Helical Bar Regulatory News (HLCL)

26 September 2018

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 April 2018 to 25 September 2018 ("the Period"), in advance of today's tour of its City and Tech Belt properties in London for analysts and investors.

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

"We have made good progress on our current development pipeline, completing the second and final phase at The Bower, and will complete One Bartholomew and the first phase of residential at Barts Square by the end of November 2018.

"Letting progress during the Period has been strong across our London and Manchester portfolios, particularly at One Creechurch Place which is now almost fully let.

"The recent disposal of The Shepherds Building enhances our firepower and we look forward to recycling the equity released from this sale into new projects to create future profits."

HIGHLIGHTS

Portfolio

· We exchanged contracts on the sale of The Shepherds Building in West London to Workspace Group PLC for £125.3m (£835 psf), representing a net initial yield of 4.8% rising to 5.1% on expiry of rent frees. The sale represents a 12.4% premium to 31 March 2018 book value.

· Phase 2 of The Bower, Old Street, comprising 171,434 sq ft of offices and 10,308 sq ft of restaurant use, achieved practical completion on 31 August 2018. 52% of the office space was already let prior to completion as well as 5,395 sq ft of restaurant space.

· We completed the freehold acquisition of Fourways House, Manchester, a c.59,000 sq ft office building for £16.5m.

· Sales of the last three remaining non-core investment assets at Sevenoaks, Reading and Glasgow completed for a combined £28.5m, a premium of 6.6% to 31 March 2018 book values.

Lettings

· Since 1 April 2018 we have let 173,045 sq ft of office space in London. These lettings have generated contracted rents of £11.8m, of which Helical's share is £4.3m, at an average premium of 4.9% to 31 March 2018 ERVs.

· We have let 11,809 sq ft to two restaurant operators at Barts Square, EC1 and The Bower, EC1, generating contracted rents of c.£344,000 (our share).

· We have let a further 12,754 sq ft of office space in Manchester at an average 3.1% premium to 31 March 2018 ERVs, representing contracted rents of c.£316,000. An 18 month extension to an existing lease on 27,220 sq ft at Churchgate & Lee House, Manchester at passing rent has also been agreed.

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 £8.0m 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 pre-let 88,706 sq ft of offices representing 52% of the available space, and 5,395 sq ft of restaurant space, for contracted total gross rental income of £6.1m. These lettings are as follows:

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

· Pre-let 29,671 sq ft during the Period, covering floors seven to nine to an existing tenant of Phase 1 for expansion space; and

· Pre-let 5,395 sq ft during the Period, to restaurant operator, Albion & East, for an urban bar which will include its own on-site gin distillery.

In its entirety, the whole scheme is 74% let with growing interest in the remaining 82,728 sq ft of office space, which comprises the top eight floors 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 completed on the sales of 120 units and exchanged contracts on a further 14 units for a combined gross sales value of £171.9m at an average of £1,558 psf. Delivery of the final units is due in October 2018;

· The second phase of residential, comprising 92 units, was launched in March 2018 and since then contracts on 28 units have been exchanged for a gross sales value of £45.2m at an average of £1,819 psf. Handover of these units will be phased over the period Q4 2019 to Q1 2020;

· The construction of One Bartholomew, a new 12 storey building of 214,033 sq ft, pre-sold to clients of Ashby Capital LLP, continues with completion due in November 2018. The building is currently 25% pre-let following the letting during the Period of the top three floors, comprising 54,482 sq ft, to the Trade Desk Inc.; and

· At 90 Bartholomew Close, a 24,013 sq ft office development, with 6,414 sq ft of restaurant space, we have agreed terms for a letting of the fifth floor, whilst the ground and lower ground restaurant space was let during the Period to Wright & Bell, a restaurant operator.

Farringdon East, EC1

We have taken possession of the site above the Farringdon East Elizabeth Line station and have started construction of a new c.89,000 sq ft office building with a ground floor restaurant unit. Completion of this building is expected in November 2019.

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 a further 47,997 sq ft to three tenants - Hyperion (16,009 sq ft), Coverys (15,994 sq ft) and Softcat (15,994 sq ft); and

· The building is now 86% let, with two and half floors remaining, at average rents of £63.60 sq ft.

The ninth floor and remaining portion of the second floor are under offer which, if let, would take the total amount of space let to 94%, with just the fourth floor remaining.

