UBS is not shifting its stance on Great Portland Estates (LSE:GPOR). The bank keeps a sell rating and a 320p price target, arguing that the landlord’s operational progress still is not translating into the returns needed to justify a re-rating.
The shares trade at a 36% discount to net tangible assets for the first half of 2026, and UBS sees little near-term reason for that gap to close.
The sticking point is return on equity. GPE continues to target more than 10% a year. The first half delivered 6% on an annualised basis and 7.5% on a straight yearly view, both short of the mark.
Capital values improved slightly at 1.5% in the half, supported by estimated rental value growth of 2.6%, although the group admits its capital value indicators have “weakened marginally”.
Earnings were stronger. EPRA earnings came in at 3.9p a share against consensus of 3.5p, helped by capitalised interest of £16 million on £15.7 million of earnings and a £1.6 million tax credit. Like-for-like net rental income grew 5%.
Less helpful was a rise in the vacancy rate to 6.9% following recent completions and higher administrative costs tied to IT investment and pay.
The development pipeline remains mixed. Minerva House absorbed an extra £14 million because of site problems and supply chain failures, although GPE still expects a 15% profit on cost and a 10% ungeared internal rate of return.
At 141 Wardour Street, the space was fully let within two months of completion, but leasing at 170 Piccadilly is taking longer.
UBS’s conclusion is that GPE’s steady operational delivery has not yet fed through to the higher returns that would warrant a more generous valuation.