Derwent London Plc · LSE:DLN
Derwent London — FY2016 Earnings Presentation
102 slides from Derwent London's earnings presentation, Feb 28, 2017
Slide 1: Annual Results 2016
ANNUAL RESULTS 2016 DERWENT LONDON PLC
Slide 2: Contents
CONTENTS Presenters: Contents: John Burns Introduction and overview 01 Simon Silver Results and financial review 07 Damian Wisniewski Valuation and portfolio analysis 19 Nigel George Portfolio management 28 Paul Williams Projects 40 David Silverman Investment activity 52 Summary 58 Appendices 61 Dis
Slide 3: Introduction and Overview
INTRODUCTION AND OVERVIEW John Burns Derwent London plc Annual Results 2016 1
Slide 4: Highlights
HIGHLIGHTS FINANCIAL OPERATIONAL 2017 ACTIVITY ■■ Final dividend per share +25.0% ■■ £31.4m1 pa of lettings in 2016, ■■ Regeared 231,400 sq ft with Expedia 6.3% above Dec 2015 ERV ■■ EPRA earnings +8.9% ■■ Pre-let 133,600 sq ft at 80 Charlotte ■■ £208m of investment disposals, Street for an initial
Slide 5: Record Letting Activity in 2016
RECORD LETTING ACTIVITY IN 2016 LETTING ACTIVITY ■■ £31.4m of new lettings at 6.3% above Rental income (£m pa) Dec 2015 ERV: 35 Pre-lets ■■ Previous record of £27.1m in 2015 Non pre-lets 30 25 ■■ Spread evenly throughout the year: ■■ H1: £16.7m 267,700 sq ft 20 ■■ H2: £14.7m 279,800 sq ft 15 10 5 0
Slide 6: Locking in Significant Cash Rental Growth
LOCKING IN SIGNIFICANT CASH RENTAL GROWTH ■■ Contractual rent in the year increased from £137.1m to £150.3m, despite £6.7m of rent lost from disposals INCREASING OUR INCOME £m ■■ Including contractual uplifts and pre-lets, 300 Rent reviews and lease renewals topped-up rent of £202.3m, up £29.7m on U
Slide 7: Central London Office Outlook for 2017
CENTRAL LONDON OFFICE OUTLOOK FOR 2017 Estimates for our portfolio Market factors ■■ London’s economic growth estimated at 1.5-2% ■■ Wide range of occupiers looking for space 0 to -5% Rents ERV movement ■■ Central London’s low vacancy rate, 4.3% in Dec 2016 ■■ Central London development demand, 53%
Slide 8: A Proactive Approach
A PROACTIVE APPROACH ■■ Recurring earnings support dividend growth ■■ Opportunity-rich portfolio and proven management: Capturing the reversion: 1 ■■ New lettings in 2017 have added £11.5m pa of rent ■■ Expedia deal locks in £3.7m of reversion Additional value: 2 ■■ Exceeding ERV ■■ Extending leases
Slide 9: Results and Financial Review
RESULTS AND FINANCIAL REVIEW Damian Wisniewski Derwent London plc Annual Results 2016 7
Slide 10: Headline Numbers
HEADLINE NUMBERS Dec 2016 Dec 2015 % change Total portfolio at fair value 1 £4,942.7m £4,954.5m (0.2) Net asset value £3,999.4m £3,995.4m 0.1 EPRA net asset value per share 2,3 3,551p 3,535p 0.5 EPRA triple NAV per share2,3 3,450p 3,463p (0.4) Gross property income £156.0m £152.0m 2.6 Net rental inc
Slide 11: Net Assets, Debt and Gearing
NET ASSETS, DEBT AND GEARING NET ASSETS, DEBT AND GEARING ■■ EPRA NAV per share up 0.5%: £m % ■■ 3,551p from 3,535p 4,000 Net assets1 NAV gearing 3,923 3,932 80 Net debt LTV ratio ■■ Increased 1.8% in H1 3,500 70 ■■ Decreased 1.3% in H2 3,000 3,012 60 ■■ Equity shareholders’ funds increased to £3,93
Slide 12: EPRA NAV Movement
EPRA NAV MOVEMENT ■■ Revaluation (deficit)/surplus: EPRA NAV PER SHARE Investment properties £(37.1)m Pence (p) 3,700 Owner-occupied property1 £(5.5)m Trading property write-down2 £(1.6)m 17 7 Share of JV revaluation surplus £1.8m 3,600 77 7 For EPRA NAV movement £(42.4)m (38)p 3,535 (44) (10) 3,551
Slide 13: EPRA Earnings
EPRA EARNINGS1 ■■ EPRA earnings £85.7m, up 8.9% from £78.7m in 2015 ■■ Excludes profit on disposals EPRA EARNINGS £m ■■ Property income and outgoings are covered on 200 pages 12-13 180 ■■ Admin costs fell by 2.9% after adjusting for impact in 2.4 0.6 2016 of prior year bonus under-accrual of £0.9m 1
Slide 14: Gross Property Income
GROSS PROPERTY INCOME ■■ Disposals include: MOVEMENTS IN GROSS PROPERTY INCOME £m Davidson Building £1.4m 180 Portobello Dock £1.0m 9.3 ■■ Lettings and reviews include: (3.9) 2015 160 5.7 (5.3) 2016 2016 lettings & 0.3 6.1 (3.1) 156.0 lettings reviews reviews 152.0 1-2 Stephen Street £0.3m £0.7m £1.
