Helical Bar Regulatory News (HLCL)

29 March 2018

HELICAL PLC

('Helical'/ 'the Company')

Portfolio and trading Update

TRANSFORMATIVE PERIOD DELIVERS PORTFOLIO FOCUS

Helical plc today presents a summary of its portfolio and a trading update covering its activities for the period 1 October 2017 to 28 March 2018 ("the Period").

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

"The sale of our industrial assets, generating £170m of gross proceeds, saw us largely complete the repositioning of the portfolio as planned. Including the recent disposal of C-Space, London EC1 and one further non-core regional asset, we have sold over £250m of investment assets since 30 September 2017, at an overall 8.5% premium to book value. These sales, taken with the sale of our retirement village portfolio for £102m in November 2017, have reduced Helical's net debt from £626m at 30 September 2017 to £373m.

"During the period we have let over 254,000 sq ft of office space in our London and Manchester portfolios with ongoing discussions with potential tenants on some of our remaining available space.

"With just a couple of small non-core disposals still to be undertaken, Helical's core portfolio now consists of eight London projects and four Manchester assets, including our exciting new office scheme above the Elizabeth Line station at Farringdon East, EC1. Over the last few years we have been positioning our office portfolio to provide clusters of multi-let, flexible office buildings with a variety of lease lengths available. Driven by what businesses desire, we provide internal shared spaces or use external public realm to enhance the experience of tenants. We believe we have the nucleus of a portfolio that provides exactly this kind of flexible space and are looking to grow from here to build on the successes of the last few years."

HIGHLIGHTS

· Sale of over £352m of assets including the entire industrial portfolio for £170m, the retirement village portfolio for £102m and London office scheme, C-Space, EC1 for £74m

· Strong addition to pipeline of future London office schemes with new £120m, 90,000 sq ft office development above the Elizabeth Line station at Farringdon East;

· Approaching completion of the second and final phase of works at The Bower, Old Street, EC1 with good interest in the remaining 119,667 sq ft available space;

· At Barts Square, EC1 we expect to complete the current works during 2018 as planned, following the successful transition from Carillion as main contractor. The second and final phase of the residential has been launched and 22 of the 92 units have been reserved in the first three weeks of sale, for an aggregate value of £30.1m (£1,782 psf);

· At One Creechurch Place, EC1, 186,194 sq ft has been let, taking it to 68% let with a further 6% under offer;

· At 25 Charterhouse Square, EC1, the entire building was let in less than nine months since completion of the refurbishment works in March 2017, at an average rent of over £75 psf for the 38,355 sq ft of office space, establishing a new record rent for the Farringdon area;

· In Manchester, work has started on the refurbishment of the offices at Trinity Court, which will increase the building's GLA by 17% to 55,672 sq ft; and

· At 35 Dale Street, Manchester, we have completed four new leases and exchanged agreements for lease on a further three leases, totalling 28,508 sq ft, securing contracted rents of £0.6m.

LONDON PORTFOLIO

Our London portfolio provides rental income, development profits and opportunities for capital growth in multi-let, flexible office buildings. Good progress has continued to be achieved over the period evidenced by ongoing lettings activity, strong residential sales at our Barts Square development and the addition to our pipeline through the acquisition at Farringdon East.

At Barts Square, EC1

· We have completed on the sales of 71 residential units (£86m), with 59 further sales exchanged (£80m) and one additional unit under offer on the first phase of 144 units. In aggregate, sales in this phase total £166m at an average of £1,557 psf. Delivery of the remaining units is now expected in the period April to June 2018;

· The second phase of residential, comprising 92 units, was launched on the 8 March 2018 and since then 22 units have been reserved for an aggregate £30.1m (£1,782 psf). This phase is due for completion by October 2019;

· One Bartholomew Close, a new 12 storey office building of c. 213,000 sq ft, pre-sold to clients of Ashby Capital LLP, is due for completion by Q4 2018;

· At 90 Bartholomew Close, our 24,000 sq ft office development, with 4,000 sq ft of ground floor restaurant space, was launched to the market on the 7 March 2018, and has generated a significant level of interest from potential tenants; and

· The main contractor at Barts Square, Carillion, which went into liquidation on the 15 January 2018, has been replaced by Mace (One Bartholomew Close), McLaren (phase 1 residential) and QOB (90 Bartholomew Close) and each element of the scheme is back fully operational. A main contractor for the second phase of residential is expected to be appointed in Q2 2018. Whilst there has been some delay to the project arising out of the replacement of Carillion, the majority of additional costs are expected to be covered by existing contingencies.

At Farringdon East, EC1

· We have exchanged a development agreement with Transport for London ("TFL") with respect to the Over Station Development at the Farringdon East Elizabeth Line Station which will lead to the creation of an office-led scheme with a gross development value of over £120m;

· A new 150-year lease is to be granted by TFL on handover of the site which is due in April 2018;

· The site has planning permission for a six storey office building of c.90,000 sq ft with a retail/restaurant unit on the ground floor; and

· The building will sit immediately to the east of Smithfield Market with views over Charterhouse Square and towards St Paul's Cathedral. Completion of the scheme is due in October 2019.

