Great Portland Estates plc · LSE:GPE
Great Portland Estates — Investor Day (April 2022)
79 slides from Great Portland Estates's investor day presentation, Apr 6, 2022
Slide 1: Customer first. Capital Markets Event 2022
We unlock potential, creating sustainable space for London to thrive Customer first. Capital Markets Event 2022
Slide 2: Agenda
Customer first Agenda Customer needs evolving, Toby Courtauld, Chief Executive GPE responding Our portfolio is well suited Dan Nicholson, Executive Director Our Flex proposition Steven Mew, Customer Experience & Flex Director Leasing strategy & success Simon Rowley, Director of Office Leasing & Flex
Slide 3: London: A Dominant World City
London: A Dominant World City Recovery Building Positive Economic Prospects: Employment Growth • Annualised GVA 22-251: London +3.1% (UK: +2.6%) • PMI business activity indices >50; ahead of wider UK 65 London Jobs2 • Healthy London office employment growth But, uncertainty: • Elevated inflation 50
Slide 4: Customer Needs Evolving, GPE Responding
Customer Needs Evolving GPE Responding Strategy: Evolving Cycle Read is Key2 100% central London West End focus (70%2) Acquisitions less sales Capex MSCI Central London… Reposition properties Low rents (£62.50 psf) £m 250 200 Match risk to cycle Net investor Low financial leverage 16.7%2 LTV 175 0 D
Slide 5: Customer first.
Customer first. Quality Flexibility Sustainability Service Health & Wellbeing Technology Social Impact 5
Slide 6: Customer first: customers demand the best
Customer first. Quality Flexibility Sustainability Service Health & Wellbeing Technology Social Impact customers demand the best 6
Slide 7: Customer first: choice is valuable
Customer first. Quality Flexibility Sustainability Service Health & Wellbeing Technology Social Impact choice is valuable 7
Slide 8: Customer first: sustainable spaces
Customer first. Quality Flexibility Sustainability Service Health & Wellbeing Technology sustainable spaces: Social Impact positive brand influence, attracts talent 8
Slide 9: Customer first: enhancing customer experience
Customer first. Quality Flexibility Sustainability Service Health & Wellbeing Technology enhancing Social Impact customer experience 9
Slide 10: Customer first: inclusive and accessible
Customer first. Quality Flexibility Sustainability Service Health & Wellbeing Technology inclusive Social Impact and accessible: a differentiator 10
Slide 11: Customer first: enabling user experience
Customer first. Quality Flexibility Sustainability Service Health & Wellbeing Technology enabling user experience; Social Impact future-proofing for tomorrow’s working patterns 11
Slide 12: Customer first: lasting positive impact
Customer first. Quality Flexibility Sustainability Service Health & Wellbeing Technology creating a lasting, Social Impact positive impact in our communities 12
Slide 13: Customer first: a real differentiator
Customer first. Quality Flexibility Sustainability Service Health & Wellbeing … a real Technology differentiator Social Impact Better customer outcomes… …better returns 13
Slide 14: Two Complementary, Overlapping Business Streams
Customer first. Two Complementary, Overlapping Business Streams HQ Flex Repositioning £1.1bn potential Targeting near-term 600k sq ft commitment organic growth Four core office products Previous Flex Cat A Cat A Flex Flex+ Flex+ Partnerships Partnerships Rebranded Fully Flex Ready to Fit Fitted Mana
Slide 15: Agenda
Agenda Customer needs evolving, Toby Courtauld, Chief Executive GPE responding Our portfolio is well suited Dan Nicholson, Executive Director Our Flex proposition Steven Mew, Customer Experience & Flex Director Leasing strategy & success Simon Rowley, Director of Office Leasing & Flex HQ repositioni
Slide 16: Our Portfolio is Well Suited
Our Portfolio is Well Suited Significant Potential to Add Value Portfolio by Asset Class by Value1 Portfolio by Product by Area2 Committed Long-Dated Retail Ready to Fit Development £451m 500k sq ft 1,750k sq ft £116m 5% 18% Development Pipeline Prime £467m 32% 19% 20% 11% Opportunity Assets Active