Slide 15: Property Outgoings and EPRA Ratios
PROPERTY OUTGOINGS AND EPRA RATIOS PROPERTY OUTGOINGS 2016 2015 £m £m Property outgoings 8.8 9.2 Decrease due to a reduction in void costs Ground rents1 0.7 0.4 Increase due to 40 Chancery Lane Surrender premiums paid 0.1 - Dilapidation receipts (0.1) (0.7) 9.5 8.9 EPRA COST RATIOS 2016 2015 % % EPR
Slide 16: Dividend
DIVIDEND ■■ We are proposing a final dividend of 38.50p per EARNINGS AND DIVIDEND share, up 25.0% on 2015 p 80 4.0x EPRA EPS (LHS) +8% ■■ We are also expecting to increase the 2017 interim Total dividend per share (LHS) 70 +25% 3.5x dividend by 25.0% Dividend cover (RHS) 60 3.0x ■■ The pipeline to 2
Slide 17: Cash Flow
CASH FLOW ■■ Decrease in net debt of £6.9m to £904.8m ■■ Cash from operations is net of a payment of £5.3m to Capita’s existing landlord FORECAST CAPITAL EXPENDITURE1 NET CASH FLOW MOVEMENTS Capital expenditure Capital expenditure Capitalised interest (Major projects) (Other projects) 2016 2015 160
Slide 18: Committed Capex Fully Funded at Year End
COMMITTED CAPEX FULLY FUNDED AT YEAR END ■■ The graph shows that the capex on committed COMMITTED CAPEX AND AVAILABLE FACILITIES projects of £363m at 31 Dec 2016 was fully funded £m 600 Cash & undrawn facilities Committed capex by cash and undrawn facilities Difference 500 ■■ The table shows the imp
Slide 19: Debt Summary
DEBT SUMMARY ■■ Total facilities increased due to £105m of 12/15 year Dec 2016 Dec 2015 USPP notes drawn in May 2016 Total facilities £1,266m £1,161m ■■ First one-year extension option on the £75m Wells Net debt £905m £912m Fargo revolving facility exercised, extending the term Unutilised facilities
Slide 20: Debt Facilities
DEBT FACILITIES MATURITY PROFILE OF DEBT FACILITIES Dec 2016 Dec 2015 £m 0 50 100 150 200 250 300 350 400 450 500 Average spot interest rate 3.65% 3.68% 2017 (cash basis) Average spot interest rate 2018 28 3.90% 3.93% (IFRS basis) 2019 150 Proportion of drawn facilities at 2020 95% 85% fixed rate or
Slide 21: Valuation and Portfolio Analysis
VALUATION AND PORTFOLIO ANALYSIS Nigel George Derwent London plc Annual Results 2016 19
Slide 22: Valuation
VALUATION Investment portfolio valued at £5.0bn: Four on-site developments valued at £662m: ■■ Flat capital values (0.2)% 2015: 16.5%: ■■ Valuation uplift 4.7%: ■■ West End (0.7)% 2015: 14.6% ■■ 2017 completions outperformed: ■■ City Borders 1.0% 2015: 22.5% ■■ White Collar Factory EC1 13.9% ■■ The
Slide 23: Property Return
PROPERTY RETURN Total property returns: TOTAL RETURN PERFORMANCE ■■ Derwent London 2.9% (2015: 19.9%) Total return index (Dec 2011 = 100) 220 Derwent London ■■ IPD Central London Offices 1 2.6% (2015: 19.7%) IPD Central London Offices1 104% ■■ IPD All Property1 3.5% (2015: 13.1%) 200 IPD All Propert
Slide 24: Rental Value Growth
RENTAL VALUE GROWTH ■■ Underlying rental growth of 5.1% in 2016: ■■ West End 5.5% RENTAL VALUE GROWTH ■■ City Borders 4.4% Half-yearly rental value growth (%) 15 ■■ Strong rental growth performance: 13.3 12 ERV uplift 9 8.1 West End % Comments 6 5.2 6.6 4.8 Lettings & 4.6 4.1 3.8 4.2 4.1 Holden Hous
Slide 25: Movement in Yields
