Great Portland Estates H2 2025 Earnings Report

Great Portland Estates EPS Results

• Actual EPS: GBX 5.30
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Great Portland Estates Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Great Portland Estates Announcement Details

• Quarter: H2 2025
• Date: 5/21/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 21, 2025
• Conference Call Time: 1:00AM ET

GPE is a FTSE 250 real estate investor and developer. GPE aims to deliver superior returns by unlocking the often hidden potential in commercial real estate in central London, creating high quality sustainable spaces for its customers and long-term value for its stakeholders.

Great Portland Estates H2 2025 Earnings Call Transcript

Key Takeaways

• Strong execution of growth strategy: committed £350m of rights issue capital, delivered record £38m of investment lettings at a 10.6% premium to ERVs and upgraded rental value guidance.
• Robust market fundamentals with a 74% supply deficit in Central London Grade A offices, prime rents up 7.6%, active demand 35% above last year and vacancy at target levels.
• Acquisitions and developments on track, having bought four West End assets at a 53% discount to replacement cost, with HQ and flex projects set to generate ~£340m of base development surpluses (up to £580m of upside) and £350m–£1bn of sales over the medium term.
• Rapid flex expansion to 600k sq ft (up 16%) with annualized NOI of £19m (up 93%), a 91% retention rate and 40% service margin, targeting 1 million sq ft and £90m NOI to drive significant value growth.
• Financial strength maintained: EPRA NAV +4.4% to 494p, EPRA LTV ~31%, rent roll +15% to £123m, and a medium-term outlook of >10% return on equity, >3× EPS growth and sustained dividend progression.

Presentation

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Are we early? We might be. Since you're all sitting so obediently, why don't we start? Welcome, everybody. Thanks very much for joining us. Despite battling through this strange thing called rain that woke us up this morning, great to see you all. We really appreciate your time, so thank you very much for coming. What I want to do this morning is start by summarizing the key messages that we'll be giving you over the next 30 or so minutes. This was an extremely productive year, as we set about executing our growth strategy, accelerating our activities as the year progressed, and delivering a strong operational performance across the board. We committed the rights-issued capital ahead of plan into new growth opportunities. We've created premium spaces into a market starved of such quality.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Our record levels of investment leasing, with strong growth in our Flex operations, have led us to upgrade our rental value guidance, all of which means that we're well set to deliver strong income and value growth from here, as we'll show you this morning. As well as putting the meat on these messages, we're also gonna cover our results and finish with our outlook. Let me first of all remind you of our strategy and revisit what we said to you back in May 2024. You'll remember this chart. It shows our long track record of contracyclical capital management, raising capital and buying when markets are cheap, developing to create value, and then selling completed business plans into stronger markets and returning surplus capital to shareholders. The last 12 months has seen us continue this clear contracyclical plan.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

In May 2024, we said the cycle was at or around its trough, and today we see central London markets inflecting, with values rising and turnover recovering. Last May, we said it was the time to buy and not sell. We did, essentially committing all the rights capital at an attractive 53% discount to replacement cost. From here, we will buy more and we will rotate towards more sales as the market strengthens. We said there was a supply drought of Grade A offices. There is, and we are delivering into it, with circa 40% of our book in production and big development surpluses to come. We said prime rents would rise. They have, up 7.6% across our prime spaces over the year, and our nearly GBP 38 million of leasing was signed at a strong 10.6% beat to ERVs. We said we would grow our unique Flex offer.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

We have, up 16% to 0.6 million sq ft, with our net operating income up 114% over the year, and which we expect to grow substantially from here, up by some two and a half times. We said we'd supplement our capital base with further debt financing, and we've done that too. GBP 400 million raised since then, adding to the GBP 350 million of fresh equity. We are delivering and have significant organic growth to come, with a strong base case return on equity outlook of more than 10% per annum and EPS growth of more than 3x. Turning then briefly to the full year results, this was a year of strong operational performance, delivering record investment lettings of GBP 38 million, handsomely beating ERVs, with offices 11.5% ahead.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

This strength is continuing, with our lettings so far this financial year already at GBP 17.6 million and 5.5% ahead of the March 2025 ERV, only six weeks after the valuation date, including last week's 62,000 sq ft 15-year pre-let generating GBP 11.7 million at a strong rental premium of 6.5% to ERV. Plus, today we have a further GBP 3 million under offer at a premium to ERV of more than 14%. Overall, rental values across the book were up 5%. Prime offices better still at 7.6%. Vacancy rates remain where we want them. Customer retention continues to be exceptional at 87% across the portfolio, and we have made strong progress across our developments and our refurbishments, as I will cover in a minute. Our financials for the year were healthy too.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Our valuation was up 3.6%, driven entirely by our activities and rental growth, with our Fully Managed spaces the best performer, up 12.8%. EPRA NAV was up 4.4%. Rent roll grew strongly by 15%, and EPRA LTV remains low at circa 30%. As we think about what next from here, our clear and differentiated strategy gives us a strong platform for growth. Four main drivers. First, income growth, 43% over the next two years from our onsite activities and more than 130% in the medium term as we lease up our pipeline and deliver 2.5x growth from our Flex spaces. Second, development surpluses. Circa GBP 220 million to come, assuming current rents and current yields, and we think there is big upside from these numbers, as you will hear in a minute. Third, more acquisitions with two off-market deals in negotiation.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Fourth, sizable sales to come, aiming at some GBP 350 million in the near term. Significant growth to come, and we'll expand on these opportunities in a minute. First of all, I want to tell you about our markets and, in particular, why supportive leasing conditions will stimulate best rents to continue rising despite today's many current macro uncertainties. First, office jobs in London are rising. Oxford Economics think they'll grow by another 200,000 by 2030, as you can see on the left. Second, levels of take-up are robust, slightly ahead of the long-run average. Third, active demand remains strong at 12.6 million sq ft, well ahead of the 10-year average and some 35% higher than it was in 2023.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Now, we know some two-thirds of this demand will only lease prime spaces, and yet the undersupply of new offices in central London, shown on the right, remains extreme. Our forecast suggests 2.7 million sq ft per annum against an annual take-up of new space of 4.7 million sq ft, or a shortage of some 74%. Indeed, 2027 could see one of the lowest-ever levels of deliveries. It is no surprise then that we think best rents are set to grow. Demand remains strong from proper businesses, with banking and finance dominating. We're seeing a record number of 100,000 sq ft+ requirements. Pre-letting is currently running at a 10-year high as customers lease earlier than ever to secure quality spaces. We know that a far higher proportion of companies are expanding their space take rather than contracting, 48% versus 14%.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

