Helical Bar Regulatory News (HLCL)

29 March 2019

HELICAL PLC

('Helical'/ 'the Company')

Portfolio and trading Update

Helical plc today provides a portfolio and a trading update covering its activities for the period 1 October 2018 to 28 March 2019 ("the Period").

Commenting on the Company's activities, Gerald Kaye, Chief Executive, said:

"Despite the uncertainty caused by the current political backdrop, we have had a strong six months which has seen us reach practical completion on two office schemes and the first phase of residential at Barts Square, EC1. We have also been successful in attracting tenants to our London and Manchester schemes at record rents for the geographical areas in which we operate.

"We have sold two office buildings at premiums to book value and reduced our LTV to below 30%, significantly increasing our firepower and our ability to acquire new projects. This has been achieved alongside a lengthening of the weighted average maturity profile of our secured loan facilities and a reduction in the average cost of this debt.

"Demonstrating the robust demand for good quality, flexible and well-located office space we continue to see strong interest in the remaining space in our recently completed buildings and make progress in growing contracted rents towards our portfolio's ERV. This letting success provides us with the confidence to continue the search for new projects to add to our current portfolio."

OPERATIONAL HIGHLIGHTS

In our development programme:

· Practical completion was achieved at One Bartholomew, EC1 in December 2018 and at Trinity, Manchester in January 2019;

· Practical completion was achieved at the final buildings in the first phase of residential at Barts Square, EC1 and the sales of 14 units completed;

· Our Farringdon East, EC1 scheme had a 'topping out' ceremony on 22 March and is on course for completion in December this year;

· Refurbishment works commenced at 54 Bartholomew Close for 10,286 sq ft of office space for delivery in September 2019.

On the letting front we had a strong performance during the Period with 101,793 sq ft of new London office lettings and 8,291 sq ft of restaurant lettings across the portfolio delivering contracted rents of £7.61m (Helical share £3.74m at 3.9% above 30 September 2018 ERVs), which included:

· 31,995 sq ft in two lettings at One Creechurch Place, EC3 meaning the 272,505 sq ft office scheme is now 100% let;

· 30,905 sq ft in two lettings at The Tower, EC1 taking occupancy to 70% of the whole building and 83% of the entire scheme;

· An additional 19,619 sq ft let to Trade Desk Inc at One Bartholomew, EC1, increasing their occupancy to 74,210 sq ft;

· A further six office lettings of 19,274 sq ft, representing £1.1m of contacted rents (Helical share £0.9m); and

· Four lettings to restaurants or retailers, including Wagamama at the Tower, EC1 and Stem & Glory at Barts Square, EC1, for contracted rents of £415,000 (Helical share £342,000) at 1.4% above 30 September 2018 ERVs.

In Manchester, four office lettings of 11,957 sq ft generated rental income of £283,000 at 7.4% above September 2018 ERVs.

LONDON PORTFOLIO

Our London Portfolio provides rental income, development profits and opportunities for capital growth in multi-let, flexible office buildings. Strong progress has continued to be achieved over the Period as evidenced by ongoing lettings activity.

The Bower, EC1

The Bower, Old Street EC1 is a 333,181 sq ft development comprising 312,575 sq ft of offices and 20,606 sq ft of bar/restaurant use. Phase 1 of the scheme, comprising 141,141 sq ft of offices at The Warehouse and The Studio and 10,298 sq ft of bar/restaurants, was completed in 2015 and is fully let generating £8.1m of gross rental income. Phase 2, comprising 171,434 sq ft of offices and 10,308 sq ft of restaurant use at The Tower, completed on 31 August 2018.

In Phase 2, we have let 119,611 sq ft of offices representing 70% of the available office space, and all 10,308 sq ft of restaurant space, for contracted total gross rental income of £8.9m. These lettings are as follows:

· Pre-let 59,035 sq ft, comprising the first six floors, to WeWork, the flexible shared office provider;

· Let 29,671 sq ft, prior to completion, on floors seven to nine to an existing tenant of Phase 1 for expansion space; and

· Let 5,395 sq ft, prior to completion, to restaurant operator, Albion & East, for an urban bar which will include its own on-site gin distillery.

During the Period, we have:

· Let 19,576 sq ft, on floors 10 and 11, to Brilliant Basics ("Infosys");

· Let 11,329 sq ft, on floor 17, to Finablr Ventures Holdings Limited; and

· Let 4,913 sq ft to restaurant operator Wagamama.

The Bower is now 83% let with good interest in the remaining 51,823 sq ft of office space, which comprises floors 12 to 16 of The Tower.

Barts Square, EC1

Barts Square, EC1 is a 3.2 acre development project situated between St Paul's Cathedral and Smithfield Market and a short walk from the Farringdon East Elizabeth Line Station. The scheme consists of 236 residential apartments, three office buildings of c.248,000 sq ft and 21,824 sq ft of retail/restaurant use as well as major public realm improvements.