MOVEMENT IN YIELDS EPRA yields TRUE EQUIVALENT YIELD MOVEMENT1 ■■ True equivalent yield 4.83% (Dec 2015: 4.52%): True equivalent yield (%) 7.5 ■■ 31 basis points outward movement in 2016 15bp 97bp 7.0 ■■ Net initial yield 3.4% (Dec 2015: 3.1%): 6.5 83bp ■■ ‘Topped-up’ net initial yield 4.1% 43bp 55b
Slide 26: Portfolio Income Potential - Reversion
PORTFOLIO INCOME POTENTIAL - REVERSION ■■ £150.3m net contractual rent: BUILD-UP OF INCOME POTENTIAL £m ■■ £19.9m of reversion captured in 2016 300 £10.7m let in 23.8 284.5 ■■ Future income reversion of £134.2m : 1 Q1 17 47.1 250 ■■ £52.0m (39%) locked in, including: 6.0 5.3 The White Chapel Buildin
Slide 27: Capturing the Reversion and Lease Expiries
CAPTURING THE REVERSION AND LEASE EXPIRIES TIMING OF REVERSION ■■ £52.0m of the reversion locked in: £m CONTRACTUAL UPLIFTS & PRE-LETS: £52.0m 20 Pre-let developments ■■ Strong pre-letting activity at £18.3m by year end 18 5.1 Contractual uplifts 16 14 12 10 8 4.9 2.5 3.3 13.7 6 4 2.5 6.1 5.3 5.5 2
Slide 28: Central London Office Rental Values
CENTRAL LONDON OFFICE RENTAL VALUES Our resilient mid-market portfolio: ■■ Average ‘topped-up’ office rent1 only £44.98 psf CENTRAL LONDON OFFICE RENT PROFILE ■■ Average ERV £53.92 psf £ psf 55 53.702 53.922 ‘Topped-up’ rents 2016 2015 Dec-15 Jun-16 Dec-16 51.22 2 <£30 psf 6% 9% 50 £30-£40 psf 12% 1
Slide 29: Development Valuations
DEVELOPMENT VALUATIONS ■■ ERV £65.4m on our four on-site developments would provide 6.7% yield on cost The Copyright Building W1 White Collar Factory EC1 Valuer’s assumptions allow for a level of risk: ■■ Finance costs: ■■ Finance rate adopted is higher than our marginal cost of debt ■■ Letting cost
Slide 30: Portfolio Management
PORTFOLIO MANAGEMENT Paul Williams Derwent London plc Annual Results 2016 28
Slide 31: Lettings Highlights
LETTINGS HIGHLIGHTS LETTING ACTIVITY ■■ Highest letting year on record: Rental income (£m pa) 35 ■■ £31.4m pa of income H1 2016 H2 2016 ■■ 547,500 sq ft 30 ■■ 63 transactions 25 ■■ Income on this space as at Dec 15 of £3.3m 20 ■■ Continued outperformance throughout 2016: 15 ■■ Overall, 6.3% above De
Slide 32: Letting Activity in 2016
LETTING ACTIVITY IN 2016 ■■ Developments and major refurbishments comprised £24.5m (78%) of 2016 letting activity: Other The Copyri ght £6.9m pa Building W1 22% £7.4m pa 24% ■■ 58% in the Tech Belt 78 Whi tfield Street W1 ■■ 57% to TMT and creative firms £1.0m pa 3% ■■ Average rent £57.27 psf 2016 L
Slide 33: Delivering Rental Growth
DELIVERING RENTAL GROWTH Lettings continued to achieve new rental levels: FITZROVIA CLERKENWELL HOLBORN Q1 £86.00 Q2 £62.50 Q3 £63.50 psf psf psf The Copyright Building W1 20 Farringdon Road EC1 Johnson Building EC1 ■■ Capita ■■ Okta ■■ Audio Network ■■ 87,150 sq ft ■■ 10,000 sq ft ■■ 10,800 sq ft W
Slide 34: Demand for Central London Offices
DEMAND FOR CENTRAL LONDON OFFICES ■■ 13.5m sq ft of total occupier demand at year end: CENTRAL LONDON OFFICE DEMAND Demand (million sq ft) ■■ 9.7% below the long-term average 30 Potentia l demand ■■ Down from 16.0m sq ft at the start of 2016 Active de mand 25 ■■ 8.7m sq ft of active demand: 20 ■■ 2.