This strong demand is colliding with a supply drought that is extreme and not set to change anytime soon, with low in-place vacancy rates. Planning departments are under-resourced, and policies around retrofit first and sustainability will constrain new development. As you know, we got ahead of these challenges, investing early in materials reuse and circular economy development to give us an edge and becoming the market leader in the process. For these reasons, as you can see on the right, rents are set to rise further. These are Savills forecasts, and we think that they are potentially pretty conservative. Remember, despite the recent run-up in rents, we think they remain affordable, with central London occupiers' average rent being only some 5%-8% of their salary bill. All up, therefore, these conditions play to our positioning: 100% core prime locations, 94% near Elizabeth Line stations.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Turning then to the investment market, where we think the story is one of recovery with the return of both competitive bidding and of larger deals. Capital values are clearly inflecting, shown in real terms on the right, driven entirely by rental growth, but they still remain near historic lows. Turnover is still pretty depressed too, but as you can see on the chart bottom left, it is up 40% since last summer, and there are some early signs of recovering market dynamics. U.K. institutions are definitely more active. We have seen more deals take trading above asking, 11 in the five months so far this year versus three in all of 2023. Plus, as you can see on the right-hand chart, there are more large deals happening today, up from one in Q4 2023 to seven in Q1 2024, and with a further six under offer. Definitely a recovering picture.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

From here, whilst challenges remain, we think sentiment could improve, clearly helped by the trajectory of interest rates. Stock levels are marginally down, and interestingly, we have seen more vendors withdraw sales in anticipation of better pricing. Plus, equity demand, shown bottom right, is marginally up to GBP 21.4 billion, as you can see in the pink bars. In tune with our contracyclical strategy, you should expect to see us move to a more balanced position with both further acquisitions and more sales as conditions strengthen, allowing us to crystallize surpluses. Summing up then our view on the market, we think conditions strongly support our strategy. For rents, whilst we contend that conditions on the ground are strengthening, continuing macro uncertainties mean we have left our key drivers as they were in November.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

That said, as you look down our actual rental value performance for the year versus November's guidance, we were towards or above the top end in all categories, which is a strong result and which has led us to upgrade our estimates for the year to March 2026, as you can see. We are now expecting to deliver overall rental growth of between 4% and 7% for the year, up from 3% to 6%. For yields, we have slightly strengthened our drivers, given the tick-up in equity looking to buy. Overall, we think they are stable to slightly down at the most liquid best end of the spectrum. As I say, overall supportive conditions. Let's turn now and look at our acquisitions, sales, and development activities, and we have had a successful year deploying the proceeds of the rights issue.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

We bought four growth opportunities, all in line with our disciplined criteria, all in the West End, and at a healthy 53% average discount to replacement cost. Each has a compelling repositioning or redevelopment business plan, and we're aiming for post-CapEx yields of between 5.5%-6.8%, with ungeared IRRs of early nines to mid twelves. With more to come too, with two deals in negotiation, both in the West End, both next to existing assets. We're also likely to sell more, as I mentioned earlier, expecting to crystallize circa GBP 350 million in the near term, and we have more than 50% by value in two assets under offer today. Plenty of opportunity then to come. Now, our most recent acquisition was One Chapel Place, highlighted here in yellow.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

We paid GBP 56 million for this tired 34,000 sq ft 1920s through to 1980s freehold in a fabulous location, two minutes from Bond Street, Elizabeth Line station, and surrounded by much larger recently rebuilt buildings, giving us a fantastic HQ redevelopment opportunity with three years of income whilst we work up our plans. Here you can see two images of the planning application we've inherited from the previous Chinese owner and which we are likely to withdraw. We know Westminster planners do not like the proposals, and bluntly, we can and we will do better. On the right, you can see an image of the existing building with an outline of the sort of massing gain that we're working up. We're aiming for somewhere between a 45%-75% net area increase, and we're confident that we can hit all of our target metrics.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

A great opportunity to create another truly best-in-class HQ building. We've also made great progress across our prime onsite HQ developments. At Aldermary, top left, we're on track to finish in Q1 2026, and we're expecting around GBP 21 million of surplus to come from here. At 30 Duke Street St James's, we've just announced the pre-let of the entirety of the offices to private equity firm Clayton, Dubilier & Rice on a new 15-year lease without break and at a blended rent some 6.5% ahead of the March 2025 ERV and 11.9% ahead of the underwrite. As a result, all of our performance metrics have moved along nicely since the March balance sheet. Progress is also good at Minerva House, where we're on time and budget to finish in Q1 2027. Our metrics are good here too, and we have healthy levels of interest from prospective customers.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

