Shares in Great Portland Estates (AIM: GPOR) rose today after the Central London landlord announced the acquisition of two West End developments and a profit share and debt structuring arrangement with Eurohypo to develop the properties, while announcing narrower losses for the first half of the year.
The two properties, Marcol House, 289-295 Regent Street, and 23/24 Newman Street, W1, were acquired through the purchase of the SPV (special purpose vehicle) entities that owned the assets from Istithmar World PJSC, part of government-owned Dubai World, for £10 million upfront and a share of potential future profits.
Great Portland bought two West End developments from Istithmar World PJSC, part of government-owned Dubai World, for GBP10 million. It assumed Istithmar's debt on the properties and restructured the facility with Germany's Eurohypo AG (EHY-XE) in exchange for a share of any future gains.
GPE has assumed Istithmar's debt on the properties and restructured the facility with Germany's Eurohypo AG in exchange for a share of any future gains. Under the terms of the agreement, GPE will commence the development of the two properties early next year, fully funding the costs, which are estimated at £78.1 million. GPE will act as development manager and receive a priority return of up to £26.3 million. The next £51 million of profit will be split equally between Eurohypo and GPE, while the excess over a combined property valuation for the two schemes of £165 million will be equally shared by GPE and Istithmar.
The Marcol House office and retail development site with planning consent for 111,548 sq ft (square feet) is located 150 metres north of Oxford Circus. Newman Street is an existing office building of 25,200 sq ft with planning consent for conversion to 22 residential apartments and provides the residential planning requirements for the Marcol house site.
Marcol House is scheduled to complete by summer 2012 and Newman Street 12 months earlier. Both buildings have existing tenants, providing an initial income of £405,750 per annum, some of whom will vacate prior to the start of the development.
“We are delighted to have concluded this acquisition and formed the new arrangement with Eurohypo and Istithmar. This deal adds two high quality West End developments to our exciting and substantial programme, scheduled to complete in 2012 at a time when we think conditions in the office market will favour the landlord,” said chief executive of GPE Toby Courtauld.
The company said this agreement structure unlocked the potential in these sites and allowed Eurohypo and Istithmar to share in the upside, planning to use it in future deals.
GPE simultaneously announces its interim results, reporting a pre-tax loss of £30 million, down from the loss of £146.3 million in H1 2008. The company’s net asset value (NAV) climbed to 225 pence per share from 216 pence at 30 June.
Shares in GPE rose 6.2 on the news this morning and was still holding on to the gains by early afternoon.