Slide 35: Dealing with Higher Business Rates
DEALING WITH HIGHER BUSINESS RATES Hill Islington LONDON PORTFOLIO AVERAGE Carnegie St Rates: Up from £16.60 to £21.40 psf (+29%) Wharfdale Rd Angel TOC: Up from £49 to £54 psf (+10%) Kings Cross TECH BELT Haggerston Park Rates: Up from £11.70 to £17.70 psf (+51%) Albany Regent’s Park S Pancras t Ho
Slide 36: 80 Charlotte Street in Context
80 CHARLOTTE STREET IN CONTEXT 80 CHARLOTTE STREET SCHEME: 53-65 Whitfield Street: ■■ 12,000 sq ft offices ■■ 21,000 sq ft private residential ■■ 10,000 sq ft affordable residential 67 Whitfield Street: ■■ 14,000 sq ft private residential 80 Charlotte Street (island building): ■■ 309,000 sq ft offic
Slide 37: Pre-letting Our Developments – 80 Charlotte Street W1
PRE-LETTING OUR DEVELOPMENTS – 80 CHARLOTTE STREET W1 ■■ 380,000 sq ft mixed-use development ■■ 133,600 sq ft pre-let to Arup in Feb 2017: ■■ 20-year lease on the lower floors ■■ Rent of £9.74m pa - £75 psf on main office floors ■■ Rent rises 2.25% pa for the first 15 years ■■ Average rent over the
Slide 38: Asset Management Highlights
ASSET MANAGEMENT HIGHLIGHTS CAPTURING THE REVERSION ■■ Portfolio reversion captured through our asset £m 30 management activities Full Income Dec ERV Previous Income ■■ 594,000 sq ft of rent reviews, lease renewals and regears concluded in 2016: 20 ■■ Income up 46%, from £19.5m to £28.5m pa ■■ Rent
Slide 39: Rent Reviews, Lease Renewals and Regears
RENT REVIEWS, LEASE RENEWALS AND REGEARS During the second half of the year, the following transactions were concluded: Q4 £50 psf Q4 £63.50 Q4 £53 psf psf 20 Farringdon Road EC1 80-85 Tottenham Court Road W1 Porters North N11 ■■ Rent review settled on 32,500 sq ft ■■ Rent review settled on 28,600 s
Slide 40: Q1 2017: Major Regear with Expedia
Q1 2017: MAJOR REGEAR WITH EXPEDIA Prior ■■ Expedia occupies 93,400 sq ft ■■ Leases expire in 2021 Regear and assignment ■■ To occupy 231,400 sq ft to 2030 (93% of the offices) ■■ Total office income to rise from £13.3m to a minimum of £15.0m in 2020 ■■ First refusal on remaining 17,100 sq ft of off
Slide 41: Slide 41
Slide 42: Projects
PROJECTS Simon Silver Derwent London plc Annual Results 2016 40
Slide 43: Derisking Our Pipeline
DERISKING OUR PIPELINE Developments ■■ Two major refurbishments totalling 273,000 sq ft completed in the year (79% pre-let): ■■ The White Chapel Building E1 (Phase 1) ■■ 20 Farringdon Road EC1 ■■ A further 1,020,150 sq ft on site (42% pre-let1): ■■ 400,150 sq ft due to complete in 2017 (73% pre-let)
Slide 44: 2016 Completion: The White Chapel Building E1
2016 COMPLETION: THE WHITE CHAPEL BUILDING E1 ■■ Light touch office refurbishment of 185,000 sq ft (Phase 1): ■■ Refurbishment of floors 1-7 ■■ Remodelled and enlarged reception area ■■ Introduction of a number of new amenities ■■ Completed Q4 2016 ■■ 78% pre-let at £7.0m pa to a range of occupiers:
Slide 45: The White Chapel Building E1 (Phase 2)
The White Chapel Building E1 (Phase 2) 43
Slide 46: 2017 Completion: The Copyright Building W1
2017 COMPLETION: THE COPYRIGHT BUILDING W1 ■■ 107,150 sq ft scheme due to complete in H2 2017 ■■ 87,150 sq ft of offices – 100% pre-let to Capita at £7.4m pa (gross) in Q1 2016 ■■ 20,000 sq ft retail – ERV of £0.9m ■■ BREEAM target of Excellent ■■ Capex to complete £24m Derwent London plc Annual Res
Slide 47: 2017 Completion: White Collar Factory EC1
2017 COMPLETION: WHITE COLLAR FACTORY EC1 ■■ 293,000 sq ft mixed-use scheme: ■■ 205,300 sq ft pre-let at £12.8m pa 70% pre-let ■■ Winner of MIPIM UK Visionary Building of the Year award 2016 ■■ UK’s first Wired Certified Platinum for Development & Redevelopment rating ■■ BREEAM target of Excellent ■
Slide 48: 46
46
Slide 49: 80 Charlotte Street W1
80 CHARLOTTE STREET W1 ■■ 380,000 sq ft mixed-use scheme: ■■ 84% offices (321,000 sq ft) ■■ 12% residential (45,000 sq ft) ■■ 4% retail (14,000 sq ft) ■■ 133,600 sq ft pre-let at £9.74m pa ■■ BREEAM target of Excellent ■■ ERV £26.4m – Offices £80 psf ■■ Capex to complete £213m ■■ Completion H2 2019
Slide 50: 48
48
Slide 51: Brunel Building, North Wharf Road W2
