Hat-trick
After British Land and Land Securities, today it’s the turn of Great Portland Estates. Just in case anyone was still unclear on this: the prospect of a shortage of prime office space in London in the next few years is driving large REITs to reconsider previously postponed developments across the City and West End, and to step up the pace of their development pipelines.
Great Portland’s chief executive Toby Courtauld, reporting an above-forecast rise of 15.5% in adjusted NAV to 283p per share, spelt it out: “For the recent rise in capital values to be sustainable, further growth in rental values is important and, helpfully, conditions are improving at the prime end of the London office leasing market.”
Courtauld added that there were also signs of recovery across the broader market for office space to let and said he expected – in the absence of an “economic setback” – office rents to rise selectively in the second half of 2010.
The group has a large near-term development pipeline of nine projects totalling 1.6m sq ft, which can all be on site by the end of 2011. It also announced a new joint venture today with Starwood that will own the long leasehold on City Tower on Basinghall Street in the City for £35m together with that on the adjacent City Place House, which Great Portland has just bought for £94m. Together the buildings, on a 1.3-acre site, provide 310,000 sq ft of flexible office space. The venture is considering options for the properties ranging from short-term asset management to a comprehensive redevelopment.
