Gerald Kaye, Chief Executive, commented:

“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, with our portfolio experiencing a valuation decline of 10.1% (on a like-for-like basis).

“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.

“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.

“Tenant demand for the best, newly developed or refurbished buildings at the forefront of sustainability with top quality amenities is strong, and seeing rising rental values.

“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.

“Being selected by Transport for London (“TfL”) as their joint venture partner for the Platinum Portfolio was a significant milestone, boosting our development pipeline by almost 600,000 sq ft, with the potential for additional schemes to be added to the joint venture in the future. This collaboration with TfL, one of London’s largest landowners, is an endorsement of the Helical brand and recognises our track record of producing high quality, successful developments across central London over many years.

“With 100 New Bridge Street, EC4, our 192,000 sq ft office scheme, due to start later this year and the three TfL schemes anticipated to start over the period from 2024 to 2026, this pipeline, our most significant for a number of years, is scheduled to deliver best-in-class office space to an undersupplied market from 2025 to 2029.

“London remains a leading world city and, barring economic or geopolitical catastrophe, there will be ongoing demand for best-in-class office buildings from occupiers who require well located, highly sustainable offices with good amenities, which are essential in attracting and retaining the top talent. There remains a shortage of this best-in-class newly refurbished or redeveloped office space in central London, enabling landlords to command premium rents, a dynamic that is likely to persist for the rest of this decade as the market plays catch up.

“With an experienced management team, a substantial development pipeline, no legacy assets and historically low gearing levels, Helical is well positioned to capitalise on the structural trends impacting the office sector.”

Operational Highlights

Disposals of £233m (our share £213m) achieved at 3.7% above book value

  • On 21 September 2022, we completed the disposal of the single asset company, Farringdon East (Jersey) Limited, which owns the long leasehold interest in Kaleidoscope, EC1, to Chinachem Group. The disposal price of £158.5m, a premium to 31 March 2022 book value, reflected a net initial yield of 4.3% and a capital value of £1,789 psf.
  • We also completed the disposal of Trinity in Manchester on 20 May 2022 to clients of Mayfair Capital for £34.6m (£590 psf), reflecting a net initial yield of 5.0%. The sale represented a premium to 31 March 2022 book value, net of rental top ups, and concluded the disposal of our Manchester office portfolio.
  • 55 Bartholomew, EC1, an office building located in the Barts Square development, was sold on 14 June 2022 to a private European investor for £16.5m (our share £8.2m), reflecting a net initial yield of 4.5% and a premium to 31 March 2022 book value.
  • We completed the sale of 14 apartments at Barts Square for total sale proceeds of £19.7m (our share £9.9m), with the sale of the final apartment in this 236 unit residential scheme completing after the year end. We also completed the sale of the freehold of the entire residential estate to its residents for £3.7m (our share £1.8m).

Continued lettings momentum delivering £5.4m (our share £3.4m) of contracted rent at a 6.9% premium

  • In the year, we completed nine new lettings totalling 65,550 sq ft, delivering contracted rent of £5.4m (our share £3.4m) at a 6.9% premium to 31 March 2022 ERVs. Lettings include:
  • The sixth and seventh floors at The JJ Mack Building, EC1 to Partners Group, a leading global private markets firm. The 37,880 sq ft letting represents an 11.7% premium to 31 March 2022 ERVs.
  • The 12th floor at The Tower, EC1, comprising 9,572 sq ft, to fintech business Stenn at a rent of £80 psf, in line with 31 March 2022 ERVs.
  • The 1,880 sq ft ground floor unit at 25 Charterhouse Square, EC1 to natural stone purveyors, SolidNature, in line with 31 March 2022 ERVs.
  • Two lettings totalling 6,999 sq ft at The Loom, E1 at rents in line with 31 March 2022 ERVs.
  • Four retail units totalling 9,219 sq ft at Barts Square, EC1 to Michelin-starred Restaurant St Barts, LAP Bikes, MyLuthier and Little Farm/Athletic Fitness, leaving only one retail unit remaining available.

Development milestone hit at 100 New Bridge Street, EC4

  • At 100 New Bridge Street, EC4, the City of London has resolved to grant planning permission and the formal decision notice will be issued upon signing of the Section 106 Agreement. On completion in Q2 2025, the carbon friendly new building will be one of the most sustainable in London and will provide 192,000 sq ft of net internal area across 10 floors, including two additional new floors which will benefit from exceptional views of St Paul’s Cathedral. Construction work is anticipated to commence in Q4 2023 once Baker McKenzie vacate the building.