BRUNEL BUILDING, 55 NORTH WHARF ROAD W2 ■■ 240,000 sq ft landmark office ■■ 16-storey distinctive diagrid structure ■■ BREEAM target of Excellent ■■ ERV £14.8m (net) - Offices c.£62.50 psf ■■ Capex to complete £99m ■■ Completion H1 2019 Derwent London plc Annual Results 2016 ▪▪ Appendices 30 to 34 4
Slide 52: 50
50
Slide 53: Future Opportunities
FUTURE OPPORTUNITIES 1 Oxford Street W1 Monmouth House EC1 19-35 Baker Street W1 ■■ Planning permission ■■ Planning permission ■■ JV with The Portman Estate1 ■■ 275,000 sq ft office, retail and ■■ 125,000 sq ft office development ■■ Planning application submitted in theatre scheme Dec 2016 54 - 68 O
Slide 54: Investment Activity
INVESTMENT ACTIVITY David Silverman Derwent London plc Annual Results 2016 52
Slide 55: Investment Activity 2016
INVESTMENT ACTIVITY 2016 ■■ One principal acquisition in the year: ■■ The White Chapel Building E1 - 30,500 sq ft lower ground floor for a total of £12.0m (£395 psf) ■■ £208m of total investment sales in the year: ■■ 3.7% net surplus to Dec 15 book value ■■ Rental income of £6.7m pa ■■ 3.4% sale yie
Slide 56: Principal Disposals
PRINCIPAL DISPOSALS 75 Wells Street W1 120-134 Tottenham Court Road W1 ■■ Rolling refurbishment on c.60% of ■■ 330-bed hotel let to Radisson Edwardian: offices Tower House WC2 ■■ Long term income – 147 year lease ■■ Recent lettings at £85 psf ■■ Effective special purchaser ■■ Fixed rental uplifts –
Slide 57: Central London Office Investment Activity
CENTRAL LONDON OFFICE INVESTMENT ACTIVITY Market statistics CENTRAL LONDON OFFICE INVESTMENT ■■ £13.1bn of central London office transactions in 2016 Value of investment transactions (£bn) 20 ■■ £3.1bn of investment transactions YTD 18 16 ■■ £1.2bn under offer 14 ■■ CBRE estimate that there is betwe
Slide 58: Sale of 132-142 Hampstead Road NW1
SALE OF 132-142 HAMPSTEAD ROAD NW1 ■■ Planning consent granted in 2010 for a 265,000 sq ft office and residential redevelopment: ■■ Attracted considerable pre-letting interest ■■ Plans stalled by HS2 proposals announced in 2012 ■■ Agreed sale to The Secretary of State for Transport for £130m before
Slide 59: Sale of 8 Fitzroy Street W1
SALE OF 8 FITZROY STREET W1 ■■ Part of the pre-let transaction at 80 Charlotte Street (pages 34-35) ■■ 147,900 sq ft Fitzrovia office: ■■ Let to Arup until 2033, no breaks ■■ Rental income of £7.2m pa ■■ Annual stepped increases until 2021 then upward only open market rent review ■■ Agreed sale to A
Slide 60: Summary
SUMMARY John Burns Derwent London plc Annual Results 2016 58
Slide 61: Summary
SUMMARY ■■ Property market has slowed but demand active Our ■■ ERV movement estimate 0 to -5% market ■■ Potential modest decline in values ■■ Opportunity-rich portfolio as demonstrated by 2017 activity: ■■ Let 161,000 sq ft at £11.5m pa Derwent ■■ Regeared 231,400 sq ft with Expedia London ■■ Agreed
Slide 62: Proforma Impact of Post Year End Events
PROFORMA IMPACT OF POST YEAR END EVENTS ■■ Impact of transactions announced today estimated at +56p per share ■■ Special dividend of 52p per share Proforma Proforma Proforma impact of NAV IMPACT figures from impact of Special events and page 16 Lettings Disposals1 transactions dividend dividend 1. E
Slide 63: Appendices
APPENDICES Derwent London plc Annual Results 2016 61
Slide 64: Appendices
APPENDICES 1. Group balance sheet 63 19. Rent and tenant banding 81 2. Net asset value per share 64 20. Lease expiries and breaks / vacancy rates 82 3. Group income statement 65 21. Lease expiry profile and lease length 83 4. Reconciliation of IFRS profit to EPRA earnings 66 22. Central London offic
Slide 65: Appendix 1 - Group Balance Sheet
APPENDIX 1 - GROUP BALANCE SHEET Dec 2016 Dec 2015 £m £m Investment property 4,803.8 4,832.3 Owner-occupied property 34.2 36.1 Investments in joint ventures 36.0 30.7 Other non-current assets 113.0 94.8 4,987.0 4,993.9 Other current assets and liabilities (73.5) (73.7) Trading property 11.7 10.5 Cas
Slide 66: Appendix 2 - Net Asset Value per Share
APPENDIX 2 - NET ASSET VALUE PER SHARE Dec 2016 Dec 2015 Diluted Diluted £m p £m p Net assets attributable to equity shareholders 3,932.3 3,922.5 Conversion of unsecured convertible bonds 1 - 140.2 Net assets for diluted NAV 3,932.3 3,521 4,062.7 3,501 Revaluation of trading properties net of tax -
