GPE to raise £350m to invest in London’s ‘attractive’ commercial property market
One of the capital’s biggest landlords, GPE has launched a rights issue to raise approximately £350m to invest in new properties across London.
The rights issue announcement came alongside the company’s full-year results and the announcement that it has swapped a property with the City of London Corporation.
The firm announced the launch of a fully underwritten three-for-five rights issue to raise gross proceeds of approximately £350m – £336m net of expenses – through the issue of 152m new Shares at a price of 230 pence each.
A Rights Issue is where existing shareholders are given the opportunity to buy a set number of new shares in the company they own.
GPE added: “Higher interest rates have disrupted the commercial property investment market, creating significant near-to medium-term acquisition opportunities in central London with values approaching their trough and assets trading broadly in line with 2009 real capital value levels”.
The fundraising comes as demand for the group’s office spaces across London has continued to return to pre-pandemic levels.
Moreover, the London office market has become more competitive due to a shortfall in high-quality office space.
After the pandemic, tenants have become increasingly picky and tend to favour best-in-class buildings with less space due to work-from-home practices.
GPE intends to use £168m of the proceeds from the Rights Issue to commit to capex for its Soho Square Estate and a new development, The Courtyard.
This will take total capex on committed GPE schemes from £498m to £666m.
The Courtyard is a new deal, acquired via a property swap with the City of London Corporation. GPE swapped its interest in 95/96 New Bond Street, W1 for £18.2m while simultaneously acquiring the long leasehold interest at The Courtyard, 1/3 Alfred Place, WC1 for £28.6m.
GPE will seek to deploy the remainder of the proceeds in new acquisitions over the next 12-18 months, subject to market conditions.
Analysts at Barclays said: “GPE raising equity to fund its developments is a strong signal given to the market that the London office market might have found a trough in values and opportunities to acquire and create value (which is their business model) are emerging, as the company has become a net buyer for the first time since 2013.”
Separately, GPE announced its final year results for the year ending March.
The company signed £22.5m worth of leases, which were booked at 9.1 per cent above last year’s estimated rental value (ERV).
The company reported an overall vacancy rate of 1.3 per cent. The value of its portfolio dropped 12.1 per cent in the year to £2.3bn.
Toby Courtauld, chief executive of GPE, said: “We are pleased to report on another year of strong operational performance.
“Our appealing blend of best in class HQ offices and Fully Managed Flex spaces, all in central London’s undersupplied markets, is proving attractive to customers, enabling us to beat the valuer’s ERV estimates by 9.1 per cent on all signed leases, the highest margin since 2012, and by 11.1 per cent across our office lettings.
He added: “Today, our portfolio is effectively full and, having delivered ERV growth towards the top end of last year’s guidance, we have upgraded our forecast for this year to five per cent to 10 per cent for our prime offices.”