Helical PLC (LON:HLCL) saw its shares rise on Tuesday as Numis Securities upgraded its rating for the property group to ‘buy’ from ‘add’ following news of a financing deal for a new office development in London.
The FTSE SmallCap firm today announced a new £50.4mln five-year development facility with US bank Wells Fargo & Co (NYSE:WFC) to part-finance the construction of a 90,000 Square feet office development at Farringdon East which is due to complete in November 2019.
It said, that on completion of construction, the facility will convert into an investment facility for the remainder of its term.
In a note to clients, Numis’ analysts commented: “While the margin is not disclosed, HLCL has put in place a forward starting interest rate cap on £40mln of the facility, commencing in Jan-20 and running until Jul-23 at 1.75%; the structure and timing of the cap should avoid Helical becoming over-hedged throughout the build process as funds are drawn progressively.”
They added; “Based on lettings success at other nearby schemes (Barts and Charterhouse Square), we are confident that Helical will be able to let the building to a strong tenant line-up on attractive terms.”
The analysts said that based on a rent of £70 per square foot and a 5% cap rate, they estimate a development profit in the region of £16mln-£18mln on a total capex spend, including the site, of around £100mln.
They noted that Helical shares trade on a 34% discount to its net asset value and yields 3.1%, so given recent share price weakness, they have upgraded their rating for the stock to ‘buy’ with an unchanged target price of 422p.
In late morning trading, Helical shares were 4.4% higher at 335.50p.