Bloomberg News

Great Portland May Bring in Partners to Fund West-End Projects

February 02, 2012

Feb. 2 (Bloomberg) -- Great Portland Estates Plc, the developer focused on London’s West-End district, may bring in joint-venture partners for its Hanover Square and Rathbone Place developments to raise capital for the projects, according to Chief Executive Officer Toby Courtauld.

The company will need to look at all available financing options for the developments because of their size, the CEO said today in an interview. No deal will materialize in the short- term, he said.

“We’re still seeing a significant amount of equity capital coming into London from overseas, which is keeping property yields low,” Courtauld said. Prices are unlikely to fall soon “because demand levels are still very high, particularly from overseas investors such as sovereign wealth funds.”

Great Portland appointed Ken Shuttleworth’s Make Architects to work on a revised plan for the Rathbone Place site north of the Oxford Street shopping district after buying the asset for 120 million pounds ($190 million) in September. The company may bring in sovereign wealth funds or financial institutions as investors in Hanover Square and Rathbone Place, JPMorgan Cazenove analyst Harm Meijer said in a Jan. 31 note.

The developer expects to submit a new planning application for Rathbone Place in the second half, Courtauld said. The company has permission to develop more than 200,000 square feet of offices, apartments and shops at its Hanover Square site in Mayfair.

The CEO spoke after Great Portland reported that the value of its buildings appreciated by 2.6 percent excluding acquisitions and disposals in the quarter through December as overseas buyers fueled demand for London properties.

Bishopsgate Tower

Great Portland is in talks with potential buyers for half of the company’s 50 percent stake in 100 Bishopsgate, an office tower project in the City of London financial district, Courtauld said. Construction won’t proceed until a tenant agrees to lease at least a “significant” amount of the building in advance, the CEO said in November.

“There are not that many tenants looking for pre-let space in the City, as you might expect given the financial services community is having a rough ride. However, there are some, and we will be talking to them,” he said.

The remaining 50 percent stake in 100 Bishopsgate is owned by Brookfield Office Properties, lower Manhattan’s largest landlord. The company doesn’t plan to increase the stake, Martin Jepson, senior vice president for development and investment, said by e-mail on Jan. 19.

Great Portland will look at a “mixed bag” of acquisitions this year, including distressed assets. The CEO doesn’t expect a surge in forced sales.

“That’s partly because London has typically not been a highly levered investment market, it tends to be quite a high equity market,” Courtauld said. “You have to look very hard. You have to dig around in the undergrowth to find interesting deals and that’s what we do.”

--Editors: Ross Larsen, Andrew Blackman.

To contact the reporter on this story: Neil Callanan in London at ncallanan@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.


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