London office developer Great Portland Estates is not likely to secure a major letting to kickstart its planned 100 Bishopsgate skyscraper in the UK capital’s financial district for at least six months, its chief executive said.
The company has a half share alongside Canadian developer Brookfield in the proposed skyscraper in the City financial district, a property market that has fared badly due to the economic difficulties facing the financial sector.
‘It will be a tall order in the near term,’ ChiefExecutive Toby Courtauld said of securing a tenant for 100 Bishopsgate. ‘By near term I mean in the next six to twelve months.’
Great Portland was also planning to sell down its stake in the scheme, a move that was not necessarily reliant on securing a pre-let first and that could serve to lift the value of the scheme, Courtauld said.
‘It (a stake sale) doesn’t have to follow a pre-let. If the right opportunity came along for us to take some money out and put it elsewhere we would do that.’
Great Portland’s adjusted NAV rose to 378 pence a share at end-September, up 20 percent from 316 pence a year ago. The value of its portfolio has risen 3.9 percent to 1.8 billion pounds ($2.8 billion) since March, it said in a statement.
The rises in NAV and portfolio value followed resilience in London’s West End property market for the six months to end of September, and came in spite of a worsening economic backdrop.
The West End property market had benefited from ‘an excess of demand for assets over supply, and a vacancy rate of around 1 percent for West End Grade A office space,’ Courtauld said in a statement.
The company’s 12-month total property return of 17.3 percent beat the benchmark Investment Property Databank central London index figure of 16.1 percent.
Alongside rival Derwent London, Great Portland had benefited during the financial crisis from the more diverse range of tenants and smaller office sizes in the West End.
The district would continue to outperform the rest of the UK but was not ‘euro zone proof’, Courtauld said. ‘There will be a slowdown in the rate of growth and we will maintain low gearing,’ he told Reuters.
‘We also have the financial flexibility to buy assets at the right price in distressed sales,’ he said.
Analysts at JPMorgan and Jefferies said the results were in line with expectations and the company’s strong balance sheet put it in a strong position.
‘Given this environment, Great Portland looks positioned for a win-win situation,’ said JPMorgan analyst Osmaan Malik.
At 0955 GMT, shares in Great Portland were down 0.2 percent at 369 pence, against a 0.5 percent rise in the broader index of UK property stocks.
Great Portland also sold a portfolio of six assets close to the London bridge train station for 27 million pounds to Hermes Real Estate Investment Management, reflecting a net initial yield of 5.2 percent.
A joint venture deal between the developer and bank HSH Nordbank to revamp and sell an office block in receivership in the City financial zone collapsed due to the economic uncertainty created by the euro zone sovereign debt crisis this summer, sources told Reuters