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Great Portland still banks on capital gains

The West End landlord retains its appeal for international capital
November 19, 2021
  • Portfolio value edges up 2 per cent in six months
  • Flexible lets offer filip to rental income

It’s the job of chief executives to be bullish. Fortunately for Toby Courtauld, the boss of West End landlord Great Portland Estates (GPOR), he can always point to one intangible asset par excellence: London’s long history of unceasing reinvention.

The latest signs suggest optimism in the capital’s post-pandemic life holds weight. In the six months to September, an independent valuer marked up the group’s property portfolio by 2 per cent, as rampant demand and leasing activity in the office estate combined with better-than-expected gains in the development portfolio to offset a 0.8 per cent decline in retail values.

Nor is a positive view confined to those who depend on London’s success. Ahead of half-year results, Courtauld and chief financial officer Nick Sanderson met with a large Singaporean fund with investments around the world. Asked what they thought of London, they told the pair “they love it”, according to Sanderson, and had pointed to the quality of the capital’s culture and economic diversity. Crossrail’s imminent arrival, slap bang in Great Portland’s yard, is another plus.

Although yields of between 4.4 and 5.2 per cent might look keen on the ground, valuations are still seen as cheap in a world of highly priced assets. Such context helps explain why £40bn of global capital is apparently waiting to be deployed in London real estate.

Consensus forecasts are for tangible net assets to edge up to 808p per share by March 2023. One potential upside to earnings and the dividend could come from further flexible office lets at healthy premia to estimated rental values. But tempted investors should watch for Christmas retail trends before diving in. Hold.

Last IC View: Hold, 711p, 11 Nov 2020

GREAT PORTLAND ESTATES (GPOR)  
ORD PRICE:747pMARKET VALUE:£1.9bn
TOUCH:746-748p12-MONTH HIGH:811pLOW: 607p
DIVIDEND YIELD:2.3%TRADING PROP:nil
DISCOUNT TO NAV:6.2%NET DEBT:24%
INVESTMENT PROPERTIES:£2.5bn*   
Half-year to 30 SepNet asset value** (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2020800-155-61.24.70
202179662.324.64.70
% change-1---
Ex-div: 02 Dec   
Payment: 05 Jan   
*Including joint ventures. **Diluted NAV.