Slide 17: HQ Repositioning: Feeding Ready to Fit
HQ Repositioning : Feeding Ready to Fit 7 Schemes, Starts from H2 ‘22 Existing Completed Existing Targeting New Build2 Near-Term Medium Term Pipeline Total 420,300 sq ft 916,000 sq ft 200,000 sq ft 400,000 sq ft 1,116,000 sq ft Capex ERV Increase Increase £828m £72m 118% +100% Minerva House, SE1 Pip
Slide 18: Significant Opportunity to Grow Flex
Significant Opportunity to Grow Flex Portfolio by Product by Area Our Portfolio is Well Suited for Flex Today1 • 87% of office spaces < 10,000 sq ft • Clusters of ownership • Facilitates relocation as businesses grow Prime Ready • Aids service provision 32% Retail 20% to Fit • Flexible layouts; capa
Slide 19: Agenda
Agenda Customer needs evolving, Toby Courtauld, Chief Executive GPE responding Our portfolio is well suited Dan Nicholson, Executive Director Our Flex proposition Steven Mew, Customer Experience & Flex Director Leasing strategy & success Simon Rowley, Director of Office Leasing & Flex HQ repositioni
Slide 20: Our Vision for our Flex Offering
Our Vision for our Flex Offering Significant Ambition. The Market is Evolving and We Are Evolving Too Our Flex Vision To create great spaces that are flexible, sustainable and beautifully designed, with the customer at its heart, offering high quality service that delivers an enticing workspace expe
Slide 21: The Flex Market is Growing
The Flex Market is Growing Driven by Demand for Flexibility, Experience and Ease Significant Central London Growth1... ... Set to Continue m sq ft More demand than ever 18 17.0 • 10%-15% forecast annual growth2 • Expected to total 12%-15% of UK office stock 12 by 20262; c.6% today +359% Key drivers
Slide 22: Three Flex Products
Three Flex Products We Understand Our Customers GPE Flex Products Fully Flex Fitted Partnerships Managed GPE delivered; Partnership delivered; What Customers Want by floor /building by desk/room Dedicated, fully furnished space; customised branding ✓ ✓ Flexible agreements; space to grow ✓ ✓ ✓ Sustai
Slide 23: Our Flex Offers: Fitted
Our Flex Offers: Fitted Hassle-Free Experience; Business Ready Private floor with your own front door Customer branded, customisable space Desks, chairs & soft furnishings all included Plug and play with a secure internet connection sesame® smart building app and lifestyle concierge service Straight
Slide 24: Our Flex Offers: Fully Managed
Our Flex Offers: Fully Managed All the Benefits of Fitted, Plus Full Service Delivery by GPE; All-in-One Bill Services include: • community manager and concierge service • food & beverage • cleaning service • maintenance inc. handyman service • planting • waste management • business rates No. of uni
Slide 25: Our Flex Offers: Flex Partnerships
Our Flex Offers: Flex Partnerships By Desk and Room Leveraging partner infrastructure: • High-intensity, smaller spaces / co-working • Delivers increased amenity; enlivens building • Incubator for future Fitted / Fully Managed customers • Provides customers with expansion / project space opportunity
Slide 26: Delivering Strong Returns
Delivering Strong Returns Growing Track Record What Have We Learned Since 2018? Accretive, Risk-Adjusted Returns • Limited risk vs. Ready to Fit Fully Managed • Lease terms not materially shorter Returns vs. Fitted Ready to Fit • Faster leasing; reduced downtime Last 12 months Actual Actual Target •
Slide 27: Our Flex Ambition
Our Flex Ambition Portfolio Packed with Opportunity Our Flex by Product (000 sq ft) GPE’s Organic Flex Growth 2018: Response to Market Demand 2018 Today 2027 • Launched first Flex spaces; Fitted and Area 87,000 sq ft 250,000 sq ft 600,000 sq ft Partnerships % of office 13% 25%1 5% portfolio 2022: Cu
Slide 28: Agenda
