Great Portland Estates
Annual Report 2008
Group key performance indicators
Over the medium-term we aim to consistently beat our benchmarks. Difficulties in the global financial markets and in parts of the real estate sector have impacted valuation levels in both the direct investment and equity markets. These pressures have affected our performance for the year although‚ relative to our TPR benchmark the Group has‚ again‚ outperformed.
The measure and benchmark
TSR is the most direct way of measuring
the increase in shareholder value during
the year.
TSR of the Group is benchmarked against the TSR of the FTSE 350 Real Estate Index as this is the most relevant group of comparable companies over the year.
Commentary
The TSR of Group outperformed the
FTSE 350 Real Estate index by 1.8
percentage points although in absolute
terms it was –30.4%. Turbulence in the
credit markets impacted our sector
more than others so the Group TSR
underperformed the wider FTSE 250
by 18.2 percentage points.
For the year to 31 March 2007 the Group’s TSR outperformed the benchmark by 38.9 percentage points and over the five years to 31 March 2008 shareholders by 30.7 percentage points.
The measure and benchmark
Adjusted net assets per share growth is
the traditional industry measure of the
success in creating value at a balance
sheet level because it captures changes
in the valuation of the portfolio and
the effect of the capital structure
of the Group.
We compare the growth in net assets per share with the increase in the retail price index (RPI) plus a hurdle of up to 12% over a three year period.
Commentary
Net assets per share declined by 2%
over the year as adverse market
movements reduced the portfolio
valuation in the second half. Our RPI
benchmark stayed at broadly the same
level of last year causing a 9.8 percentage
point relative underperformance for the
year. For the five years to March 2008
the Group’s net assets per share has
grown by a compound 20.1% pa
compared with the benchmark of 7.6% pa.
The measure and benchmark
TPR is calculated from capital growth
in the portfolio plus net rental income
derived from holding these properties
plus profit on sale of disposals
expressed as a percentage return
on the period’s opening value.
The Group’s portfolio TPR is compared to a universe of over £25 billion of similar assets included in the IPD central London benchmark. This is an independent index and is the most appropriate way of benchmarking asset level returns against comparable buildings in our market.
Commentary
The Group generated a portfolio TPR
of 2.6.% in the year whereas the
benchmark produced a return of minus
4.5%. This out performance placed the
Group in the top quintile of portfolios in
the IPD universe. Over the last five years
the Group’s portfolio TPR has
consistently exceeded this benchmark.
The measure and benchmark
ROCE is measured as reported profit
before financing costs plus revaluation
surplus on development property
divided by the opening gross capital.
This measure illustrates the level
of value creation from operating
activities compared to the capital
base of the business.
The ROCE is best compared against the Group’s weighted average cost of capital which we calculate at 7.6% at March 2008.
Commentary
ROCE for the year was 1.8%‚ which
is below the Group’s WACC.
The underperformance for the year is
due to the second half valuation falls.
Our ROCE is unlikely to outperform
the benchmark if investment markets
remain challenging. Over the five years
to March 2008 the Group’s excess
return compared to its WACC is 60%.
*Year to 31 March