If you take these three schemes together, we've about GBP 277 million of CapEx to come. Almost all of it is fixed. We're creating big ERV increases, up 168%, 73% of which is now pre-let, and we're generating a sizable surplus to come of some GBP 111 million, shown at the bottom of the table. With only Minerva left to let, were we to see 10% ERV growth on that scheme alone, not that challenging given both the market conditions I outlined earlier and the quality of the space we're creating, the total surpluses from these three schemes would rise to around GBP 133 million or more than GBP 0.30 per share with limited risk. Good business from these best-in-class schemes and with plenty of further upside to capture.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Next up in our HQ pipeline are three more gems to which we'll be adding Chapel Place, as I touched on a few minutes ago, and all delivering into the supply drought I referenced earlier. On the left, you can see some of the terracing at Soho Square, again best in class, with a big area increase on a West End square, and we expect to start imminently. Top right is our recently acquired Whittington House, opposite and next to our existing holdings on the pedestrianized Alfred Place in the West End, and again starting later this year. At the bottom are revised proposals at St Thomas Yard, next to Borough Market, where our planning application is in for a major refurb and extension scheme next to London Bridge Station, and where we gain vacant possession in just over a year's time.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Taken together, these three exemplary schemes will generate increases in area of 55% and in ERV of 164%, and we'll be targeting our usual surpluses and IRR metrics. As ever, all best in class, all near major transport hubs, and given the supply drought, well timed to capture strong upside. Now, so far, I've only talked about our HQ CapEx program, and as you know, we're also very actively growing our Flex portfolio through multiple refurbishment schemes, which Nick will talk about in a minute. Here you can see the sum of our current program: all Central London, mainly West End, all of the highest quality, all near major transport hubs, and at 12 schemes covering 1.1 million sq ft or 37% of our portfolio by area, and crucially, timed to deliver into an undersupplied occupational market where rents are growing.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Now, before handing over to Nick, I want to summarize the shape of the portfolio today and to reinforce the message that this business is full of growth opportunities across the whole portfolio. I've already talked about the HQ developments, which once finished and let, will move to the long-dated investment segment at the bottom of the stack. It is not just our developments that give us growth. We also have more than GBP 1.6 billion, or almost 60% of the current book value in what we call active portfolio management assets, and you can see some of them here. They give us multiple angles for both rent and value growth through refurbishing to create higher quality spaces and therefore higher rents, leasing vacancies as refurbishments finish and capturing the reversion, sometimes restructuring or regearing our interest, and of course, through preparing some for major refurbishment or redevelopment.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Taken together, this segment gives us real upside. Their valuations are undemanding at only circa GBP a square foot. They do not need much CapEx. They are all well located and all have good foundations that we can build value upon. Now, as you know, one of our most exciting growth opportunities is our Flex operation. We were early to the game, starting back in 2017, have built the infrastructure, and now have some 25% of the total portfolio given over to this powerful model. We are just getting going, and Nick will talk about our growth plans in a moment. Finally, once we have delivered our business plan, properties often move to the long-dated segment from which we have typically sold. We expect to sell circa GBP 350 million from this group near term and a further GBP 650 million over the medium term, but that is for another day.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Now over to Nick to hear about our exciting Flex growth plans.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

Thank you, Toby. Good morning, everyone. Let's dig into our unique Flex offer, where we are delivering our growth strategy with conviction. As we've been saying for a while, Flex is now the default choice for customers with smaller space needs in Central London, representing 90% of our sub-5,000 sq ft lettings in the year ahead of the market average. In a growing market, customer demand continues to be broad-based, with ever-increasing demand from previous traditional cafe customers, along with larger corporates and services firms. Customers are paying a premium for our high-quality hassle-free spaces, with our average Fully Managed rent well ahead of GBP 200 per foot. Our continued growth means our annualized NOI is now GBP 19 million, up 93% since September.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

We're also delivering valuation performance too, with our Fully Managed values up nearly 13% in the year, endorsing our 1 million sq ft ambition. Today, our nearly 600,000 sq ft of Flex space is 60% in the West End and 61% is Fully Managed, the focus of our planned growth in buildings that we own, we fit out, and we operate. Our average Flex unit size is around 3,000 sq ft, with an average lease length of three and a half years. We're providing outstanding customer satisfaction with our NPS of +48 for our Fully Managed spaces, driving our 91% retention rate. We're leasing new Fully Managed space successfully too, with GBP 23 million of deals in the year to an increasingly corporate customer base.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

With almost a deal a week, we secured rents more than 10% ahead of the Fully Managed ERV and an average GBP a square foot, higher still at GBP 227 for our West End lettings. As shown top right, our strong leasing and operating capability are combining to deliver outsized performance well ahead of our targets. We're generating strong absolute returns with an average yield on cost of 6.6% and service margin of 40%. Relative to ready-to-fit, we delivered a 120% rent beat and a 77% 10-year cash flow beat. As I've already said, we've got strong customer retention and good lease duration too. Our operating performance is also strong. Our Fully Managed spaces are today generating GBP 39 million of annualized rent. We're currently managing GBP 20 million of OpEx and other costs across the categories shown in the green bar.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

With a gross to net of 50%, our annualized NOI is GBP 19 million or GBP 104 a foot. Once we factor in both amortized fit out and refresh CapEx, along with the Fully Managed specific corporate overheads, this results in an annualized net cash return averaging GBP 78 a foot, or 45% higher than the ready-to-fit net rent. Economies of scale are already emerging with our clustering and established best-in-class team driving both higher customer retention and lower costs. Plus, there is plenty more net income growth to go for. We will generate GBP 6.3 million of additional NOI as we finish up the leasing of our recent completions, including Alfred Place and SIX, which are already 74% and 52% let, respectively.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

Our four onsite schemes, all in the West End, will deliver a further GBP 12.3 million, with our pipeline schemes expected to add another GBP 17.5 million, taking our Fully Managed NOI to GBP 55.4 million, so an organic growth uplift of 2.5x. As we execute more acquisitions to hit our 1 million sq ft ambition, total NOI would increase to GBP 90 million, a more than fourfold uplift overall. With more than GBP 19 million of annual service profit shown in blue, we will be creating additional value of more than GBP 200 million or more than GBP 200 per square foot based on the valuer's current 8.5% cap rate. Our Flex activities remain a significant income and value growth driver. Now, a few comments on our full year results, which provide a platform for growth, and we have passed both the valuation and earnings trough.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

Starting with our priority to drive value growth and following a strong second half, we delivered a like-for-like valuation uplift of 3.6% as the best continues to outperform, and EPRA NTA rose 4.4% to GBP 4.94 per share. EPRA earnings increased 13% to GBP 20 million, with our cost-saving activities reducing admin costs by GBP 3 million. As expected, EPRA EPS was GBP 0.052, and as we said we would, we're paying total dividends of nearly GBP 32 million. You will find the usual walks in the appendices. We have also maintained our financial strength with EPRA LTV at 30.8% and available liquidity of almost GBP 400 million as we deployed the rights issue proceeds ahead of plan, whilst also locking in GBP 400 million of new debt financing in the year.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