Agenda Customer needs evolving, Toby Courtauld, Chief Executive GPE responding Our portfolio is well suited Dan Nicholson, Executive Director Our Flex proposition Steven Mew, Customer Experience & Flex Director Leasing strategy & success Simon Rowley, Director of Office Leasing & Flex HQ repositioni
Slide 29: Our Flex Experience: Elm Yard
Our Flex Experience 2018-2021: Fitted Space Elm Yard – 4 floors Fitted 15,900 sq ft 4 To Date: • 4 floors Fitted & Let • Premium rents • All pre-completion lettings • WAULT unaffected 29 # Number of units
Slide 30: Our Flex Experience: Piccadilly Buildings
Our Flex Experience 2018-2021: Fitted Space Elm Yard 4 Piccadilly Buildings – 9 floors fitted 19,600 sq ft 9 30 # Number of units
Slide 31: Our Flex Experience: City Tower
Our Flex Experience 2018-2021: Fitted Space Elm Yard 4 5 City Tower – 5 Floors fitted 26,100 sq ft 9 Piccadilly Buildings 31 # Number of units
Slide 32: Our Flex Experience: Fitted Space
Our Flex Experience 2018-2021: Fitted Space 35 Portman Sq, W1 Elm Yard 160 Old St, 4 1 1 5 2 1 9 Pollen House, W1 City Tower Piccadilly Buildings Elsley House, W1 32 # Number of units
Slide 33: First Fully Managed Space Delivered
Our Flex Experience 2021: First Fully Managed Space Delivered 16 Dufour’s Place, W1 16,900 sq ft 7 Launched in March 2021 • Fully let: Sept 2021 • Average rent: £195 psf • Multi-channel marketing • Focus on customer service 33 # Number of Units
Slide 34: Fully Managed Rolled Out to Further Seven Locations
Our Flex Experience 2021-22: Fully Managed Rolled Out to Further Seven Locations Kent House, W1 Alfred Place, W1 Elm Yard, WC1 The Hickman, E1 2 2 1 3 1 7 2 Pollen House, W1 16 Dufour’s Place, W1 City Tower, EC2 Woolyard, SE1 7 34 # Number of units
Slide 35: Our Flex Portfolio
Our Flex Portfolio Proven in Numerous Buildings and Locations: 248,000 sq ft; 57 Units GPE Flex: Key Selling Points • Well located, high quality buildings • Self contained • From reputable owner • Thoughtfully designed 3 2 • Sustainably managed • Embedded technology 2 1 5 3 1 1 1 1 2 4 8 7 3 2 1 Fle
Slide 36: Fully Managed Leasing
Fully Managed Leasing What Have We Learnt? Experience is Invaluable Broad Range of Demand for GPE Flex • Our confidence in Flex growth was well founded • Customers from wide GPE Flex1 Customers • Flex 55% of CBRE Tenant Advisory transactions range of sectors (2021); 31% 2018 Banking • Different driv
Slide 37: HQ Repositioning: Robust Office Demand
HQ Repositioning Robust Office Demand for Best-in-Class Space Strong Active Demand: : 9.5m sq ft > 9.3m sq ft 10 yr avg.1 • Active demand ahead of average; Other Banking, Finance & Insurance • Good sector spread 0.6m sq ft, 7% 3.3m sq ft, 34% • 40% expansion led • Obsolescence growing driver Public
Slide 38: HQ Repositioning: Robust Office Demand
HQ Repositioning Robust Office Demand for Best-in-Class Space Strong Active Demand: : 9.5m sq ft > 9.3m sq ft 10 yr avg.1 • Active demand ahead of average; Public Sector Other Banking, Finance & Insurance • Good sector spread 0.5m sq ft, 6% 0.6m sq ft, 7% 3.3m sq ft, 34% • 40% expansion led • Obsole
Slide 39: HQ Repositioning: Leasing Success
HQ Repositioning: Leasing Success Ready to Fit; Sustainability Wellness & Tech 1 Newman Street, W1 • Only one floor remaining • 5th – 7th floors (40,000 sq ft) let to Exane • 4th floor (13,800 sq ft) let • 3rd floor (13,800 sq ft) under offer ahead of ERV Driver for success: • Sustainability • Welln
Slide 40: HQ Repositioning: Leasing Success
HQ Repositioning: Leasing Success Ready to Fit; Self Contained & Amenity 50 Finsbury Sq, EC2 • Jan 21: committed to scheme • Aug 21: Pre-let 121,800 sq ft to Inmarsat • £8.5m p.a. on 20 year lease with 15 year break Driver for success: • Self contained HQ • Amenity 40
Slide 41: HQ Repositioning: Leasing Success
HQ Repositioning: Leasing Success Ready to Fit; Best-in-Class Hanover Square, W1 Key 2021 leasing: • 18 Hanover rents top out at £121.00psf • 20 Hanover let to London Fashion Academy • 1 Medici Courtyard completed with further lettings to KKR and UPL (£127.50 psf) In total 92% let (offices 100%) • A
Slide 42: What Next?
