Great Portland's £125m cash call
Great Portland Estates, the London office developer, will this week launch a surprise rights issue to raise about £125m.
Battle hardened: Toby Courtauld is keen to build up his war chest.
Chief executive Toby Courtauld is keen to build a war chest for acquisitions as opportunities begin to emerge in its core London market.
GPE has one of the most conservative balance sheets in the sector. It is not under pressure to raise funds and has debts of only £375m, none of which are repayable until 2012.
But while Courtauld is keen to acquire well-located investment property, let to strong occupiers on long leases, he is likely to remain downbeat about prospects for the commercial property sector in general.
The company is expected to announce its fund raising on Tuesday, alongside results that will also show that GPE's loan-to-value ratio is less than 40%, lower than most rival firms that have already completed rights issues.
While the company is expected to reveal a 43% decline in the value of its property assets in the year to March 2009, analysts are forecasting underlying profits of about £21.5m compared with £23.8m a year ago. GPE, which specialises in buying buildings, refurbishing them and then letting them at higher rents, has halted its development programme. It has no plans to restart any building work in the short term.
Its decision to halt developments has led to an increase in the number of empty properties, as leases expire at buildings due for a makeover.
Despite this, Courtauld insisted in January that the company could weather the recession because its West End properties are let at 'defensively low' average office rents of £40.10 per square foot.
In a fillip to the company, GPE let 60,887 square feet of West End office space to High Street clothing retailer New Look in February. But the deal included a 15-month rent-free period and GPE is paying the retailer £2.5m as a cash incentive over the first six months of the lease.
New Look signed a 15-year lease on the space, located in GPE's Wells & More development in the West End. It will pay £2.58m a year in rent.
In March, Richard Peskin, GPE's long-serving chairman, stepped down to join Internos Real Investors as a capital partner.
The real estate management firm was set up in 2007. Peskin, who had been chairman of GPE for 42 years, was replaced by Martin Scicluna.
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