Great Portland Estates (LON:GPE) said it delivered a year of record leasing, rising earnings and higher asset values, while management emphasized that the central London landlord has flexibility to keep investing, sell assets or return capital to shareholders depending on market conditions.
Chief Executive Toby Courtauld told investors the year had been “all about us executing on our growth strategy,” pointing to record leasing, acquisitions made at discounts, asset sales at a premium and continued development of prime central London office space. He said the company remains focused entirely on prime central London, where demand for high-quality office space continues to outstrip supply.
“Absent a macro-driven downturn, we are well set to deliver both strong income and value growth across our portfolio,” Courtauld said, adding that the company expects to deliver “accretive total accounting returns.”
Record leasing drives earnings growth
Great Portland Estates reported record leasing of £70.9 million for the year, 10.3% ahead of estimated rental value, or ERV. Courtauld said the fourth quarter was the strongest, with lettings 15.8% ahead of ERV, and that the company had maintained last year’s run rate into the first quarter of the new financial year.
The company said its rent roll rose 46%, while rental values increased 5.8%, led by prime offices, which were up more than 7%. Vacancy was better than forecast, and retention in its fully managed space was 64%. Courtauld said AI-led customers now account for about 27% of fully managed customers.
New Chief Financial Officer Jayne Cottam, presenting her first results for the company, said earnings per share rose 63% to £0.085, ahead of consensus. She attributed the increase partly to the record leasing year and growth in fully managed space, including the leasing of 100% of Wardour Street within two months of completion, as well as the full-year benefit from Alfred Place and 6 St. Andrew Street.
The dividend rose 4% to £0.082 per share and was fully covered, Cottam said. EPRA net tangible assets increased 6.1% to £5.24 per share, also ahead of consensus.
Portfolio values rise as prime offices outperform
Cottam said the company’s portfolio recorded like-for-like valuation growth of 4.3%, while ERV increased 5.8%. Offices, which account for 87% of the portfolio, delivered the strongest valuation and ERV growth, while retail assets, representing 13% of the portfolio, performed less strongly.
Development assets saw the sharpest valuation increase, rising 22.2%, including an £82 million development surplus captured within valuations. Fully managed assets rose 4.4%, while the stabilized portfolio increased 3.6%.
Cottam said 73% of the portfolio has an EPC rating of A or B and that those assets recorded valuation growth of 6.4%. She added that assets outside that category are being repositioned and are expected ultimately to achieve A or B ratings. The company’s West End assets, which represent 66% of the portfolio, saw valuation growth of 6%.
Great Portland Estates’ loan-to-value ratio fell to 28.6% from 30.8%, helped by £490 million of sales, including 1 Newman Street and Wells Mews. Liquidity increased by £36 million to £412 million. Cottam said Moody’s reaffirmed the company’s Baa2 investment-grade rating, and the group has no refinancing needs until October 2028 after arranging a new £525 million ESG-linked revolving credit facility and extending an existing £150 million facility.
Management highlights income growth potential
Cottam said the rent roll now stands at £153 million and, excluding sales, is expected to rise by about £42 million over the next 12 months. She said leasing of vacancy and capturing reversion should add about £16 million, while development and refurbishment activity should add £26 million.
Looking further ahead, Cottam said the potential rent roll could almost double to £299 million with the completion of on-site developments including The Delft and Whittington House and assuming 10% rental growth. However, she noted that expected medium-term sales of £1.2 billion would reduce rent roll by about £60 million.
The company is targeting EPRA EPS of about £0.10 over the next 12 months, representing 20% growth. Cottam said the company remains “well on our way to tripling our earnings from April 2025,” though she cautioned that the path may not be linear.
Fully managed space is becoming a larger contributor to the business. Cottam said net operating income from fully managed space has grown from £9 million to £28 million over two years, ahead of the company’s target timeframe, and could more than double to £58 million over the medium term. She said the company’s ambition is to reach £100 million of fully managed NOI after future acquisitions of around 375,000 square feet.
Sales program and development pipeline remain central
Courtauld said the company has transitioned from a net buyer to a net seller, consistent with its capital allocation model. Since its 2024 rights issue, Great Portland Estates has completed six acquisitions in the West End for £231 million, or £756 per square foot, at an average discount to replacement cost of more than 60%. Including capital expenditure, the total investment is just under £500 million.
The company also completed four disposals for £516 million at about £1,200 per square foot, more than twice the price of its acquisitions and at an aggregate 2% premium to book value. Courtauld said additional disposals are expected, including about £200 million in the near term and more than £1 billion over the medium term.
On developments, Courtauld highlighted three on-site HQ schemes. Duke Street, St James’s is now 100% pre-let ahead of completion in the autumn, with a projected profit on cost of 37% and an ungeared internal rate of return above 30%. At The Delft in Southwark, the company pre-let 40% to data analytics company Quantexa in January. Whittington House recently started a major refurbishment, and Courtauld said there is already leasing interest.
Market outlook supported by supply shortage
Courtauld said leasing conditions in the company’s core markets remain supportive because demand is materially outstripping supply. He cited expected growth of 170,000 London office jobs by 2030 and said active demand is up 13% over the last 12 months, about 40% above the long-run average.
The vacancy rate for Grade A space in the core market is “virtually 0,” Courtauld said, including 0.3% in the West End. He said the company is maintaining guidance for office rental value growth of 4% to 7% this year, with prime space expected to outperform secondary space.
In the question-and-answer session, Courtauld said recent rent reviews included a “just short 50%” increase for a financial services tenant at Hanover Square. Simon Rowley, director of office leasing and flex, said the company is not seeing incentives move outward and instead expects some compression, with incentives currently typically around 12 months per five-year term certain.
Courtauld said the company expects to remain a net seller this year and will decide whether proceeds are best used for pipeline investment, acquisitions or returns to shareholders. “Look out for potentially returns to shareholders as the year progresses,” he said.
About Great Portland Estates (LON:GPE)
GPE is a FTSE 250 real estate investor and developer. GPE aims to deliver superior returns by unlocking the often hidden potential in commercial real estate in central London, creating high quality sustainable spaces for its customers and long-term value for its stakeholders.
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