Slide 67: Appendix 3 - Group Income Statement
APPENDIX 3 - GROUP INCOME STATEMENT Year ended Year ended Dec 2016 Dec 2015 £m £m Gross property income 156.0 152.0 Profit on disposal of trading properties 1.9 3.2 Write-down of trading property (1.6) - Other income less other costs 2.4 2.3 Property outgoings (9.5) (8.9) Net property and other inco
Slide 68: Appendix 4 - Reconciliation of IFRS Profit to EPRA Earnings
APPENDIX 4 - RECONCILIATION OF IFRS PROFIT TO EPRA EARNINGS Reconciliation of IFRS profit attributable to equity shareholders to EPRA earnings Year ended Year ended Dec 2016 Dec 2015 £m £m IFRS profit for the year attributable to equity shareholders 58.7 766.2 Revaluation deficit/(surplus) 37.1 (650
Slide 69: Appendix 5 - Explanation of EPRA Adjustments
APPENDIX 5 - EXPLANATION OF EPRA ADJUSTMENTS Adjustments 2016 2016 2016 A B C EPRA EPRA IFRS basis basis £m £m £m £m £m £m Net property and other income 149.2 (1.9) 1.6 148.9 145.4 Administrative expenses (30.9) (30.9) (30.0) Revaluation deficit (37.1) 37.1 - - Profit on disposal of investment prope
Slide 70: Appendix 6 - EPRA Like-for-Like Rental Income
APPENDIX 6 - EPRA LIKE-FOR-LIKE RENTAL INCOME Properties owned throughout Development the year Acquisitions Disposals property Total £m £m £m £m £m 2016 Gross rental income 120.8 5.4 3.0 26.2 155.4 Property expenditure (4.6) (1.0) (1.0) (2.9) (9.5) Net rental income 116.2 4.4 2.0 23.3 145.9 Profit o
Slide 71: Appendix 7 - Debt Facilities
APPENDIX 7 - DEBT FACILITIES £m £m Maturity 6.5% secured bonds 175 March 2026 3.99% secured loan 83 October 2024 1.125% unsecured convertible bonds 150 July 2019 4.41% unsecured private placement notes 25 January 2029 4.68% unsecured private placement notes 75 January 2034 3.46% unsecured private pl
Slide 72: Appendix 8 - Net Debt
APPENDIX 8 - NET DEBT Dec 2016 Dec 2015 £m £m Financial liabilities - due after more than 1 year 922.5 918.2 Acquired fair value of secured bonds less amortisation (14.0) (15.0) Equity component of unsecured bonds 12.6 12.6 Unwinding of discount of unsecured bonds (7.0) (4.9) Unamortised issue and a
Slide 73: Appendix 9 - Fixed Rates and Hedging
APPENDIX 9 - FIXED RATES AND HEDGING Dec 2016 Dec 2015 Proportion of drawn facilities at fixed rates or hedged 95% 85% Weighted average duration of swaps 1 4.6 years 4.6 years Mark-to-market cost of swaps £17.3m £17.6m Weighted average duration of fixed rate instruments 9.2 years 9.3 years HEDGING P
Slide 74: Appendix 10 - Valuation Performance by Village
APPENDIX 10 - VALUATION PERFORMANCE BY VILLAGE Valuation Valuation Weighting movement Dec 2016 Dec 2016 20161 £m % % West End Central Fitzrovia2 1,764.8 35 2.5 Victoria 552.4 11 (5.0) Baker Street/Marylebone 188.4 4 (8.7) Paddington 85.9 2 2.5 Mayfair 81.4 1 (13.3) Soho/Covent Garden 43.1 1 (3.9) 2,
Slide 75: Appendix 11 - Drivers of the Valuation
APPENDIX 11 - DRIVERS OF THE VALUATION Movement (%) 6 Four on-site Like-for-like portfolio Portfolio developments 5 4.3 4 3 2 1 (4.3) 0 0.6 (0.2) (0.8) (1) (2) ERV/Income Yield Stamp Duty Project surplus1 Underlying performance 1 A combination of stamp duty increase, letting activity, yield movement
Slide 76: Appendix 12 - Rental Value Growth
APPENDIX 12 - RENTAL VALUE GROWTH RENTAL VALUE GROWTH1 2015 H1 2016 H2 2016 2016 % % % % West End 10.8 4.4 1.1 5.5 City Borders 15.2 3.8 0.6 4.4 Central London 12.0 4.2 0.9 5.1 Provincial 3.3 2.3 2.2 4.5 Underlying 11.8 4.1 1.0 5.1 1 On EPRA portfolio Derwent London plc Annual Results 2016 74
Slide 77: Appendix 13 - Valuation Yields
APPENDIX 13 - VALUATION YIELDS YIELD PROFILE1 EPRA INITIAL YIELDS Yield (%) Net initial ‘Topped-up’ 8 Pre-EPRA EPRA yield initial yield % % 7 West End 3.7 4.1 6 City Borders 2.8 4.0 Central London 3.4 4.1 5 Provincial 6.4 6.4 EPRA portfolio 3.4 4.1 4 Reversionary yield 3 True equivalent yield Initia
Slide 78: Appendix 14 - Context to Yield Movement
