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Great Portland's valuations groan

The London commercial landlord has suffered from political uncertainty and economic weakness
May 24, 2019

Ongoing uncertainty and anaemic economic growth weighed on returns for Great Portland Estates (GPOR), with the London office landlord reporting a portfolio valuation increase of just 0.2 per cent for the year after a decline of 0.4 per cent during the second half. That was compounded by a 6.4 per cent reduction in valuations for short-leasehold properties – which account for a fifth of the portfolio – as investor demand for these types of assets declined. That also contributed to a total property return of 3.5 per cent, underperforming the 4.5 per cent reported by the Central London MSCI benchmark.  

IC TIP: Hold at 731.6p

Great Portland was a net seller of investments for the sixth consecutive year, which weighed on adjusted net asset value (NAV) growth of 8p, or 1 per cent. A share buyback flattered, effectively adding 5p to that uplift. Management disposed of £349m in assets, at a 0.7 per cent discount to March 2018 estimated rental values. However, the rent roll increased 6.2 per cent, with potential to increase to £152m, after 78 new lettings were agreed 6.9 per cent above March 2018 estimated rental values.

Analysts at Berenberg expect adjusted NAV of 767p a share at the March 2020 year-end, down on 845p a year earlier.

GREAT PORTLAND ESTATES (GPOR)   
ORD PRICE:731.6pMARKET VALUE:£ 1.98bn
TOUCH:731.2-731.6p12-MONTH HIGH:778pLOW: 649p
DIVIDEND YIELD:1.7%TRADING PROP:£5.6m
DISCOUNT TO NAV:14%  
INVESTMENT PROP:£2.54bn*NET DEBT:7%
Year to 31 MarNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20156955071489.0
20168475551639.2
2017796-140-40.810.1
2018**84076.721.511.3
201985156.117.912.2
% change+1-27-17+8
Ex-div: 30 May   
Payment: 8 Jul   
*Includes joint ventures **Excludes special dividend of 32.15p a share