What Next? Greater Choice The Future • With great choice comes greater flexibility • More take up of fully managed space • Restrained pipeline filtered by non-physical criteria: • Partnership – ‘looking for a developer not a building’1 • Values alignment – Social impact • Sustainability – ‘Not inter
Slide 43: Agenda
Agenda Customer needs evolving, Toby Courtauld, Chief Executive GPE responding Our portfolio is well suited Dan Nicholson, Executive Director Our Flex proposition Steven Mew, Customer Experience & Flex Director Leasing strategy & success Simon Rowley, Director of Office Leasing & Flex HQ repositioni
Slide 44: Four Near-Term Schemes – First Start Imminent
Four Near-Term Schemes – First Start Imminent All Prime; Exemplary Sustainability; Strong Growth Potential 2 Aldermanbury Square, EC2 New City Court, SE1 319,800 sq ft; +82% 389,100 sq ft; +297% Enabling works started Expected planning outcome Q4 ’22 Anticipated start Q1 ‘22 Anticipated start Q1 ‘24
Slide 45: Low Carbon HQ Repositioning
Low Carbon HQ Repositioning Our Three Innovative Approaches Re-use and Extend Low Carbon New Build Circular Economy New Build Minimise carbon by reutilising as Re-use of elements of buildings Re-use of elements of buildings much of existing building such as basements. Efficient low such as basements
Slide 46: Reuse and Extend: Minerva House, SE1
Emerging Approaches Reuse and Extend: Minerva House, SE1 Key metrics • Capex: £113m; ERV: £10.5m 46
Slide 47: Reuse and Extend: Minerva House, SE1
Emerging Approaches Reuse and Extend: Minerva House, SE1 Proposals • Three upper storey extensions and extensive landscaped terracing • New and retained façade 47
Slide 48: Reuse and Extend: Minerva House, SE1
Emerging Approaches Reuse and Extend: Minerva House, SE1 Proposals • Extensive new public realm: • Public square adjoining Southwark Cathedral • New east-west pedestrian route and public art • Redesigned arrival experience maximising river views 48
Slide 49: Reuse and Extend: Minerva House, SE1
Emerging Approaches Reuse and Extend: Minerva House, SE1 Proposals • Retention of 80% of existing structural frame • Re-use of existing foundations • Fossil fuel free • Energy efficient heating/cooling; openable windows 49
Slide 50: Reuse and Extend: Minerva House, SE1
Emerging Approaches Reuse and Extend: Minerva House, SE1 Credentials • Target embodied carbon <340kg CO2e per m2 Gold – V2 Outstanding Net Zero OC 4-6 Stars EPC A 50
Slide 51: Low Carbon New Build: New City Court, SE1
Emerging Approaches Low Carbon New Build: New City Court, SE1 Key metrics • Capex: £377m; ERV: £29.0m 51
Slide 52: Low Carbon New Build: New City Court, SE1
Emerging Approaches Low Carbon New Build: New City Court, SE1 Proposals • New highly sustainable 26-storey building, sympathetic restoration of listed Georgian terrace buildings and reconstruction of Keats House with the retention of its original façade • High-quality and fully accessible public rea
Slide 53: Low Carbon New Build: New City Court, SE1
Emerging Approaches Low Carbon New Build: New City Court, SE1 Proposals • Optimisation of structural grid to minimise carbon content • Energy efficient heating/cooling; openable windows • Fossil fuel free • Significant greening and biodiversity 53
Slide 54: Low Carbon New Build: New City Court, SE1
Emerging Approaches Low Carbon New Build: New City Court, SE1 Credentials • Target embodied carbon < 572kg CO2e per m2 Gold – V2 Outstanding Net Zero OC 4-6 Stars EPC A 54
Slide 55: Low Carbon New Build: Aldermanbury Square, EC2
Emerging Approaches Low Carbon New Build: 2 Aldermanbury Square, EC2 Key metrics • Capex: £268m; ERV: £24.3m 55
Slide 56: Low Carbon New Build: Aldermanbury Square, EC2