APPENDIX 14 - CONTEXT TO YIELD MOVEMENT ■■ Yields supported by: VALUATION YIELDS1 ■■ Low interest rates Yield % or Gap between DL TEY and 10-year Gilt 9 Derwent London True Equivalent Yield 10-year Gilt ■■ Currency rates favourable to overseas investors Derwent London Initial Yield Gap between DL TE
Slide 79: Appendix 15 - Portfolio Statistics by Village
APPENDIX 15 - PORTFOLIO STATISTICS BY VILLAGE Rent Net Vacant review/ Estimated Floor Vacant contracted Average space lease area floor area rental rental rental renewal Total rental Valuation Weighting ‘000 ‘000 income income value reversion reversion value £m % sq ft1 sq ft £m pa £ psf £m pa £m pa
Slide 80: Appendix 16 - Portfolio Income Potential - Reversion
APPENDIX 16 - PORTFOLIO INCOME POTENTIAL - REVERSION Rent uplift pa Rent pa £m £m £m Contracted rental income at Dec 2016, net of ground rents 150.3 Contractual rental uplifts The White Chapel Building E1 5.7 1-2 Stephen Street W1 3.9 40 Chancery Lane WC2 2.81 Tea Building E1 2.3 Turnmill EC1 1.9 Ot
Slide 81: Appendix 17 - Available Space and Projects
APPENDIX 17 - AVAILABLE SPACE AND PROJECTS Vacant Pre-let Total Gross Net Pre-let Total area area area vacant Ground vacant rent net ‘000 ‘000 ‘000 ERV rent ERV ERV ERV sq ft sq ft sq ft £m pa £m pa £m pa £m pa £m pa Activity post year end Available to occupy (EPRA) The White Chapel Building E1 40 -
Slide 82: Appendix 18 - Portfolio Summary
APPENDIX 18 - PORTFOLIO SUMMARY WAULT NO of Weighting including pre-lets Valuation properties % 8.9 yrs > £200m 4 22 Rental income: £(0.5)m £100m - £200m 14 41 Income: - Pre-let income: £18.3m3 £50m - £100m 15 22 Rental income: £111.2m < £50m 58 15 WAULT: 15.4 yrs Income: 74% Rent2: £69.16 91 100 WA
Slide 83: Appendix 19 - Rent and Tenant Banding
APPENDIX 19 - RENT AND TENANT BANDING CENTRAL LONDON ‘TOPPED-UP’ PROFILE OF TENANTS’ OFFICE RENT BANDING1 BUSINESS SECTOR2 £0-£30 ps f Other 6% Fi nancial 8% £30-£40 ps f Government and 3% £60+ps f 12% public admin Medi a, TV, marketing 24% 4% and advertising Cha ri ties 30% 4% Reta il sales 10% £40
Slide 84: Appendix 20 - Lease Expiries and Breaks / Vacancy Rates
APPENDIX 20 - LEASE EXPIRIES AND BREAKS / VACANCY RATES ■■ £11.0m of income subject to breaks / expiries in 2016: ■■ EPRA vacancy rate of 2.6%2 at the year end – up from 1.3% at the start of 2016 ■■ £2.3m taken into projects or sold ■■ 89% of remainder retained or re-let ■■ Portfolio average lease l
Slide 85: Appendix 21 - Lease Expiry Profile and Lease Length
APPENDIX 21 - LEASE EXPIRY PROFILE AND LEASE LENGTH EXPIRIES AND BREAKS AS A PERCENTAGE OF PORTFOLIO INCOME1 West City End Borders Provincial 2017 2018 2019 2020 2021 Total Expiries 1 1 1 3 9 4 8 12 36 Holding over - - - - - - - - - Rolling breaks 1 1 - 2 1 - - 1 4 Single breaks 1 - - 1 5 5 4 4 19 3
Slide 86: Appendix 22 - Central London Office Demand
APPENDIX 22 - CENTRAL LONDON OFFICE DEMAND Market statistics OFFICE TAKE-UP Take-up (million sq ft) ■■ Central London take-up of 12.2m sq ft in 2016: 20 Central London ■■ 4% below the annual average 18 16 ■■ 17% lower than 2015 14 Average ■■ West End take-up stood at 3.6m sq ft: 12 10 ■■ 14% below a
Slide 87: Appendix 23 - Central London Office Supply
APPENDIX 23 - CENTRAL LONDON OFFICE SUPPLY Market statistics OFFICE DEVELOPMENT PIPELINE ■■ Vacancy rates increased steadily in 2016 but remain below Floor area (million sq ft) Vacancy rate (% ) 12 12 the long term averages: Central London Completed Completed average Under construction Vacancy rate
Slide 88: Appendix 24 - Central London Office Vacancy
APPENDIX 24 - CENTRAL LONDON OFFICE VACANCY Vacancy rate (%) 16 West End City 14 Central London 12 West End average City average 10 8 6 4 2 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: CBRE Derwent London plc Annual Results 2016 86
Slide 89: Appendix 25 - Central London Office Rental Growth
APPENDIX 25 - CENTRAL LONDON OFFICE RENTAL GROWTH Rental growth (% pa) 40 30 20 10 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 -10 -20 West End -30 City Central London -40 Source: CBRE Derwent London plc Annual Results 2016 87
Slide 90: Appendix 26 - Central London Office Investment Market
