EDITOR’S COMMENT I would have thought it was a tough time to be the chief executive of a listed property company at the moment.
The two big sets of results published this week delivered figures that weren’t pretty. Biggest loss in more than a decade, first time in more than five years that your turnover has dipped below £100m.
But those numbers are for 2020, and the chief executives we spoke to this week are very much focused on the future and the opportunities that the past 12 months or so may well be serving up.
While I am, of course, naturally drawn to pessimism with the journalistic blood in my veins compelling me to look for the bad story (don’t blame us, we can’t help it), I do also love a bit of positivity and silver-lining hunting – and both Landsec and GPE delivered. Both are feeling ready to get buying. And both are actively looking. GPE is looking at a lot – some £1.7bn of potential acquisitions. That is a sizeable uplift on the average amount of kit it has its eye on at any one time, which I’m told is anywhere between £750m and £1.25bn.
The REIT is able to look at more, not just because it is financially robust, but because of the opportunities the worldwide shift we’ve all witnessed over the past year has brought about.
The shutdown in international travel has seen fewer deep-pocketed overseas investors visiting London to buy big, shiny trophy assets or value-add opportunities. The slowdown in that investor base has meant sellers are less inclined to publicly market their assets (no big competition) and more inclined to have quiet chats with people they know have the ability (and capital) to follow through.
The increasing focus on high-quality, environmentally-sound and wellbeing-focused space is also playing into the hands of the likes of GPE. From 2030, building stock that has an EPC rating of less than B will essentially be obsolete. You won’t be able to rent it and you won’t be able to sell it.
EG has done some analysis on stock that won’t reach this level. Guess how much there is? A lot.
And guess how many property owners out there will be able to take an E-rated property to B-rated property and then include all the other bells and whistles occupiers are demanding, from tech capabilities to wellness facilities?
Definitely not a lot.
Even without those opportunities, GPE says its strategic focus on spending more to deliver quality assets will see this week’s figures turned around. Near-term and onsite projects, says chief executive Toby Courtauld, will boost rents by more than 104%.
The cost of Covid for shopping centre owners not quite liquid enough to shoulder the impact of moratoriums is throwing up opportunities in the sector, which are turning Landsec’s head and getting it primed to buy at the right price.
So, while I may secretly have hoped for some messages of doom and gloom for the sector this week, there are indeed some silver linings from a year in which the world shutdown. If you can see the opportunity and are willing to put in some hard graft and capital.
To send feedback, e-mail samantha.mcclary@eg.co.uk or tweet @samanthamcclary or @EGPropertyNews
