TOUCH: | 308-309p | 12M HIGH | 460p | LOW: 172p |
| DIVIDEND YIELD: | 4% | DEV PROPERTIES: | £24.2m | |
| DISCOUNT TO NAV: | 2% | |||
| INVEST PROPERTIES: | £780m | NET DEBT: | 70% | |
| Year to 31 Mar | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 317 | 83 | 39 | 10.8 |
| 2006 | 401 | 188 | 92 | 11.0 |
| 2007 | 594 | 326 | 236 | 11.3 |
| 2008 | 580 | -3 | -2 | 11.9 |
| 2009 | 314 | -436 | -241 | 12.0 |
| % change | -46 | - | - | +1 |
Ex-div: 27 May Payment: 14 Jul | ||||
