The new Great Portland Estates (LSE:GPOR) £350 million equity raise comes at just the right time to capitalise on the central London property market’s cyclical upswing.
That’s according to Shore Capital Markets’ analysis of the property investor’s third-quarter trading update published today.
Although the equity raise will suppress GPE’s earnings profile in the immediate years, it “should be capable of delivering significant upside to capital returns as prime space is returned to a supply-constrained London market”, said Shore Cap’s Andrew Saunders.
Valuations of office property, GPE’s bread and butter, have tanked 58% since 2016; a daunting figure that nonetheless should represent the market’s nadir.
This year GPE became a net acquirer for the first time in a decade as management took advantage of these cheaper assets.
In the midst of these shifting market dynamics, GPE shares remain at a 31% discount to Shore Cap’s 2025 net tangible asset forecast.
This is a “substantial” discount, said Saunders, yet with the UK interest rate cycle likely to see potential cuts this year and West End office valuations stabilising, it “may now represent the floor level”.
Shore Cap reiterated its 'buy' recommendation at the current 347.5p share price.