Helical Bar Regulatory News (HLCL)

22 April 2024 HELICAL PLC

("Helical" or the "Company")

Trading Update for the Period Since 8 January 2024

Helical today provides an update covering its trading activity for the period 8 January 2024 to 19 April 2024 ("the Period") in advance of the publication of its Full Year results, which will be announced on Thursday 23 May 2024.

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

"We continue to build on the momentum since our last update in January with new leases signed at The JJ Mack Building and The Bower at values above 31 March 2023 ERVs, with further space under offer, while rent collection for the year remains robust at 99%.

"The sale of 25 Charterhouse Square, EC1, continues the recycling of equity from our investment portfolio. The proceeds will be used to reduce our borrowings in advance of us progressing our funding for the next stage of our development pipeline.

"The above activity, coupled with wider market data points, provides further encouragement that the prime London office letting market is trending positively. We are looking ahead to the rest of year with cautious optimism as we progress the delivery of best-in-class office space into what is becoming an increasingly undersupplied market."

The JJ Mack Building, EC1

The JJ Mack Building, EC1 is a best-in-class office building comprising 200,611 sq ft of office space across 11 floors, together with 5,439 sq ft of ground floor retail. During the period, we completed:

· The letting of the 15,484 sq ft eighth floor to Three Crowns LLP, a leading international arbitration firm, at a premium to the March 2023 ERV.

· The letting of two of the three ground floor retail units to Sainsbury's.

In addition, the fourth floor (23,566 sq ft) and the ground floor office space (7,128 sq ft) are under offer. On completion, a total of 169,421 sq ft (82%) will be let with good interest being shown in the remaining fifth and tenth floors and ground floor retail unit.

The Bower, EC1

The Bower, EC1 is a landmark scheme comprising 312,573 sq ft of office space across The Tower, The Warehouse and The Studio, together with 21,059 sq ft of restaurant and retail space.

· On 27 October 2023, following non-payment of rent for the September quarter, we exercised our right to forfeit the individual leases for six floors let to WeWork in The Tower. Subsequently, we entered into a short-term licence arrangement with them to re-occupy the space until 25 December 2023, following receipt of a fee equivalent to the whole of the September quarter's rent and service charge due under the terms of the previous contractual arrangements.

· Since then, we have:

- Signed a lease with WeWork to 14 June 2024 outside the Landlord and Tenant Act at the pre-existing rent on the third floor, to enable them to continue to meet their obligations to their customer Stripe.

- Let the 11,306 sq ft 16th floor as expansion space for Verkada, who also occupy the 17th floor, at 31 March 2023 ERVs.

- Let the 9,568 sq ft 14th floor to Incubeta, who are an existing tenant moving from the 16th floor, at a rent above the March 2023 ERVs.

- Signed a management agreement with InfinitSpace to provide serviced offices on the first and second floors at The Tower, which were previously let to WeWork. InfinitSpace has subsequently signed five of the previous members of WeWork, comprising circa 90 desks and representing approximately half a floor of The Tower. A marketing campaign to attract further members to the scheme has commenced which has generated a significant uptake in interest in the remaining space.

Following these initiatives, The Tower is 85% let, up from 62% following the forfeiture of the original WeWork leases, with good interest being shown in the remaining space from existing and potential new tenants. The Warehouse and The Studio remain 100% let.

Operational Performance

Rent Collection

· As at 19 April 2024, we had collected 98.4% of the March quarter rent (5 April 2023: 97.6%) and expect to collect a further 1.6% via agreed payment plans.

· We have now collected 99.0% of all rent contracted and payable for the financial year to 31 March 2024. Of the balance, 0.6% remains to be collected via payment plans with the remaining 0.4% subject to ongoing discussions or written off.

Sales

We exchanged contracts on the sale of the long leasehold interest in 25 Charterhouse Square, EC1 for £43.5 million to Ares Management on 25 March 2024, reflecting a 6.5% discount to 30th September 2023 book value. The sale will complete on 25 April 2024 and the proceeds will be utilised to repay borrowings on our revolving credit facility. The six-storey, 42,921 sq ft scheme was redeveloped by Helical in 2017 and at the point of sale, the office space was let to Anomaly, Hudson Sandler, Entain and SolidNature.