APPENDIX 26 - CENTRAL LONDON OFFICE INVESTMENT MARKET Market statistics CENTRAL LONDON OFFICE INVESTMENT ■■ £13.1bn of central London investment transactions in 2016: Value of investment transactions (£bn) 20 ■■ 13% above average although 19% lower than 2015 18 16 ■■ Overseas investors accounted for
Slide 91: Appendix 27 - White Collar Factory Letting Update
APPENDIX 27 - WHITE COLLAR FACTORY LETTING UPDATE ■■ 205,300 sq ft let at £12.8m pa (now 70% pre-let): ■■ 189,700 sq ft (£11.9m pa) in the tower ■■ 15,600 sq ft (£0.9m pa) let in the low rise campus offices ■■ Three restaurants under offer Rent Min uplift Q1 2017 Adobe £1.01m pa 14,900 sq ft £67.50
Slide 92: Appendix 28 - The White Chapel Building Letting Update
APPENDIX 28 - THE WHITE CHAPEL BUILDING LETTING UPDATE ■■ 144,250 sq ft let at £7.0m pa (78% of Phase 1): ■■ Rents range from £45-55 psf PHASE 1 Rent Min uplift 7 Q3 2016 GDS £2.85m pa 54,700 sq ft £52.00 psf - 6 5 Q4 2016 Lebara Q3 2016 Reddie & Grose £1.01m pa 20,700 sq ft £49.50 psf £52.50 psf 4
Slide 93: Appendix 29 - 2016 Completion - Other Refurbishments
APPENDIX 29 - 2016 COMPLETION - OTHER REFURBISHMENTS Three other smaller refurbishments totalling 159,000 sq ft completed over the year: 81% let 64% u/o 46% let 20 Farringdon Road EC1 78 Chamber Street E11 78 Whitfield Street W1 ■■ 88,000 sq ft office refurbishment ■■ 37,000 sq ft of offices ■■ 34,0
Slide 94: Appendix 30 - Current Projects - Profit on Cost
APPENDIX 30 - CURRENT PROJECTS - PROFIT ON COST White Collar Factory The Copyright Building Brunel Building 80 Charlotte Street Completion Q1 2017 H2 2017 H1 2019 H2 2019 Commercial area (sq ft) 967,000 285,000 107,000 240,000 335,000 Residential area (sq ft) 53,000 8,000 - - 45,0002 Est. future cap
Slide 95: Appendix 31 - Project Summary - On Site
APPENDIX 31 - PROJECT SUMMARY - ON SITE Current Pre- Total net scheme Proposed 2017 2018 2019+ capex to Current income area area capex capex capex complete Delivery office Property £m pa ‘000 sq ft ‘000 sq ft £m £m £m £m date c.ERV psf On-site developments White Collar Factory EC1 - 124 293 11 - - 1
Slide 96: Appendix 32 - Project Summary - Potential Future Schemes
APPENDIX 32 - PROJECT SUMMARY - POTENTIAL FUTURE SCHEMES Current Pre- net scheme Proposed Earliest income area area possession Property £m pa ‘000 sq ft ‘000 sq ft year Comment Consented 1 Oxford Street W1 - - 275 2018 Offices, retail and theatre Monmouth House EC11 0.6 69 125 2020 2016 consent - Op
Slide 97: Appendix 33 - Project Pipeline
APPENDIX 33 - PROJECT PIPELINE On-site Consented Potential Appraisals developments 1.02m sq ft + projects 0.40m sq ft + 0.62m sq ft = pipeline 2.04m sq ft 1 Oxford Street W1 Monmouth House EC13 te d ed en nt ns nse 1.02m sq ft 1.02m sq ft Co Co 1 2 +95% +124% White Collar Factory EC1 The Copyright B
Slide 98: Appendix 34 - Delivering Our Pipeline
APPENDIX 34 - DELIVERING OUR PIPELINE Floorspace (million sq ft) 0.40 2016 2017 2018 2019 0.35 0.30 65% 0.25 30% 0.20 22% 0.15 100% 70% 19% 0.10 78% 19% 35% 0.05 81% 81% 0.00 in el e W tte 1 n 2 W ht EC ar in el ild ap hit EC do W ild run y ll g ig et lo 1 or C o Bu Ch W 1 1 ad ring in yr g re ar E1
Slide 99: Appendix 35 - Portfolio Map
APPENDIX 35 - PORTFOLIO MAP Primrose Hill Islington Carnegie St Wharfdale Rd Angel Haggerston Kings Cross Park Alban Regent’s Park y St S t Pancras Hoxton International Th am Euston es lin k Euston Old Street Up pe rW St Mat Old Street ob Clerkenwell urn Pl thew’s Great Bloomsbury Shoreditch Row Reg
Slide 100: Appendix 36 - Management Structure - Executive Team
APPENDIX 36 - MANAGEMENT STRUCTURE - EXECUTIVE TEAM John Burns* Chief Executive Officer Damian Wisniewski* Finance Director Simon Silver* Property Director Nigel George* Property Director Paul Williams* Property Director David Silverman* Property Director Tim Kite* Company Secretary Richard Baldwin*
Slide 101: Disclaimer
DISCLAIMER This presentation has been prepared by Derwent London plc (the may become apparent. Past performance is not indicative of future “Company”). No representation or warranty (express or implied) of results and forward-looking statements are not guarantees of future any nature is given nor is
Slide 102: Slide 102