At 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 186,194 sq ft to four tenants, Hyperion (115,910 sq ft), Travelers (15,969 sq ft), Enstar (31,958 sq ft) and Dell Corp. (22,357 sq ft);

· The sixth floor (15,994 sq ft) is currently under offer and there is interest being shown in the remaining space (70,317 sq ft).

At The Bower, EC1

· Phase 2 of the development (178,571 sq ft), the refurbishment of The Tower, is due for completion in June 2018. We have pre-let 58,904 sq ft to WeWork and there is a good level of interest in the remaining space.

25 Charterhouse Square, EC1

· During the period we let 24,768 sq ft to three separate tenants at an average rent of £75.67 psf for 19,630 sq ft of offices and at £59.35 psf for 5,138 sq ft of retail. The building is now fully let.

The Loom, E1

· We completed four new lettings in December 2017 totalling 9,385 sq ft, all at rents at or above September 2017 ERV; and

· We have recently let 1,830 sq ft of newly refurbished space at its ERV of £52.50 psf to a digital marketing creator. Of the remaining 12,120 sq ft of available space, 6,400 sq ft is under offer at ERV.

At C-Space, EC1

· We purchased this building in June 2013 and completed its redevelopment in October 2015, including 12,000 sq ft of additional space to increase it to 61,973 sq ft, at a total cost of c.£36m; and

· The building was fully let by October 2016 at average rents of c.£59 psf and was sold in November 2017 for c.£74m.

MANCHESTER PORTFOLIO

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

Trinity Court

· We acquired this 47,443 sq ft office building in May 2017 for £12.9m and have obtained planning permission during the period to refurbish the building increasing it to 55,672 sq ft; and

· Works started in February 2018 and are expected to complete in Q1 2019.

35 Dale Street

· We have refurbished 38,000 sq ft of office space and 6,000 sq ft of leisure space;

· We have completed four new leases, totalling 16,741 sq ft and exchanged on three agreements for lease on 11,767 sq ft, securing contracted rents of £0.6m;

· Two further lettings are in solicitors' hands for 4,777 sq ft; and

· Following this activity c.60% of the 53,365 sq ft office building is now let with 21,728 sq ft remaining.

31 Booth Street

· The 25,441 sq ft refurbished office building was completed in March 2017;

· We have completed one new lease for the ground and lower ground floors, totalling 4,278 sq ft, at £25.71 psf; and

· 21,163 sq ft remains available to let.

NON-CORE PORTFOLIO

During the period, disposals generated sales proceeds of £280m comprising:

· Our retirement village portfolio sold for £102m, a discount of 13% to its 31 March 2017 book value, with £26m deferred for 12 months until November 2018;

· Our industrial portfolio sold, in two separate transactions, for gross proceeds of £170.3m, a premium of £19.5m to its September book value of £150.8m; and

· Our offices in Crawley sold for £7.9m, in line with its September 2017 book value;

FINANCING

The period saw significant activity across finance and treasury. We:

· Repaid our £102m investment facility with Deutsche Pfandbriefbank AG following the sale of C-Space, EC1 and the refinancing of The Loom, E1 and Churchgate and Lee House, Manchester with Aviva;

· Increased our investment facility with Aviva, due for repayment in December 2024, by £45m to £124m;

· Transferred our £60m development facility with HSBC, with £45m drawn down, to the purchaser of our retirement village portfolio;

· Repaid our 6.0% £80m Retail Bond with an £8.7m redemption premium, reducing future interest rate payments by £11.1m, a net saving of £2.4m in total;

· Repaid the outstanding £54m debt on our revolving credit facility with Barclays and reduced the facility from £90m to £50m (all undrawn);

· Reduced the amount drawn down on our £100m revolving credit facility with RBS/HSBC by a net £38m, leaving £23m outstanding and £77m undrawn;

· Agreed a £50m five-year development and investment facility for our office scheme at Farringdon East, EC1; and

· Following the repayment of bank facilities we have cancelled c.£180m of interest rate swaps for varying lengths with an average swap rate of c.2.1% at a cost of £5.1m. Whilst this will reduce our expected EPRA NAV per share at 31 March 2018 by c.4.3p, there will be a corresponding reduction in future interest costs, initially of £3.5m pa.

At 28 March 2018, the Company's borrowings comprised:

· £474m of investment facilities, of which £319m was drawn down;

· Our share of bank facilities in joint ventures of £58m, of which £50m was drawn down; and

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

Following all this activity, the Company has £96m of cash with net borrowings of £373m (30 September 2017: £626m). In addition, the Company had £77m of uncharged investment properties.

EXECUTIVE COMMITTEE

The Company recently announced the promotion of James Moss, Group Financial Controller, and Tom Anderson, Senior Investment Executive, to Helical's Executive Committee.

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