· Of the first phase of 144 residential units, we have now completed on the sales of 134 units for a gross sales value of £171.8m at an average of £1,558 psf;

· The second phase of residential, comprising 91 units, was launched in March 2018 and since then contracts on 37 units have been exchanged for a gross sales value of £63.0m at an average of £1,810 psf. Completion of these units will be phased over the period Q4 2019 to Q1 2020;

· Both of the restaurant units in the first phase were let in the Period representing 3,101 sq ft at average contracted rents of £41.90 psf.

· One Bartholomew, EC1, a new 12 storey building of 214,434 sq ft, pre-sold to clients of Ashby Capital LLP, was completed in December 2018. The building is currently 35% let following the letting of the top four floors, including an additional floor during the Period, comprising 74,210 sq ft, to the Trade Desk Inc.;

· At 90 Bartholomew Close, a 24,013 sq ft office development, with 6,414 sq ft of restaurant space, we have let the first floor, comprising 4,642 sq ft. The ground and lower ground restaurant space is let to Wright & Bell, a restaurant operator trading as Lino; and

· At 54 Bartholomew Close, work has commenced on the refurbishment of this building which, on completion in September 2019, will provide 10,286 sq ft of office space.

Farringdon East, EC1

The development of the over-station development at Farringdon East had a 'topping out' ceremony on 22 March and we expect to complete construction in December 2019. Once finished the over-station development will comprise a six storey 86,163 sq ft office building with a 2,419 sq ft of retail/restaurant unit.

One Creechurch Place, EC3

This 272,505 sq ft office building, developed in joint venture with Healthcare Of Ontario Pension Plan ("HOOPP"), was completed in Q4 2016. During the Period, we let the remaining 31,995 sq ft and the building is now fully let at an average contracted rent of £63.60 psf and a WAULT on the office space of 11.7 years.

The completion of the letting of this office building will allow Helical to receive the balance of its profit share and its original equity share in the project, which will be reinvested into new opportunities.

The Loom, E1

During the Period we completed four new lettings on 11,154 sq ft at average contracted rents of £52.75 psf, an 8.3% premium to 30 September 2018 ERVs. The building (comprising 108,640 sq ft of offices) is now 98% let with 1,725 sq ft being refurbished before being marketed for letting.

Power Road Studios, W4

This 57,585 sq ft office building is 69% let and during the Period we completed a new letting for 3,478 sq ft at £38.50 psf, marginally above 30 September 2018 ERVs.

MANCHESTER PORTFOLIO

Our Manchester Portfolio provides rental income and opportunities for capital growth in multi-let, flexible office buildings.

Churchgate & Lee House

Terms have been agreed to pre-let circa 27,000 sq ft of space which will become vacant in April at a rental level which is 22% above its current level and on new ten-year leases. Terms have also been agreed to let the 8,208 sq ft of newly refurbished space which, once completed, will make the 245,529 sq ft office building fully let.

35 Dale Street

The last unit (6,900 sq ft) in this building, comprising 47,041 sq ft of offices and 7,071 sq ft of retail, has been let in the Period taking it to full occupation.

Trinity

Redevelopment works on this 54,807 sq ft office and 4,387 sq ft retail building completed in January 2019 and it was launched to the letting market in February. There is a significant amount of tenant interest in this newly refurbished building and we are confident that it will be substantially let during the course of this year.

Fourways House

We acquired this building (comprising 42,789 sq ft of offices and 16,278 sq ft of retail/restaurant use) in July 2018 and we have begun to apply our asset management skills. In the Period we completed three new lettings of 5,057 sq ft at average rents of £24.00 psf.

SALES

During the Period we completed on the sale of Shepherd's Building W14, exchanged in the first half of the year, for £125.3m and at a 12.4% premium to 31 March 2018 book value and sold 31 Booth Street, Manchester for £11,925,000 and at a 20.5% premium to 30 September 2018 book value.

FINANCING

During the Period we:

· Extended the repayment date of our £200m loan facility, which finances The Bower, EC1, by 20 months from November 2019 to July 2021;

· Extended the repayment date of our development facility on Barts Square, EC1 by 24 months from December 2019 to December 2021, and reduced the facility from £133m (Helical share £58m) to £118m (Helical share £52m); and

· Repaid £31m of our long term investment facility, due for repayment in December 2024, following the sale of The Shepherds Building in October 2018, reducing the facility from £124m to £93m.

As a consequence of these changes the weighted average maturity of our secured loan facilities, assuming the two one year extensions of our £150m RCF are exercised, is 4.2 years (30 September 2018: 4.0 years) and our weighted average cost of debt is 4.0% (30 September 2018: 4.3%).

At 28 March 2019, the Group's borrowings comprised:

· £493m of secured investment/development facilities, of which £330m was drawn down;

· Our share of secured bank facilities in joint ventures of £52m, of which £49m was drawn down; and

· A £100m unsecured Convertible Bond, due for repayment or conversion in June 2019.

The Group has £201m of cash with net borrowings of c.£278m (30 September 2018: £399m).

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