Overall, we generated positive TAR of 6%, delivering prime spaces against a backdrop of ERV growth, with more to come as we build on our strong foundations. Our GBP 2.9 billion portfolio is opportunity rich, with 83% in offices, where we experienced the strongest ERV growth of 5.3%, with overall portfolio ERV growth of 5%. Our Fully Managed rents were up 7.5%, with 6% growth at our long-dated office properties. Overall, the portfolio has an average capital per foot of just over GBP 1,100, and the investment properties are valued at around a 20% discount to replacement cost. We think there'll be growth from here, and that's before factoring in any potential yield compression, with our portfolio equivalent yield today at 5.5% and our reversionary yield at almost 7%, much higher still at almost 9% on a share price implied basis.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

Finally, the best continues to relatively outperform at both an ERV growth level in purple and by valuation shown in green. By EPC rating, our A and B spaces again outperformed, as did our higher capital value per square foot spaces. Our West End properties, representing nearly 3/4r of the portfolio, outperformed too, with ERV growth of 5.7%. We expect these trends to continue as we invest to drive growth. Our GBP 700 million CapEx program combines GBP 357 million to complete our seven onsite HQ and Fully Managed schemes, shown in yellow, with a further GBP 343 million for our four near-term schemes in pink. These CapEx estimates include appropriate inflation allowances, and you will find the usual scheme-by-scheme detail in the appendices.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

These schemes have a total GDV of GBP 1.8 billion, which will deliver a surplus to come of more than GBP 340 million based on conservative 10% cumulative rental growth. As we show, there's serious upside potential, with further rental growth and some mild prime yield compression taking the surpluses to nearly GBP 600 million or GBP 1.50 per share. The lines on the chart prudently show how these surpluses would accumulate over time based on profit release at Scheme PC, although our pre-letting activities typically accelerate these. On the right, our investing activities clearly change the portfolio composition, which Toby covered earlier, with long-dated properties shown in gray growing from 21% to 52%, all else equal.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

However, our recycling activities will evolve the portfolio mix further, with prospective sales of around GBP 1 billion in the next few years, meaning active portfolio management properties shown in dark blue will again dominate, with Flex also representing almost 40% of the office portfolio. In reality, our sales of long-dated properties will likely be higher still, given our disciplined capital management, as they were in the last cycle with more than GBP 3 billion of disposals. We're also investing to drive income growth with a significant organic rent roll growth opportunity. Our rent roll today is GBP 123 million, up 15% over the year. Over the next two years, this builds by more than GBP 50 million, or 43%, and rises to more than GBP 280 million in the medium term, an uplift of 131%, including the market rental growth we expect to capture.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

Of course, some of this uplift will be tempered through sales of long-dated properties into more stable investment markets, but there's lots of growth to go for, which should deliver a more than threefold increase in EPRA EPS over the coming years. As we said 12 months ago, we expect FY 2025 to be the EPS inflection point at just over GBP 5. From here, as we lease up our onsite developments and refurb program, we expect EPS to more or less double over the next two years, which will accelerate further as we deliver our near-term pipeline and capture market rental growth. Once we factor in finance and other costs to deliver this growth, along with our likely earnings accretive sales, we anticipate annual EPRA EPS of GBP 0.15-GBP 0.20 in four or five years' time.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

As a result, we expect to maintain our progressive dividend policy with potential DPS growth by FY 2027. As we continue to invest for growth, we will be maintaining our financial strength. Following our significant investment activity in FY 2025, LTV is today around 30% as we continue to operate within our 10%-35% through the cycle target range. Interest cover is strong at 10.9x. Our well-timed debt financing activity in the autumn means we've almost GBP 400 million of liquidity, and we've extended our average debt maturity to more than five years, whilst our average weighted interest rate remains in the fours. Looking ahead, as the bar chart shows, we expect LTV to remain above the midpoint of our through-the-cycle range as our investment and divestment activities become more balanced.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

As you know, a couple of big sales can really move the needle and give us significant incremental acquisition capacity. Pulling this all together with our financial outlook, as we deliver and crystallize surpluses in line with our business plan, we expect both property value and NTA growth in this new financial year and beyond based on our current market outlook. The capture of our significant organic rent roll growth opportunity will drive both income and EPRA EPS growth, with an expected threefold EPS increase supporting our progressive dividend policy. We will maintain our diversified debt book along with healthy liquidity and our through-the-cycle LTV range, and over time, our enhanced earnings profile may potentially enhance our credit rating too.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

In sum, through the capture of attractive prime rental growth and our disciplined capital management, we expect a stronger TAR outturn for the year ahead as we move towards delivering a 10%+ annual return on equity before factoring in any potential yield compression. Of course, shareholder returns would be higher still should the share price discount narrow. Now, back to Toby to wrap up.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Thank you, Nick. Let's wrap up then with our outlook. In short, we expect more growth supported by our strengthening market opportunity. During this recent period of elevated political and economic uncertainty, London has become relatively more attractive, consolidating its position as Europe's business capital, with demand for offices running a long way ahead of supply, meaning rents are rising and office values are inflecting.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Plus, we're seeing early signs of an investment market recovery, with Grade A yield compression very much a possibility. With these supportive conditions, we're successfully executing our growth strategy. First, delivering lots of income growth, particularly across our Flex spaces, where we can look forward to NOI rising by more than two and a half times. Second, delivering development surpluses across our best-in-class projects from a base of circa GBP 220 million all the way up to GBP 580 million if markets move in our favor or up to around GBP 1.50 per share. Third, more acquisitions. Fourth, more sales with at least GBP 1 billion over the medium term.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Of course, all this activity is in prime Central London only, with more than 70% in the West End, a market with one of the highest barriers to entry anywhere in the world, and 94% of which is near an Elizabeth Line station. To sum up then, we're well set to capture significant growth. Our operational infrastructure is in place with a deeply experienced team. Our balance sheet is strong, and our prospective return on equity looks attractive, even more so for shareholders should our share rating continue to improve. GPE is in great shape with all to play for, and we can look forward to capturing our strong potential over the next few years. Right, that's the formal bit. We will have some microphones running around the room. I think we've got the senior team here to help us answer some questions. Who'd like to go first?

