Helical bets on ‘best-in-class’ pipeline as it declares £64.5m loss
Helical has suffered a £64.5m loss, but said its “best-in-class” pipeline puts it in a strong position.
The pretax loss is a sharp fall from last year’s profit of £89m, arising from an £88.1m net loss from sales and revaluation.
Chief executive Gerald Kaye said: “The central London office market has suffered a fall in capital values over the last year and Helical has not been immune to these market movements.”
Helical has suffered a £64.5m loss, but said its “best-in-class” pipeline puts it in a strong position.
The pretax loss is a sharp fall from last year’s profit of £89m, arising from an £88.1m net loss from sales and revaluation.
Chief executive Gerald Kaye said: “The central London office market has suffered a fall in capital values over the last year and Helical has not been immune to these market movements.”
The value of the developer’s see-through investment portfolio fell by 10.1% from £1.09bn in 2022 to £839.5m. Using IFRS, its investment property portfolio value fell to £681.7m from £938.8m. The net asset value was down 11.4% to £608.7m.
Contracted rents were also down to £39m from £46.4m, from an ERV that had also fallen to £60.4m from £67.1m. However the REIT’s share of net rental income increased by 7.2% to £33.5m.
Helical’s vacancy rate jumped from 6.7% to 16.1% over the year, largely due to the JJ Mack Building, EC1, achieving practical completion. Excluding that, the vacancy rate was a stable 6.2%.
The total return of Helical’s property portfolio, as measured by MSCI, was -5.6%. While this is a fall from last year’s performance of 10.7%, it outperformed MSCI’s Central London Offices Total Return Index of -8.6%.
Echoing the sentiments expressed by Landsec and British Land last week, Kaye said the current market should favour quality offices.
“While previous valuation falls have been caused by recessions following periods of economic exuberance leading to an oversupply of new office space, the current decline in values reflects a number of differing cyclical and structural factors,” Kaye said.
“The impact of all these factors has accelerated the bifurcation in the market. With best-in-class property valuations adjusting to reflect the movement in bond yields, it is the older, poorer quality buildings that are facing what is likely to be a deeper correction, with downward price discovery potentially not reaching an endpoint until a lease ends and the rent stops, or from refinancing events.”
He added that tenant demand for the best in class was incredibly strong.
“Against this backdrop, Helical has continued to recycle capital out of its mature, stabilised assets, reduced leverage and cut its ongoing core administration costs by over 13% for the year ahead. As a result, it is well placed to capitalise on any ongoing market dislocation and the structural trends impacting the office sector.”
Recently Helical’s pipeline was boosted by 600,000 sq ft after being selected by Transport for London as its Platinum Portfolio. Kaye said this was “a significant milestone” and “an endorsement of the Helical brand”.
The REIT’s 192,000 sq ft office scheme at 100 New Bridge Street, EC4, is due to start later this year, while the three TfL schemes are expected to start between 2024 and 2026. Kaye said this put Helical in a good position to “deliver best-in-class office space to an undersupplied market” from 2025 to 2029.
Helical also reduced its LTV from 35% to 27.5%.
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