Emerging Approaches Low Carbon New Build: 2 Aldermanbury Square, EC2 Proposals • New highly sustainable 12-storey building with extensive landscaped communal roof terrace offering stunning views across London • Typical floor; 28,600 sq ft with terraces and natural light on all elevations • Three ent
Slide 57: Carbon Reduction Initiatives
Emerging Approaches Low Carbon New Build: 2 Aldermanbury Square, EC2 Carbon Reduction Initiatives • Reduced carbon content in materials • Increased cement alternatives in concrete mixes • Steel from green energy electric arc furnaces • Reuse of existing steel for roof plant areas and secondary suppo
Slide 58: Low Carbon New Build: Aldermanbury Square, EC2
Emerging Approaches Low Carbon New Build: 2 Aldermanbury Square, EC2 Credentials • Target embodied carbon < 572kg CO2e per m2 Gold – V2 Outstanding Net Zero OC 4-6 Stars EPC A 58
Slide 59: Circular Economy New Build: French Railways House
Emerging Approaches Circular Economy New Build: French Railways House, SW1 Key metrics • Capex: £70m; ERV: £7.9m 59 1. Including 50 Jermyn St, SW1
Slide 60: Circular Economy New Build: French Railways House
Emerging Approaches Circular Economy New Build: French Railways House, SW1 Proposals • New highly sustainable 7-storey building with extensive landscaped communal roof terrace • Improved retail on Piccadilly and Jermyn St 1. Including 50 Jermyn St, SW1 60
Slide 61: Circular Economy New Build: French Railways House
Emerging Approaches Circular Economy New Build: French Railways House, SW1 Proposals • Re-use of structural steel from 2 Aldermanbury Square • Saving over 1,000 tonnes of carbon • 99% reduction on embodied carbon in steelwork frame • Allowing removal of all on-floor columns; improved market appeal •
Slide 62: Circular Economy New Build: French Railways House
Emerging Approaches Circular Economy New Build: French Railways House, SW1 Credentials • Target embodied carbon < 400kg CO2e per m2, comparable to major refurbishment Gold – V2 Outstanding Net Zero OC 4-6 Stars EPC A 1. Including 50 Jermyn St, SW1 62
Slide 63: Sustainability-Led Development
Sustainability-Led Development Significant Performance to Come Committed and Near-Term Forecast Capex of £878m; >90% Offices Committed £m 300 297 • 50 Finsbury Square, EC2 • Expected completion Q4’22 • 94% ERV secured 200 196 • Only 50% of profit taken to date 160 Near-Term 133 • Potential £1.1bn ne
Slide 64: Agenda
Agenda Customer needs evolving, Toby Courtauld, Chief Executive GPE responding Our portfolio is well suited Dan Nicholson, Executive Director Our Flex proposition Steven Mew, Customer Experience & Flex Director Leasing strategy & success Simon Rowley, Director of Office Leasing & Flex HQ repositioni
Slide 65: The Time Is Now: Sustainability, A Decade's Experience
Sustainability: A Decade’s Experience A Strategic and Economic Imperative Press Release 6 February 2020 GPE signs innovative £450 million ESG-linked Revolving Credit Facility *UHDW3RUWODQG(VWDWHVSOF *3(RUWKH³*URXS´ DQQRXQFHVWKDWLWKDVVLJQHGD PLOOLRQ(6*- OLQNHGXQVHFXUHGUHYROYLQJFUHGLWIDFLOLW\ ³5&)´ DW
Slide 66: Sustainability: Regulators
Sustainability: Regulators Regulation Driving Change National • Minimum B energy efficiency rating 2030 • Annual energy performance (building-by-building) reporting requirement, likely Local • Local planning guidance on whole life carbon; retro-fit first policy; design for reuse Our Response: • Plan
Slide 67: Sustainability: Investors
Sustainability: Investors Also Impacted by New Legislation • Net flows into Responsible Funds up 6,000%1 • Responding to investor indices for more than a decade • New legislation driving greater Investors focus: • EU Taxonomy • Sustainable Finance Disclosure Regulations • UK Taxonomy Our Response: •
Slide 68: Sustainability: Customers