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Yep, thanks. Thanks, Rob.

[Rob Jones, Operations Oversight Analyst at BNP Paribas]

Morning, Rob Jones from BNP Paribas. Toby, I've got three in total. The first one was on the Savills rent forecasts. I can't remember which slide it was, but you said you thought they were too conservative. I just wanted to understand why you think they're too conservative, or indeed how conservative you think they might be. Secondly, I think it was slide 23 on the development surpluses to come. On that slide, you've got a solid line and two dotted lines either side of it. You said the GBP 270 million surplus to come is your base, but I wonder perhaps if it's not your base case, and maybe the 10% is given that that's the solid line. Then, Nick, you talked about a couple of big sales can really move the needle in terms of firepower.

[Rob Jones, Operations Oversight Analyst at BNP Paribas]

I wonder if you fast forward to 12 months from today, whether you still expect to be the owner of or part owner of Hanover.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Rob, as ever, very good questions. First of all, on the Savills rents, so if you just look at our own performance at the prime end of the spectrum, whether it's Fully Managed at 7.5% last year or our prime offices at 7.6%, that is a rate that is faster than the Savills compounded rate shown in their chart. Okay? On the market, the rental market slide, Rich, we can see what they forecast. I think there are a couple of interesting things about this. Firstly, the West End growth rate over that five years, three years actually, it has, according to Savills, slowed down a bit. At the prime end, I'm not sure that's right.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

I think that's the point we're making. At the prime end, we think we could see some pretty healthy growth from here. The other interesting thing about this is that it's suggesting that secondary rents are now also on the move. Okay? That's what happens when you run out of prime spaces. If you go back to our traffic light slide, Rich, one of the strongest outperformers in the year just gone, you can see their secondary assets, where we were predicting down 2% to flat, and we delivered +4%. Marc, why don't you just give us a very, very quick update on how you're seeing rents in the core of the markets and the West End in particular? Thank you.

[Marc Wilder, Leasing Director at Great Portland Estates plc]

I think there are a load of factors that play into why rent is moving as strongly as it is at the moment.

[Marc Wilder, Leasing Director at Great Portland Estates plc]

Toby's referenced on this particular slide a number of reasons, particularly the strong demand. We know that banking finance is driving that demand. We know that there are expansionary requirements out there. We know that in particular submarkets, and this plays into the rental growth, that there is virtually nothing available. Mayfair and St James's has got 0%. City Core has got 0.1%. Fitzrovia, 0.3%. North of Oxford Street, 0.4%. The combination of lack of vacancy and also the under-offers at the moment, which are 4.1%, which is the highest since Q3 2019, all of that is playing into a number of deals. Last year, there were 137 deals over GBP 100 a square foot across central London. To Toby's point, something like Minerva House, we think that we will benefit from that.

[Marc Wilder, Leasing Director at Great Portland Estates plc]

Not only the sort of grade B stock where people are diverting to, and that goes back to the chart that Toby showed on slide six, but also if you look at super prime rents, we've been a beneficiary with CD&R, where super prime rents now in Mayfair and St James's is GBP 220+ a square foot. If you look at the city, that today is now around GBP 100 a square foot. Again, if you look at the super prime, there it's GBP 120. Sorry, GBP 120 a square foot as well. Lots of examples and lots of good activity, both across the take-up and also the deals that people are prepared to pay. That point of salary costs being 5%-8% of rents is a very real factor.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Yeah. Thank you, Marc. Very helpful. Second question, development returns.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

I think on Nick, on your chart, we show the GBP 342 million, which is essentially suggesting our base proposition is that we are going to get some rental growth. The gearing of development returns into rents is pretty high, especially when yields are where they are. As we know, our costs are broadly fixed. That is why we are seeing that degree of compression, of move up in the profits. Showing up all the way up to nearly GBP 600 million, that is as big a number as we have ever had. Just to put that in context, we have never had the potential to deliver that much surplus, certainly in the 20 however many years I have been doing this. That is a great place from which to build, I think, some proper growth. Third question, firepower. Nick, do you want to touch on that? Yeah.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

Rob, just to add in terms of the we've been very clear around our TAR outlook, and there's a breakdown built in the back of how you get there. That does include some rental growth, both at the investment portfolio level and at the development level, which you should expect. In terms of sales, I think the question was, 12 months from now, will we be stood here saying that we still own Hanover Square? Maybe I'll answer the question differently. Six months' time, I think we probably will be still owning Hanover Square. Twenty-four months from now, may well not. I think that one of the things that you've seen over the course of the last 12 months, as Toby's touched on, investment markets have stabilized, demand for larger lot sizes has increased, but also our long-dated properties have been performing well.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

Clearly, the main event for us at Hanover Square is delivering the rent reviews. They kick off back end of this year. Let's see the level of rent that we capture. We feel very confident around that. I think it's fair to say it's probably not a long-term hold, but it's not a decision that we need to make today. Hopefully, we've given you some reasonably good signaling around the kind of properties we're likely going to be selling. It's long-dated properties, business plans delivered, but more relevantly, where the forward-look returns are below the returns that we need to both deliver our cost of capital and to deliver the TAR target that we've set. What we haven't factored into any of the analysis as yet is sales of Fully Managed properties. That may happen over time.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

We're not remotely wedded to holding any asset if the forward-look returns do not justify that ownership. As you have seen, the performance from Fully Managed continues to be strong. We are really seeing the power of clustering come through. What we are also seeing is not only are we getting great rents when customers are moving in, we are also being able to push those rents on when the vast majority of those customers stay. We think there is more rental growth to come through. One of the things that thematically we are hearing in the market from some of our peers, and they are not direct peers, but those that are operating in the broader Flex arena, is why are rents in the Flex arena not keeping pace with what is going on in the prime category? I think there is an expectation there will be more growth to come through.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

We're certainly delivering that growth. We're doing deals in the City at north of GBP 200 a square foot. We've done one deal in the West End at north of GBP 300. We think there is more growth to come there as well.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Rob, just last point. The Hanover Square, if we can go back to that slide with the picture of Hanover on it, it's not in the 350. It's in the 650. Thank you. Yeah. More. Yeah.

