GPE has lined up a pipeline of potential acquisitions valued at almost £3bn as the investor-developer becomes a net buyer of London real estate for the first time in a decade.
The company has spent around £150m on sites since March 2023, chief executive Toby Courtauld told EG as the company published its latest annual results. The average discount that it paid for those assets to their replacement cost – the cost of buying the land and building on it from scratch – was 42%.
“It’s very rare to be able to do that, and it tends to be in disrupted markets,” Courtauld said. “If you look at the investment market, Q1 ’24 is the lowest quarter that we can find in volume of transactions in modern history. You’ve got a disrupted investment market; real prices are down a long way. Hence why we are buying again.”
To back its acquisition spree, the company is launching a rights issue to raise £350m, a figure that will boost the business’s investment capacity to £450m, over and above its existing £500m of development commitments.
“The rights issue fundamentally is about allowing us to do more,” said chief financial and operating officer Nick Sanderson. “What we are looking to do is deploy half of the proceeds to HQ developments and half into new flex opportunities, and we think we will be able to deploy the proceeds over the next 12 to 18 months.”
The company has eight acquisition targets that it terms “A” assets, with a quoted price of £244m and £491m of planned capex that would allow the company to convert the building into flex space or an HQ. Courtauld and the team have estimated that it will complete some £350m of that £735m in opportunities.
“The A list is essentially where we have good information, we are in a one-on-one dialogue and we have enough information to build a business plan,” Courtauld said.
Three of those are near-term, flex-focused deals, with one having just exchanged in the West End, where the company has struck a property swap with the City of London Corporation to acquire the long leasehold at the Courtyard, 1/3 Alfred Place, WC1, for £28.6m, with the simultaneous sale of its short leasehold interest in 95/96 New Bond Street, W1, for £18.23m. The deal will complete next January.
“That site is next to other sites that we own,” said Courtauld, highlighting the company’s goal of creating flex clusters around key transport hubs. “It’s also just north of the Elizabeth Line, and the Elizabeth Line is banging currently – around 325m journeys made been already since it opened.”
Next comes the B list, where Courtauld said the company has less information and is “a bit more remote from a trade”. Those 19 sites have a combined quoted price of £1.17bn, and the team said it will probably complete at least £257m-worth.
Across the A and B lists, some three-quarters of targets by value are in the West End, Midtown and Farringdon, with 16% in the City of London and 10% in Southwark. There is a roughly equal split between sites the company would offer as flex and those that would be more traditional HQs.
In the West End, there are 15 targets spanning 1.1m sq ft, with 71% by value marked for flex and 29% for HQs. Midtown and Farringdon are home to four targets of a combined 540,000 sq ft, 28% of which by value would be flex and 72% HQs.
In the City, there is 442,000 sq ft across four targets, almost all of which would be HQ space, while in Southwark the company is eyeing 233,000 sq ft across four acquisitions, 21% of which is earmarked for flex and 79% for HQs.
The longer-term watch list has 15 sites with a combined asking price of £1.4bn, giving the company a total acquisition pipeline of £2.8bn.
Announcing the company’s results this morning, Courtauld said: “We believe the central London investment market is now at or around its trough and is turning in our favour, with real property values having fallen to 2009 levels, triggered by elevated inflation and high interest rates.
“As a result, we fully expect to add to our growth prospects and have identified a compelling set of accretive acquisition opportunities.”
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