600,000 sq ft expansion of development pipeline following TfL joint venture selection

  • In February 2023, Helical was selected by Transport for London’s wholly owned commercial property company, TTL Properties Limited, as the investment partner for its commercial office portfolio joint venture. Contracts are expected to be signed shortly to formalise the joint venture. The portfolio will create well‐connected, highly sustainable and inclusive workspaces across central London and initially will be seeded with three over‐station development sites, namely:
  • Bank Over-Station Development – located above the recently opened Bank station entrance on Cannon Street. This eight-storey office development will measure 142,000 sq ft and the joint venture intends to start on site in 2024.
  • Southwark Over-Station Development – located above Southwark Tube station. The scheme has consent for a 220,000 sq ft hybrid timber office building over 17 floors. The development is expected to start on site in 2025.
  • Paddington Over-Station Development – located on the Grand Union Canal, close to the Elizabeth Line station at Paddington. This 19-storey building will provide 235,000 sq ft of office space and construction is expected to commence in 2026.

Financial Highlights

Earnings and Dividends

  • IFRS loss of £64.5m (2022: profit of £88.9m).
  • See-through Total Property Return1 of -£51.4m (2022: £89.5m):
  • Group’s share1 of net rental income increased 7.2% to £33.5m (2022: £31.2m).
  • Net loss on sale and revaluation of investment properties of £88.1m (2022: gain of £51.7m).
  • Development profits of £3.2m (2022: £6.6m).
  • Total Property Return, as measured by MSCI, of -5.6%, compared to the MSCI Central London Offices Total Return Index of -8.6%.
  • IFRS basic loss per share of 52.6p (2022: earnings of 72.8p).
  • EPRA earnings per share1 of 9.4p (2022: 5.2p).
  • Final dividend proposed of 8.70p per share (2022: 8.25p), an increase of 5.5%.
  • Total dividend for the year of 11.75p (2022: 11.15p), an increase of 5.4%.

Balance Sheet

  • Net asset value down 11.4% to £608.7m (31 March 2022: £687.0m).
  • Total Accounting Return1 on IFRS net assets of -9.4% (2022: 15.0%).
  • Total Accounting Return1 on EPRA net tangible assets of -12.1% (2022: 10.2%).
  • EPRA net tangible asset value per share1 down 13.8% to 493p (31 March 2022: 572p).
  • EPRA net disposal value per share1 down 11.1% to 490p (31 March 2022: 551p).

Financing

  • See-through loan to value1 decreased to 27.5% (31 March 2022 restated2: 35.0%).
  • See-through net borrowings1 of £231.4m (31 March 2022 restated2: £388.3m).
  • Average maturity of the Group’s share1 of secured debt of 2.9 years (31 March 2022: 3.0 years).
  • Change in fair value of derivative financial instruments credit of £12.8m (2022: £18.0m).
  • See-through average cost of secured facilities1 of 3.4% (31 March 2022: 3.2%).
  • Group’s share1 of cash and undrawn bank facilities of £244.2m (31 March 2022 restated2: £147.0m).
  • Helical elected to become a REIT, effective 1 April 2022, and is exempt from UK corporation tax on relevant property activities.

Portfolio Update

  • IFRS investment property portfolio value of £681.7m (31 March 2022: £938.8m).
  • 10.1% valuation decrease, on a like-for-like basis1 (7.7% including sales and purchases), of our see-through investment portfolio, valued at £839.5m (31 March 2022: £1,097.3m).
  • Contracted rents of £39.0m (31 March 2022: £46.4m), compared to an ERV1 of £60.4m (31 March 2022: £67.1m).
  • See-through portfolio WAULT1 of 5.0 years (31 March 2022: 5.6 years).
  • Vacancy rate increased from 6.7% to 16.1%, primarily due to The JJ Mack Building, EC1 achieving practical completion during the year, excluding which the vacancy rate was 6.2% (31 March 2022: 6.1% on a like-for-like basis).

Sustainability Highlights

  • Net Zero Carbon Pathway published in May 2022, setting out our commitment to becoming a net zero carbon business by 2030. Signatory to the BPF Net Zero Pledge and the Better Build Partnership Climate commitment.
  • The JJ Mack Building, EC1 achieved 2018 BREEAM “Outstanding” at the design stage and an EPC A rating following practical completion. A NABERS 5 Star rating is anticipated, reflecting our commitment to achieving excellent energy efficiency in operation.
  • Improvements across sustainability measures, with 5 Star GRESB ratings awarded for both our standing investments and our developments and a CDP Score of B (up from C). We have also retained MSCI ESG AAA and EPRA Sustainability BPR Gold.