Sustainability: Customers Business Embracing Sustainability • Commitment to SBTi1 carbon emission targets: 1,255 companies (+20% global capitalisation) • Improving sustainability a high priority for next 12 months2: SMEs 41%; Large Cos: 60% • War for talent: 67% of 16-24 year olds: ‘sustainability c
Slide 69: Sustainability: What's Next? Carbon
Sustainability: What’s Next? Carbon Carbon: Legislation will move from mitigation to regeneration Increasing focus on embodied carbon will drive change • Legislation coming • Greater scrutiny on developers • Emerging markets for reuse of materials • Further certification will be imposed on Net Zero
Slide 70: Sustainability: What's Next? Nature and Social Impact
Sustainability: What’s Next? Nature and Social Impact Climate Resilience • Nature-related risk and opportunity management framework The Time Is Now Our sustainability statement of intent for 2030 Our Response: • GPE Sustainability Statement of Intent embraces nature Creating a • GPE ESG-linked RCF e
Slide 71: Agenda
Agenda Customer needs evolving, Toby Courtauld, Chief Executive GPE responding Our portfolio is well suited Dan Nicholson, Executive Director Our Flex proposition Steven Mew, Customer Experience & Flex Director Leasing strategy & success Simon Rowley, Director of Office Leasing & Flex HQ repositioni
Slide 72: Attractive Total Returns with Upside Potential
Attractive Total Returns with Upside Potential HQ Repositioning Flex 1. Driving capital value growth 1. Driving higher through development surpluses net income per sq ft Potential development Targeting 6%+ stabilised commitment £1.1bn2 income yield 600,000 sq ft potential3 Targeting 15%+ profit on c
Slide 73: Financial Capacity to Deliver
Financial Capacity to Deliver GPE Financial Givens: Discipline and Strength Sector Leading Debt Metrics Significant Capacity for Investment No change to approach: conservative LTV, financial Flex capex (LHS) flexibility, strong liquidity £m 400 Development capex (LHS) 50% 50% GPE LTV Sector average
Slide 74: Primed for Acquisition Opportunities
Primed for Acquisition Opportunities GPE Acquisition Givens Clear Acquisition Criteria Attractive Central London Locations • Tired properties needing repositioning • Environmentally stranded • Development/value add potential • Flex conversion • Attractive central London locations • Supported by infr
Slide 75: 7/15 Gresse Street, W1
7/15 Gresse Street, W1 Our Recent Acquisition GPE Flex Locations 8 7/15 Gresse St, W1 • Located in heart of Fitzrovia; an area we know well • 200m from Crossrail station Acquired March 2022 • £36.5 million; £864 psf; NIY 5.6% • 43,000 sq ft; flexible floorplates • Long leasehold (107 years) • Vacant
Slide 76: Evolving Our Model
Evolving Our Model Recycling discipline continues Total return focus HQ developments • Anticipating short-term earnings decline • Track record of value crystallisation • Sale of 160 Old Street & surrender premium in H1’22 Flex • Vacant possession required for near-term developments and delivery of a
Slide 77: Agenda
Agenda Customer needs evolving, Toby Courtauld, Chief Executive GPE responding Our portfolio is well suited Dan Nicholson, Executive Director Our Flex proposition Steven Mew, Customer Experience & Flex Director Leasing strategy & success Simon Rowley, Director of Office Leasing & Flex HQ repositioni
Slide 78: Summary: An Evolving and Exciting Strategy
Summary An Evolving and Exciting Strategy HQ Repositioning & Flex; two complementary, overlapping business streams • Both satisfy customers’ evolving needs; flexibility, service, technology & sustainability • Both with strong growth potential: • HQ Repositioning: 1m sq ft pipeline starting now • Fle
Slide 79: GPE. Greater together
GPE. Greater together