[Callum Marley, Analyst at Kolytics]

Callum Mariley from Kolytics. Three questions, two quick ones first. Great to see the strong top-line rent growth. Could you just provide a little bit more color on underlying like-for-like net rental income growth and how you expect that to evolve, particularly as vacancy has increased and costs are relatively flat?

[Callum Marley, Analyst at Kolytics]

In the half-year results, you had a 2026 rental target of GBP 198 million, I believe, and now you're guiding to GBP 177 million by 2027, so about 10% lower. Can you just outline the main drivers for that decrease?

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Sure. Nick, maybe you want to take the second one. On the first one, Callum, if we just go to the income projections, I think if I understood your question, I think that's answered by the walk that Nick took us through as to what's happening to net rents. Currently GBP 123 million, up 15 in the last 12 from here. We don't give you dates for that, but we do talk about next two years, so you can gauge broadly what's happening within that. Was that broadly what you were after?

[Callum Marley, Analyst at Kolytics]

What if there's a like-for-like number?

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

The like-for-like number is I can't tell you what that is exactly, actually, because it's going to be very dependent on whether or not we sell some of the things. The timing of the sales that we've been talking about, as you heard me say, 50% of the GBP 350 million is under offer. If we sell those very quickly, then the net rental number comes down, or rather some of that rent comes out of the P&L for next year. On the longer-dated stuff, Nick,

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

Just to confirm, your question was, I think, why is that lot together not the same as what we were forecasting or guiding to two years ago?

[Callum Marley, Analyst at Kolytics]

Yeah. It's kind of like one year as well. I think that's the 2027, and the previous deal was the 2026.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

Yeah. Historically, we've done this in a number of different ways.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

We've put no timings on it at all. We've put timings on it year by year, and we've now moved to doing it over periods of time. The reason being, a one-month change in the PC date of a development can clearly make things very, very lumpy. I can come back and give you a more specific question as to which individual buildings may have moved within it. The thing I would be focusing on, candidly, is the entire journey. The fact is that we're not entirely wedded to that 284. I think in reality, things will change between now and then. What we're absolutely focused on is delivering this near-term growth, and we are confident, though, there will be longer-term growth. What that exact number looks like, I don't know, the 284.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

What I do feel confident around, given what our business plan, which involves buying, selling, developing, leasing, is that the growth that feeds through to the EPS level of threefold growth over the next four to five years, I feel very confident around. We know what the levers are that we need to pull, and the vast majority of them are in our control. The one thing that really is a little bit out of our control is the rental growth. The rental growth is not that relevant when it comes to the EPS. It is clearly much more relevant when it comes to the NAV, but we are pretty confident in that rental growth as well. The way we have traditionally made money in this business is through creating a rental story, which you then hold for it or sell.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

The sale, often, we've sold buildings before we've received that rent. If you take a development, for example, if you go back to things like Fetter Lane, we pre-leased it and sold it, or others besides, before we've received the rent. You never see it in the P&L, but we crystallize the surpluses earlier than that.

[Callum Marley, Analyst at Kolytics]

That's clear. Maybe just on that.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

Can you talk into the microphone?

[Callum Marley, Analyst at Kolytics]

Sorry. Maybe just on that last one on that growth profile. Toby, you've been through several economic cycles and just looking at where we are today in the current environment. How do you contrast, obviously, what you're saying with the investment market that's potentially inflecting positively against an operating environment where unemployment and occupancy potentially could be inflecting negative?

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Yeah. I don't think any cycle is the same, first point, although there are often similarities.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

I feel today that there are similarities to some of the conditions we saw in 2012, 2013. As we came out the other end of the sovereign debt moment and the bond taper tantrum that we saw back in that period, we noticed in 2013, for example, a significant pickup in customer demand in 2013 from 2012. It had been quite weak in that two-year period leading up to that. We saw rents correspondingly rise. You can actually see it in some of the data in the back of the deck. There is a long history of leasing and the premium we got to ERVs, and you see it spike in 2013. I think there are some similarities today to that. In other words, limited supply, decent pickup in demand for space, whatever was happening in the macro backdrop.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

One of the points I tried to make earlier was that there is a bit of a disconnect between the London story and the macro story. For example, Liberation Day, relevant for all of us in so many ways, but we are not seeing it at all in customers' any form of changed approach to our own leasing. I'm not even sure the U.K. macro metrics are that relevant when we think about, for example, unemployment and so on, because London is a completely different place. It's an international city. It's a capital city. It's a center of business. It is not a manufacturing hub of any description. It's reliant on skills, and there are lots of them, many in this room, that go to drive demand. Growth in those skills doesn't seem to be slowing up anytime soon.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

I mean, if you look at the jobs growth number we publish in here, that's with pretty anaemic macroeconomic GDP growth. That said, London's GDP forecasts are running at twice the rate of the U.K. overall. I think we published that in the back somewhere. You have a different story. The read across to London from macro issues is quite difficult to do. The other final thing I would say is that it may just be that our friend on the other side of the pond is one of London's greatest supporters, because with all of the noise going on over there, push factors have suddenly become relevant again from the U.S. to here. We're really seeing that. I do not think that's going to slow up as well.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

I think London is presenting itself as actually a relatively stable, strong, deep skills, free, and open city once again, which is a good thing. Interesting. Thank you. Yes.

[Eleanor Frew, Analyst at Barclays]

Eleanor Frewr from Barclays here. Thinking about acquisitions, and at the half-year, you had quite large acquisition A-lists and B-lists. You have obviously now used the rights issue proceeds, still have GBP 45 million acquisitions to come. Maybe how are you thinking about acquisitions ahead of that, if there are still opportunities, or is the focus now shifted to selling? On those A and B lists, was there anything that you missed out on, and why, if so?

