Great Portland Estates Portland Great www.gpe.co.uk Annual Report 2010 Great Portland Estates plc What’s in this report? 33 Cavendish Square London W1G 0PW Unlocking Profitable investments Tel: 020 7647 3000 £161 million committed Fax: 020 7016 5500 Annual Report 2010 potential in new acquisitions Maintaining high occupancy Maximising retention Minimising voids Reinventing space Mixing the best of the old with the best of the new Great Portland Estates Annual Report 2010 Unlocking potential in central London – some examples from last year Bought Sold Acquired 1 Marcol House, 2 Spirella House, 3 103/113 Regent Street, W1, 289/295 Regent Street, W1, 266/270 Regent Street, W1, purchased for £13.5 million* and 23/24 Newman Street, sold for £11.5 million* in The Great Ropemaker W1, bought for £10.0 million (September 2009) Partnership (December 2009) (November 2009) P8 P21 P21 Great Portland Street T o t t G e o n w ll ad h e l Ro Portland Place s el a e us kenw m r R Cler S t Farringdon Road C r Baker Street e d o e re oa u t a e R r u on t Sq leb R ary o Westw M a ay d G B l o lo u Goodge St o c New Cavendish St m e s s t b e W u orn C r e r olb Mortimer Stll y h H h P s ig S H Kingsway a London Wall l E a t n d c c Lane Fetter g e q e C w S r Margaret St a t a 1 y Cheapside r ree v sh L St e i a e re nd R igmo Street n o W Oxford e ad 1 2 Gr Queen St 6 Fleet Street C Ca Cornhill h Aldwych nno New Bond St Regent St a n S Bishopsgate r tre i et d n r Roa g te wa C ys 7 Savile Row Ba r 9 o s Uppe s d r Thames Street n Bdg Blackfriars R tra o S a P d Bdg Southwark a rk 3 L t Bdg London a n n e e m k Kensington Palace Gardens Hyde Park n Kensington a b Gardens 8 m Waterloo Bdg E a i r ly ll il a o d M t ll c a a i cc P Pi V Blackfriars Road Blackfriars Green Park Waterloo Road dge tsbri Waterloo Knigh St James’s Park Str Knightsbridge G h eet ro ig s H d v Westminster Bdg R e n n n to o g to r n p P si l n m a e ro c K B e Development Sold Leasehold extension Design and production: FSC – Forest Stewardship Council. The CO2 emissions associated with 6 Hanover Square Estate, W1, 7 15/16 New Bond Street, W1, 8 Jermyn Street Estate, W1, Radley Yeldar | ry.com This ensures there is an audited the production and distribution of development one step closer sold for £45.0 million new 125 year leasehold chain of custody from the tree in this report have been neutralised with Compulsory Purchase (May 2009) interests acquired Print: the well-managed forest through to net zero through a renewable Order of 18/19 Hanover for £6.0 million* The Midas Press Plc to the finished document in the energy project in China. Square, W1 for £35.9 million P21 (September 2009) This report is printed on Cocoon printing factory. (December 2009) Silk, which is 50% recycled and P20 FSC certified, by an FSC accredited P21 printer using vegetable oil and 50% soya based inks. Cert no. SGS-COC-003320 * Our share of joint venture transactions. Annual review Governance Financials 01 What’s inside Annual review Pages 01–47 Bought Development joint venture 02 GPE’s business model 4 90 Queen Street, EC4, 5 50% interest in our 04 Our progress against targets acquired for £45.8 million Bishopsgate Estate, EC4, 06 Our business in action (October 2009) put into the 100 Bishopsgate 14 Group key performance indicators Partnership joint venture 16 Chairman’s statement through sale of 50% of our P20 holdings for £42.9 million (March 2010) “ Great Portland Estates has had an P23 excellent year despite the volatile market conditions. We focused on our strategic priorities, delivered a strong financial performance and the Group is well positioned for a sustained recovery in the real estate sector. Great Portland Street T o t t G e o The financial results reflect the quality of n w ll ad h e l Ro Portland Place s el a e us kenw m r R Cler S t Farringdon Road C r our property portfolio and the efforts of Baker Street e d o e re oa u t a e R r u on t Sq 1 yleb R ar o our employees – adjusted net assets per Westw M a ay d G 1 B l o lo share up 