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Helical gets shot in arm from TikTok deal

The office landlord signed new leases ahead of estimated rental values
Helical gets shot in arm from TikTok deal
  • The leasing of Kaleidoscope to TikTok propelled the portfolio valuation higher
  • Four asset disposals have reduced gearing and boosted acquisition firepower

Helical’s (HLCL) office portfolio received a major post-pandemic credibility boost last year. The March letting of the whole of the Kaleidoscope building in Farringdon to TikTok at a 5.4 per cent premium to the March 2020 estimated rental value (ERV) drove a 3.4 per cent like-for-like increase in the value of the portfolio. 

The technology group is now Helical’s top tenant, accounting for just over 20 per cent of the contracted rent roll. New lettings picked up across the board, with the commercial landlord signing 11 new leases at an average 5.5 per cent above March 2021 ERVs. That offset rent lost on sales, lease breaks and expiries, resulting in a £0.2m increase in contracted rent. 

The task now is replenishing the development pipeline; one made easier by the firepower afforded by a portfolio loan-to-value ratio that stands at just over 22 per cent. Chief executive Gerald Kaye said the group is assessing a number of opportunities. New projects will focus on sustainable and energy-efficient buildings, which also have enhanced amenities such as secure bike parking. It already has form on that score: six of the group’s nine buildings are BREEAM rated excellent or outstanding. “There’ll be a green premium in terms of rents and yield,” Kaye said. 

Peel Hunt upgraded its March 2022 net tangible assets forecast by 10 per cent to 552p a share, up from the 533p reported at the 2021 financial year-end. That leaves the shares trading at a 22 per cent discount to forecast net tangible assets, a valuation that seems too harsh when set against a substantial outperformance of the MSCI Central London Offices Total Return Index. Buy. 

Last IC view: Buy, 310p, 13 Aug 2020

HELICAL (HLCL)    
ORD PRICE:429pMARKET VALUE:£520m
TOUCH:420.5-432p12-MONTH HIGH:455pLOW: 240p
DIVIDEND YIELD:2.4%TRADING PROP:nil
DISCOUNT TO NAV:14%  
INVESTMENT PROP:£820m*NET DEBT:31%
Year to 31 MarNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201744241.634.08.6
201845030.822.39.5
201947543.535.810.1
202049943.032.38.7
202150120.514.810.1
% change+0.4-52-54+16
Ex-div: 24 Jun   
Payment: 26 Jul   
*Includes investments in joint ventures