Commercial property price growth is back, but not as we know it. Great Portland, the London west-end focused real estate investment trust, saw a 2.8 per cent pick up in the value of its buildings in its second quarter, lifting underlying net asset value (NAV) by 4.2 per cent. But at the same time market rents fell. However, until rents start heading back up, which Great Portland's management does not expect to happen until the second half of 2010, the company thinks that recent price rises - which are based on restricted supply - are unsustainable. Underlying NAV fell by 8.2 per cent to 225p over the first half, reflecting a 5.1 per cent valuation fall in the first quarter.
Despite the limited number of properties on the market, Great Portland has invested and committed capital of £140m since its year end and is in negotiations to spend another £48m. A £166m rights issue in June left the group with over £500m-worth of fire-power for acquisitions. Great Portland's reputation as a canny property buyer and manager was underlined by a reduction in the amount of empty space in its buildings, with void levels falling from 7.8 per cent to 5.8 per cent during the half year. This came despite a rise in office vacancy rates in the west end from 9.2 per cent to 10.2 per cent.
Broker Evolution Securities forecasts a year-end NAV of 246p (245p in 2009).
| GREAT PORTLAND ESTATES (GPOR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 283p | MARKET VALUE: | £886m | |
| TOUCH: | 282-283p | 12-MONTH HIGH: | 299p | LOW: 127p |
| DIVIDEND YIELD: | 3.2% | TRADING STOCK: | nil | |
| PREMIUM TO NAV: | 27% | |||
| INVESTMENT PROPERTIES: | £737m | NET DEBT: | 23 | |
| Half-year to 30 Sep | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 367 | -146.2 | -60.5 | 3 |
| 2009 | 223 | -29.8 | -12.2 | 3 |
| % change | -39 | - | - | - |
Ex-div: 18 Nov Payment: 5 Jan | ||||