King Street, Hammersmith W6

Following termination of the development agreement with Hammersmith & Fulham Borough Council and the determination of the value of the land held by the Company (which is in a 50/50 joint venture with Grainger plc) we completed the sale of the land to the Council and received payment in full of £7.5m (our share), an amount in excess of our 31 March 2018 book value.

The Loom, E1

At The Loom, we have let 6,400 sq ft to The Fairtrade Foundation, 3,619 sq ft to Vidsy Media and 15,907 sq ft to Hey Habito, which has expanded into newly refurbished space increasing its occupancy from 7,054 sq ft. These new lettings were at an average of £51.30 psf, a premium of 3.0% to their 31 March 2018 ERVs.

The Shepherds Building, W14

We have exchanged contracts on the sale of The Shepherds Building in West London to Workspace Group PLC for £125.3m (£835 psf), representing a net initial yield of 4.8% rising to 5.1% on expiry of rent frees. The sale price represents a 12.4% premium to the building's 31 March 2018 book value. Completion is due in early October.

Prior to the sale, we had let 12,375 sq ft to four new tenants at an average £49 psf, a premium of 4.3% to their 31 March 2018 ERVs.

Power Road Studios, W4

We have completed two new lettings of 2,594 sq ft at a 29% premium to their 31 March 2018 ERVs.

MANCHESTER PORTFOLIO

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

Churchgate & Lee House

Churchgate & Lee House remains fully let. Asset management during the Period included an 18 month lease extension with UCI on 27,220 sq ft.

35 Dale Street

The offices at 35 Dale Street are now 90% let with the first to fifth floors fully occupied. In the Period we had one new letting of 3,234 sq ft at £24.00 psf, a 7.6% premium to 31 March 2018 ERVs. A further three leases (totaling 11,753 sq ft) have completed during the Period which had exchanged prior to 31 March 2018.

31 Booth Street

At 31 Booth Street, the fifth and sixth floors were let to The Appointment Group Ltd for 5,635 sq ft at £25.00 psf, in line with 31 March 2018 ERVs. Part of the second floor, representing 2,314 sq ft, has been let to Buro Four Project Services. A further 1,571 sq ft on the first floor has been let to Hurley Partners. Good interest has been noted in all the remaining space in the building.

Trinity Court

At Trinity Court, works continue on the refurbishment of the building, increasing it from 47,443 sq ft to 59,051 sq ft. Completion of these works is expected in December 2018.

Fourways House

We completed the freehold acquisition of Fourways House, Hilton Street, Manchester for £16.5m from a private individual in July 2018. The purchase price represents a net initial yield of 5.3%. This brick built Grade 2 listed Victorian former packing warehouse provides c.59,000 sq ft of office space over seven floors.

Since acquisition we have obtained possession of two of the ground floor leisure units which will form part of the planned refurbishment of the atrium.

FINANCING

The Period saw significant activity across finance and treasury. We entered into:

· a £50.4m development and investment facility with Wells Fargo to finance the Farringdon East over-station development. This five-year facility is repayable in July 2023 and protection against increases in interest rates is provided by a 1.75% interest rate cap on £40m between January 2020 and July 2023; and

· a new £150m revolving credit facility ("RCF") with three of our principal lenders, Barclays, HSBC and RBS. This facility replaces the Company's previous £100m RCF with RBS and HSBC, due to be repaid in April 2022 and its £50m RCF with Barclays, due to be repaid in November 2019. The new facility will initially be repayable in July 2023 but incorporates two one-year extensions, exercisable in July 2019 and July 2020 which, if exercised, will extend the facility's repayment date to July 2025. Borrowings under the terms of this new RCF are protected against interest rate rises by £105m of interest rate caps at 1.75% for the initial period to July 2023.

At 25 September 2018, prior to the completion of the £125.3m sale of Shepherds Building, the Company's borrowings comprised:

· £524m of investment/development facilities, of which £334m was drawn down;

· Our share of bank facilities in joint ventures of £58m, of which £51m was drawn down; and

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

The Company has £72m of cash with net borrowings of £413m (31 March 2018: £363m). In addition, the Company has £44m of uncharged investment properties.

BOARD APPOINTMENTS

During the Period we announced the appointment of Joe Lister as an independent Non-Executive Director of the Board and a member of the Audit and Risk, Nominations and Remuneration Committees, with effect from 1 September 2018. Joe is the Chief Financial Officer and an Executive Director of Unite Group plc.

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