Development Pipeline

· 100 New Bridge Street - Our best-in-class office development at 100 New Bridge Street, EC4, is adjacent to City Thameslink and a short walk from Farringdon and Blackfriars stations. In the period, we have obtained a Section 73 planning approval to enhance the ground floor amenity and improve the floorplate efficiency. This carbon friendly, new building will provide 194,000 sq ft of office space across seven retained floors and three new floors once completed in Q1 2026. We are progressing talks with a 50:50 joint venture partner, which we anticipate concluding in the near future, and expect to sign the main construction contract and development debt facility at the same time.

· 10 King William Street - This eight storey office development located above the recently opened Bank station entrance on Cannon Street will deliver 142,000 sq ft of prime space. Since formation of the joint venture with Places for London (TfL), we have been progressing the enhancement of the scheme alongside Fletcher Priest Architects and the wider professional team. We have submitted a non-material planning amendment application under Section 96a to introduce significant public realm improvements, making Abchurch Lane a shared space and a much improved cycle arrival experience, and the inclusion of a wellness lounge at mezzanine level. Initial enabling works are due to take place over the course of the summer in readiness for a formal start on site in October of this year. Construction tendering is ongoing and we aim to achieve practical completion of the scheme by December 2026.

· Paddington OSD - Situated close to the Elizabeth Line station at Paddington, this 19-storey building will provide 235,000 sq ft of office space. In the period, we have submitted a non-material planning amendment application under Section 96a to introduce terracing to each individual office floor and we continue to develop the design to enhance the scheme with a particular focus on the end of trip facilities and arrival experience. We are due to acquire the site, in joint venture with Places for London, in January 2026.

· Southwark OSD - We are having detailed discussions with Southwark Borough Council regarding a purpose-built student accommodation scheme comprising c.430 studio units together with the delivery of a separate on-site affordable housing building. We aim to submit a planning application during the summer with the ambition to have an implementable consent by the time the site is purchased in July 2025.

Financing

£300m Revolving Credit Facility ("RCF")

During the period the Group cancelled £100m of its RCF, reducing it from £400m to £300m. At 31 March 2024, the Group had drawn £230m with an effective interest rate of 2.9% and a maturity of 2.3 years. Following the completion of the sale of 25 Charterhouse Square, EC1, referred to above, the amount drawn is expected to be reduced to £188m. The RCF benefits from interest rate swaps at an average of 0.9% plus margin on 100% of the drawn amount for the remaining term of the facility to July 2026.

Other Facilities

In our joint ventures, at 31 March 2024, we had drawn £66.1m of the £69.9m (our share) facility with Pimco (formerly Allianz) to develop The JJ Mack Building, EC1. As a result of the strong letting progress during the Period, the margin on the facility has fallen from 3.50%, at 31 March 2023, to 2.25%.

Cash and Undrawn Facilities

At 31 March 2024, the Group had c.£24m of cash and £84m of undrawn loan facilities with an overall weighted average cost of debt of 2.9% (31 March 2023: 3.4%) and an average maturity of 2.1 years.

Sustainability

We continue to perform well against our sustainability goals and targets, receiving a CDP score of B in February 2024 and scoring the highest in our peer group for GRESB Standing Investments. Most notably in the period, we received our final Outstanding BREEAM certification for The JJ Mack Building EC1, achieving a score of 96.4% which is currently the highest score of a commercial development in the UK under the New Construction 2018 scheme. This impressive result supports our continued commitment to drive sustainability forward on all our developments and demonstrates what is possible when sustainability is embedded as a key driver from the outset.

Non-Executive Board changes

In February 2024, Robert Fowlds joined the Board as an independent Non-Executive Director and this was followed by the appointment of Amanda Aldridge who joined the Board on 1 April 2024 as an independent Non-Executive Director and Audit and Risk Committee Chair Designate.

Subject to Amanda's re-election at the 2024 AGM, it is intended that she will succeed Joe Lister to become Chair of the Audit and Risk Committee ("Committee") following the conclusion of the AGM. Joe, who has successfully served as the Chair of the Committee for the last five years, has decided to step down from the Board following his appointment as Chief Executive of Unite Group plc in January 2024. He will continue to serve as Chair of the Committee until the 2024 AGM.

Notice of Results

The Group confirms that it will announce its full year results for the 12 months ended 31 March 2024 on Thursday 23 May 2024. There will be a presentation for analysts on the morning of the results, for further details, please contact FTI Consulting.

For further information, please contact:

Schelical@fticonsulting.com