A compelling outlook for real estate has resulted in Helical’s board concluding its strategic review into the company with a three-year blueprint for growth.
Led by chairman Richard Cotton, a comprehensive business review found that the company’s “exciting pipeline of committed developments, which due to the quality of the schemes and anticipated supply shortages, are well placed to attract premium rents and achieve strong returns”.
Writing in annual results, he added: “We are confident that we have a coherent strategy in place to deliver shareholder value. In the meantime, there are very clear priorities for our experienced team of investment and development professionals, centred on reducing the portfolio vacancy in our completed buildings and maximising the potential in our development pipeline, all at a lower operational cost.
“The board is therefore unanimous in its view that, given current market conditions and outlook, the potential returns on a three year view far exceed the likely returns from alternative strategies to return capital to shareholders. To this end, it has signed off on a detailed three year plan, also encompassing business cost reduction and management incentives, which provides a clear blueprint for future growth.”
Annual results to 31 March 2024
The board’s review follows a painful year for the company, in which EPRA net tangible assets (NTA) per share was down 32.9% to 331p (31 March 2023: 493p).
This was primarily driven by the impact of a 95 basis points outward yield movement on its portfolio in the year, increasing the true equivalent yield for the portfolio to 6.34% (31 March 2023: 5.39%) and reducing the investment portfolio valuation to £660.6m (31 March 2023: £839.5m).
EPRA earnings per share was 3.5p (2023: 9.4p), resulting in a vastly reduced dividend for the year of 4.83p (including the proposed of 1.78p per share final dividend (2023 final dividend: 8.70p, 2023 total dividend: 11.75p).
Vacancy rate on its completed assets was 17.6%.
See-through loan to value increased to 39.5% (2023: 27.5%) with a pro-forma LTV, post year-end sales, of 28.7%.
Helical’s development pipeline
- Development has commenced at 100 New Bridge Street, EC4, which is expected to be completed by March 2026.
- Contracts were signed in July 2023, confirming Helical as Transport for London’s (TfL’s) commercial office joint venture partner. The long-term partnership will see the delivery of new high quality and sustainable space predominantly above or adjacent to key transport hubs.
- 10 King William Street, EC4: an eight-storey office development on an island site, located above the recently opened Bank station entrance on Cannon Street, delivering 140,000 sq ft of office and retail space. This development is due to commence in Q4 2024 with completion due by December 2026.
- Southwark Over Station Development, SE1: Located over Southwark tube station, the site benefits from planning for a 222,000 sq ft NIA office scheme. Detailed pre-application discussions are being held with Southwark Borough Council regarding an alternative purpose-built student accommodation scheme. It aims to submit a planning application during Summer 2024, commence on site in July 2025 and complete in Summer 2027.
- Paddington Over Station Development, W2: Situated close to the Elizabeth Line station at Paddington, this 19-storey building will provide 235,000 sq ft of office space. The site will be acquired by the joint venture in January 2026 and the intention is to deliver the scheme in 2029.
- Terms have been agreed, and contracts will shortly be signed, with the long leasehold owner of the existing building at Brettenham House, WC2 for the wholesale refurbishment of the 120,000 sq ft office building with Helical acting as development manager and contributing towards construction costs. Work has already commenced and completion is expected in Q1 2026.
New chief executive
Matthew Bonning-Snook, current property director, will succeed Gerald Kaye as chief executive of the company in July. Kaye will step down at the 2024 AGM after 30 years with the company. He will remain as an external consultant having agreed to support on the delivery of the company’s office developments at 100 New Bridge Street and Brettenham House. Bonning-Snook joined Helical in 1995 and the board in 2007, and been responsible for delivering a significant number of highly profitable projects.
Chairman’s comments
“These results reflect a period of economic volatility, with the higher interest rate backdrop negatively impacting on investment yields and structural challenges in the occupational market.
“Looking forward, with inflation returning to normal levels at 2.3% and interest rates forecast to decline, the investment market is expected to strengthen with rental growth continuing for “best-in-class” office space.
“We have today announced that Gerald Kaye has informed the Board that will be handing over his executive duties and stepping down from the Board at the AGM in July, with Matthew Bonning-Snook succeeding him. I am pleased that Gerald will continue in a consultancy role to deliver our next two projects, at 100 New Bridge Street, EC4 and Brettenham House, WC2.
“Matthew has an extensive track record of delivering highly profitable schemes over nearly three decades at Helical and he is the right choice to maximise the opportunities at the Company. During the year he secured the joint venture with Transport for London (“TfL”)’s property company, Places for London, and the three new schemes added to our pipeline, with the potential for additional opportunities, will form the cornerstone of our exciting development pipeline for the rest of this decade.
“In recent months I have been leading a comprehensive business review, the details of which can be found in my Chairman’s Statement below. In summary, we have an exciting pipeline of committed developments, which due to the quality of the schemes and anticipated supply shortages, are well placed to attract premium rents and achieve strong returns. At the same time, in order to optimise the value of our investment properties, we need to complete our asset management plans, principally through leasing up vacancy, and be ready to realise value as and when liquidity returns to the investment market.
“We are confident that we have a coherent strategy in place to deliver Shareholder value. In the meantime, there are very clear priorities for our experienced team of investment and development professionals, centred on reducing the portfolio vacancy in our completed buildings and maximising the potential in our development pipeline, all at a lower operational cost.
“The Board is therefore unanimous in its view that, given current market conditions and outlook, the potential returns on a three year view far exceed the likely returns from alternative strategies to return capital to Shareholders. To this end, it has signed off on a detailed three year plan, also encompassing business cost reduction and management incentives, which provides a clear blueprint for future growth.”