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Dan, maybe you would like to take the second part of that question a second, stuff that we perhaps did not do, and maybe just a comment on what we might do from here.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

I mean, Eleanor, I'll take you back to the point I made earlier, which was that we are definitely shifting to a more balanced position. I mean, this time last year, we were super clear. It was not the moment to sell. Let's also be clear, we're not about to sell anything for any price. We'll only sell what we own for the price that reflects the quality of the asset, and in turn, for us, doesn't give us enough prospective returns. The forward IRR is not enough. An institution, for example, can more happily hold a long-dated income stream off a generally lower cost of capital than we have. That transition mechanism of why we exist is very much alive today, much more so than it was 12 months ago, which is why we're moving towards a more balanced position. We will still buy.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

I checked a couple of things just this morning, as I said earlier, on a couple of deals we're working on. They're both accretive. They'll both be the sorts of things we love buying. I mean, the other thing I'd say is, historically, you can actually buy at any point in the cycle and make money if you know what you're doing, you know why you're buying it, and you know how to extract value from it. I remember we bought something in 2007 on Oxford Circus and sold it in 2009. We bought at the top and sold at the bottom, made a positive, unlevered 12% IRR. You can always buy well if you're focused and you know what you're looking for. Stuff we've missed and perhaps some color on how you're seeing the investment market today, Dan?

[Dan Nicholson, Executive Director at Great Portland Estates plc]

In terms of things that we missed, I think we didn't. Short answer. As most acquisitions people always tell you, they get it right. We had four acquisitions last year. We've got two or three which we're still tracking. I mean, we bid in a lot of processes. Our name is out there on stuff that was openly marketed. That's the sort of method of keeping match fit. You often don't expect to win those because there's a lot of other capital that gets exposure to those marketed processes. Our favorite phrase is side doors, not front doors. Side doors being looking at things through relationships with banks, off-market processes. I think all the stuff that we got through those processes and through those side doors, we managed to transact on last year.

[Dan Nicholson, Executive Director at Great Portland Estates plc]

We do have a couple that we're still looking at, which we'd love to buy. One or two have been in the press. We're still tracking them. We never give up. If it's still unsold, we absolutely don't stop. Did we miss them? They haven't transacted, so they don't count as misses in our book. We'll keep pursuing until the conclusion is reached. In terms of the market going forward, I mean, Toby and Nick have talked about the improvement in the investment market. The risk-reward curve has moments and pieces on it which are glowing warmer than the others. Last year, as Toby said, it was value-add stuff. There was a lot of PE money, a bit of private money active in the market.

[Dan Nicholson, Executive Director at Great Portland Estates plc]

There were certain bits of the market that became quite heated, and there was competition in bidding processes. We did take part, but we're sort of pleased not to win them. Actually, you're starting to see the different bits of the risk-reward curve start to become lively. We've seen U.K. institutions come back into the market. L&G bought something, top left-hand side, 30 Golden Square. M&G have an office in the city, under offer, which, again, it's a return from different people that we've seen active over the last year or two. Different parts of the risk-reward sort of curve are starting to become active. What we'd like to do is bid and be successful in the parts where there isn't a huge amount of competition.

[Dan Nicholson, Executive Director at Great Portland Estates plc]

We're constantly looking at where the pressure is, and then we'll dive into the bits where there isn't that pressure. Yes, there will definitely be more. Obviously, it's now a balanced approach with we've got some room left in the rights issue, but obviously, from sales going forward, we'll create some additional liquidity to enable further acquisitions and to keep the team engaged.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Of course, we've got a big ambition in our Fully Managed spaces. We're looking to acquire up from our 560,000 or 1,000,000 sq ft over the next few years. That's a unique offer that nobody else has, which gives us, for the right assets, an edge in the market, for sure. Thank you, Eleanor. Yes.

[Adam Shapton, Analyst at Green Street]

Adam Shapton from Green Street. Just one from me.

[Adam Shapton, Analyst at Green Street]

On one of the Flex sides, you broke out rent free, I think, for the first time. I think it was bundled together with other previously. It looks like, I guess, sort of three, four months on a three-year deal. Just wondering if that's, is that consistent across the portfolio? Is it becoming a market convention? How do you expect it to evolve in the future?

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Simon, do you want to talk about the package of deals that we're typically doing and how you're seeing the evolution of rent free?

[Simon Rowley, Flex Workspaces Director at Great Portland Estates plc]

Yeah. Morning, Adam. We typically grant a month's rent free for each year of income that we're receiving. That's mainly to do with just an incentive. Clearly, the fit-out is already there, so there's nothing that is going into the fit-out. Typically, in the market, that's what you'd expect. It's nothing unusual.

[Simon Rowley, Flex Workspaces Director at Great Portland Estates plc]

That is also being supported by the rental growth that we've seen. The ERV uplifts, but also that average rent over the last year was GBP 206 per square foot, which is pretty much in line with the long-term average of GBP 207. This year, we expect to see more of the same, but actually, more of our void coming through this year is in the West End. I think on slide 61, Rich, there's a pie which shows where our rental tone is. You'll see in the West End, the average rent is GBP 234 per square foot. Mayfair and St James's is there where you might be surprised to see the average rent is GBP 235, less than Soho. The reason being that that's been in slightly secondary assets. We're now delivering E&D, which is 170 Piccadilly. That is going to be a Fully Managed whole building.

[Simon Rowley, Flex Workspaces Director at Great Portland Estates plc]

We are anticipating rents of circa GBP 300 per square foot there. You should expect Mayfair and St James's to tick up. I think that average will increase over this year because of that West End pipeline.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

As those rents go up, what happens to that rent-free package?

[Simon Rowley, Flex Workspaces Director at Great Portland Estates plc]

It remains the same, albeit obviously the value of that rent free naturally has gone up proportionally.

[Adam Shapton, Analyst at Green Street]

Yeah. On renewals, obviously, you're getting impressive retention rates. Any rent-free on renewals, or is that?

[Simon Rowley, Flex Workspaces Director at Great Portland Estates plc]

Typically not. On the renewals, we have a typically 5% annual uplift on our rents, and we're renewing at or above those levels, and typically without rent free and, importantly, without broker fees most of the time.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Yeah. That's a huge leakage if we can save broker fee. What's the typical rate we're paying to brokers on a new letting?

