Nov. 11 (Bloomberg) -- Great Portland Estates Plc, the property developer focused on London’s West End, reported a narrower loss for the first half after its buildings depreciated more slowly. The shares had their biggest gain in five months.

The net loss for the six months ended Sept. 30 shrank to 30 million pounds ($50 million), or 12.2 pence a share, from 146.3 million pounds, or 60.5 pence, a year earlier, the London-based company said in a statement today. Net asset value rose to 225 pence a share after an adjustment for financial derivatives, from 216 pence at June 30.

“London’s investment markets have recovered marginally from their lows,” Chief Executive Officer Toby Courtauld said in the statement. A sustained recovery won’t occur until rents improve, something that will only begin to happen in the second half of 2010, he said.

Values of offices in the West End, where 83 percent of Great Portland’s properties are located, and the Midtown area rose 2.9 percent in the third quarter from the previous three months, Investment Property Databank Ltd. estimates. That cut the 12-month decline to 25 percent.

Great Portland climbed 18 pence, or 6.8 percent, to 282.5 pence in London, giving the company a market value of 883 million pounds. It was the biggest daily rise since June 4.

Best-Performing Stock

Before today, the shares had gained 5.9 percent in a month, the best performance among the 16 stocks in the FTSE 350 Real Estate Index, which rose 1.5 percent.

Great Portland wrote down the value of its properties by 24.5 million pounds in the first half of its fiscal year. That compares with a depreciation of 102.9 million pounds a year earlier.

In the three months through September, the buildings appreciated by 2.6 percent, generating an investment return of 4.1 percent. That made Great Portland the first British real estate investment trust to report a recovery in values on a quarterly basis after the 42 percent drop for shops, offices and warehouses across the U.K. in the two years ended June 30.

Capitalization rates for new or recently refurbished offices in good locations in the West End fell 25 basis points to 5.25 percent in the third quarter, Jones Lang LaSalle Inc. estimates.

Rents for the best buildings in good locations bottomed out and the weak pound helped investment to more than double from the second quarter to 1.1 billion pounds, according to the Chicago-based commercial-property broker.

Rights Offer

In June, Great Portland raised 166 million pounds in a rights offer to pay for acquisitions. Great Portland is also in talks to form ventures with banks to manage properties backed by loans that are in default.

Today, the company announced a profit-share and debt structuring arrangement with German lender Eurohypo AG, a unit of Commerzbank AG. Great Portland will acquire two developments in the West End from Istithmar World PJSC for 10 million pounds and a share of any future profits. The sites are Marcol House on Regent Street and 23/25 Newman Street.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.

Last Updated: November 11, 2009 11:51 EST