On the back of solid interim results Great Portland Estates (GPE) has said it is looking to raise significant funding to enable it to make further acquisitions in London's West End.
The property company plans to raise around £140m via a proposed placing of up to 31.25m shares. A spokesperson was coy about the proposed issue price as the book has not yet been built, but it is likely to be at a discount to yesterday's closing price of 459.3p, given the dilutive effect of the placing (9.99% of the current issued share capital).
The funds will be used to top up a war chest of £400m in cash and undrawn credit facilities that will be used to buy property in central London.
Start your trial of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
It is already in detailed discussions about three such property purchases costing about £110m, and a further three are in detailed analysis.
Latest Videos FromMoneyWeek
Interim resultsFor the six months ended September 30th, GPE delivered a total property return of 12.8%, outperforming IPD's central London benchmark of 9.6%, driven by a capital return of 9.6% against 5.1% for the IPD central London.
The IPD (Investment Property Databank) provides benchmarking and portfolio analysis services across the globe.
Rental values grew 2% (2.4% West End offices, 2.7% West End retail), with an acceleration in the second quarter (1.1% versus 0.9% in the first quarter).
Net asset value per share was up 5.2% to 424p.
After a revaluation surplus, reported profit before tax was £76.7m (2011: £79.1m), with the interim dividend per share increased 3.1% to 3.3p.
Including non-recourse debt in the joint ventures, total net debt was £814.6m (March 31st 2012: £686.9m) equivalent to a loan to value ratio of 37.7% at September 30th 2012 (March 31st 2012: 34.2%).
Toby Courtauld, Chief Executive, said: "We are pleased to report a strong start to this financial year, and another period of outperformance of the London commercial property market; we have delivered material surpluses from our development programme, further attractive acquisitions in the West End, profitable disposals and numerous lettings ahead of market rates.
"Conditions in our central London market remain supportive. Although the rate of leasing was below the long run average around the time of the Olympics, we are witnessing a solid pick-up in demand from prospective occupiers, particularly in the West End.
"We maintain our confident outlook; our portfolio, 100% in central London, is rich with asset management and development opportunity and is well positioned for further growth; our conservative gearing and low cost firepower, expected to be supplemented by the placing announced this morning, will enable us to deliver on our existing growth plans and exploit new opportunities as we find them."
CM