15.5%, EPRA earnings per share u Goodge St o c New Cavendish St m e s s t b e W u rn C r e bo up 11% with low debt levels to allow for r ol Mortimer Stll y h H h P s ig S H Kingsway a London Wall l E a t n d c c Lane Fetter g e q e C w S r future investment.” Margaret St a t a y Cheapside r ree v sh L St e i a e re nd R igmo Street n o W Oxford e ad Gr Queen St Fleet Street C Ca Cornhill h Aldwych nno 4 New Bond St Regent St a n S Bishopsgate r tre i et d n 5 Martin Scicluna Chairman r Roa g te wa C ys Savile Row Ba r o s Uppe s d r Thames Street n Bdg Blackfriars R tra o S a P d Bdg Southwark a rk 17 A look at our market L t Bdg London a n n e 20 A close look at our business e m k Kensington Palace Gardens Hyde Park n Kensington a 26 Our financial position b Gardens m Waterloo Bdg E 30 Our people a i r ly ll il a o 35 Managing our risks d M t ll c a a i cc P Pi V 38 A responsible approach Blackfriars Road Blackfriars Governance Green Park Waterloo Road Pages 48–73 dge tsbri Waterloo 48 Board of directors Knigh St James’s Park Str Knightsbridge G 50 Report of the directors and Corporate governance h eet ro ig s H d v Westminster Bdg 10 R e 62 Directors’ remuneration report n n n to o g to r n p P si l n m a e ro c K B e Financials Pages 74–101 Other information 104 Notice of meeting Acquired Developed 110 Shareholder information 9 Kingsland House, 10 Woolyard, Bermondsey Street, 122/124 Regent Street, W1, SE1, practically completed and bought for £4.0 million* in 63% let as at 31 March 2010 Full index The Great Capital Partnership (July 2009) Page 111 (December 2009) P12 1 EPRA adjustments on a diluted basis see note 7 on page 84. P21 Further information www.gpe.co.uk Front cover Marcol House, 289/295 Regent Street, W1 Great Portland Estates Annual Report 2010 02 GPE’s business model How we manage our business Operating approach GPE owns and manages a portfolio of well located properties worth £1.7 billion including joint ventures. Our team of specialists seeks to manage and grow this asset base profitably through numerous value-add strategies. Our operating approach has the following critical elements: – Detailed analysis of property and economic cycles – Intense focus on local London markets using a strong network of contacts – Use of development and refurbishment to upgrade rental values – Frequent acquisitions, disposals and joint venturing to improve portfolio returns – Creation, monitoring and execution of individual property business plans – Close tenant relationships – Use of flexible and moderate levels of leverage to enhance equity returns – Careful attention to sustainability matters Our integrated team has specialisms in: Investment, Development, Asset Management, Finance Influenced by Our markets The risks we face London’s property markets are cyclical and The key risks which impact our suffered during the 2007–09 downturn. business are set out below. More recently they have recovered. Our portfolio is centred on the more resilient Key risks and less volatile West End locations. Economy and property market – Central London real estate market Our quarterly valuation movement underperforms 13 0 – Economic recovery falters 12 0 Investment and development 110 100 – Missed investment opportunities 90 – Failure to maximise income 80 – Poor development decisions 70 Financing 60 Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 – Limited availability of further capital Indexed, September 2006 =100 – Adverse interest rate movements Our locations* – Inappropriate capital structure 7% People North of Oxford Street £680.6m 11% Rest of West End £352.0m – Retention of key staff City £132.8m – Insufficient resources Southwark £82.3m 55% Regulatory 28% – Adverse regulatory regime – Health and safety incidents * Includes Group’s share of joint ventures Market analysis P17 k Risk Management P35 k Annual review Governance Financials 03 Strategic priorities In early 2009, a difficult economic and property market environment led us to set three key priorities for the last financial year.