[Simon Rowley, Flex Workspaces Director at Great Portland Estates plc]

On new letting, it's 10% of the gross rent of an annual gross rent blended.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Yeah. Trying to disintermediate that, that's an opportunity as well for us. Sorry, Ella.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

I was going to add to that, Adam. One of the things you've picked up on is we're evolving our disclosure. We'll keep evolving our disclosure. We'll keep doing that to give you more information. Actually, one of the charts, Rich, you had up earlier, we didn't get to—Simon didn't get to touch on all of it, which is the chart about where the demand is coming from. This is really important. We've done the analysis now looking across our customer base. The chart bottom right reaffirms this message that the vast majority of demand we're seeing is not from SMEs. It never has been for us.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

It's been typically from bigger corporates wanting this to be a small part of their overall footprint. That is really important. It's a really important message. It doesn't mean they will be insensitive to how economic conditions evolve, but it does mean that this is proper grown-up businesses actively making the decision to go into spaces that they could fit out themselves, they could manage themselves, but frankly, they don't want to because they'd rather focus on their core business and let us do it for them instead. I think that is a trend that we will see more and more of. We'll see more deals with the likes of Next, Standard Chartered, etc., going forward from it. It's a really important differentiator, not just about what we're doing, but it's about how the market is evolving.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Over the last two years, the average Flex deal size in London has gone up by 45%. Some players are having to reduce their units to get them away. Actually, there is more demand coming through for the bigger units. Witnessing what we do at Next was 12,000 sq ft, 11,500 sq ft. Thanks, Adam.

[Adam Shapton, Analyst at Green Street]

Thank you.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

We have probably got time for one more. Yeah, Mark.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Thank you. Mark from Bank of America. Just a quick follow-up on your—and just to make sure I understand correctly—your valuation surplus, GBP 342 million. Is that taking on board the fact that you are developing at 6% plus yield on cost and the market yield is probably set at 5%? Is that reflecting that, or is this part of the 25 basis points yield compression you are adding on?

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

No, the GBP 342 million assumes no ongoing market compression from here.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

It assumes current yields, but it is the transition of the value of the asset using 10% uplift on prime rents, and costs to deliver based on the existing balance sheet cost of the asset, and then deducting clearly the value from everything. Were we to get yield compression from where we sit today, can we just go to the HQ summary slide? We get yield compression on, say—let's have a look. Minerva should come up in a second, which is in the 5s, cap rate, right? No, the HQ 3. Anyway, if we were to get compression from that level, the 340 goes up. If we were to do better than 10% rental growth—thank you, Rich—bottom left, if we were to do better than the 10% rental growth, as I described, the 111 starts to really motor. As you can see, 10% gets us 133.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

The gearing into that profitability is pretty high.

[Nick Sanderson, CFO and COO at Great Portland Estates plc]

Fair enough. On your GBP 0.15-GBP 0.20 target range, medium term, just making sure medium term means four, five years for you. What could be the reason to beat that GBP 0.20 per share?

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

I think I said in my script, yeah, we are talking about medium term, four to five years. What are the risks associated with it? As I say, it is not rental growth.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Upside risk.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

The things that would provide upside here are if we recycle more, actually, because we will likely be selling assets—I do not need these on when I am looking at this all out. We will likely be selling assets where the yield is lower than our cost of debt. At the moment, we are assuming in this forward look, GBP 1 billion of sales.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

I think in reality, over the medium term of four- to five-year horizon, it's going to be more than that. I think that is something that will come through. Also, this is static. This is not looking at any further acquisitions. Particularly if we deliver, which we still want to, this ambition of the 1,000,000 sq ft, the extra income you get from your Fully Managed will certainly get you nearer, I think, to the 20 than the 15. What clearly we will do, as we always do with our disclosures, as we go forward and get nearer to that four or five years out, we'll get more precise in terms of what the EPS outlook is that we have.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

To be extremely precise here, rental growth, what sort of rental growth are you talking about?

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Are you talking about the 10% rental growth you assume on your?

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Yes, 10% cumulative. You can see it's this very small little bar just there. Okay. Actually, the rental growth consequences are much bigger in valuations than they are in the EPS line, which is often why we sell.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Absolutely. The final one is on capitalized interest. What sort of quantum should we assume here?

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

I mean, this year, capitalized interest was around GBP 30 million in convention with accounting standards. I think the year ahead, it's going to be a little bit higher. It will tail off. I mean, this year, so the year just ended, and the year ahead, I think we'll have EPS growth next year compared to this year. I think we're still in that peak development phase.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Perhaps thinking about it another way around, I look two years forward from now, our LTV is going to be pretty similar. Our net debt to EBITDA multiple will half. The next two years, there is a lot of execution for us to deliver, which we are going to be all on top of, but it will really start to move not just the balance sheet side of the business, but more relevantly, the P&L and income side of the business. That capitalized interest will start to fall down unless the team buy more HQ developments that we can then start to feed into the hopper.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Thank you.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Okay, everybody. Listen, there is clearly lots of growth for us to grab. I hope that was helpful. We are looking forward to rents going up. We are looking forward to values going up. We are looking forward to lots of development surpluses.

[Toby Courtauld, Chief Executive at Great Portland Estates plc]

Look out for some sales from us as this year progresses. As I say, we've put ourselves into an amazing position, and it is now for us to grab it, which we fully intend to do with some of your help, I should add. Thank you very much, everybody, for coming. If you have any further questions, we're always around to help answer them. Thank you.

Participants

Executives

• Nick Sanderson, CFO and COO
• Toby Courtauld, Chief Executive
• Simon Rowley, Flex Workspaces Director
• Marc Wilder, Leasing Director
• Dan Nicholson, Executive Director

Analysts

• Eleanor Frew, Analyst at Barclays
• Callum Marley, Analyst at Kolytics
• Rob Jones, Operations Oversight Analyst at BNP Paribas
• Analyst at Bank of America
• Adam Shapton, Analyst at Green Street