Derwent London Plc · LSE:DLN
Derwent London — H1 2023 Earnings Presentation
101 slides from Derwent London's earnings presentation, Aug 10, 2023
Slide 1: Interim Results 2023
Interim Results 2023 LONDON DERWENT 4 zs a 2 J iy d Lh ge NANA AAA AA HALA EA EIEN A EA y 7
Slide 2: Contents
CONTENTS Presenters Contents Paul Williams Introduction and overview 01 Damian Wisniewski Results and financial review 06 Nigel George Valuation and investment 16 Emily Prideaux Sustainability 23 Leasing and asset management 25 Delivering the right product 32 Developments 37 Summary 45 Appendices 47
Slide 3: Introduction and Overview
INTRODUCTION AND OVERVIEW PAUL WILLIAMS 1
Slide 4: Overview and Guidance
OVERVIEW AND GUIDANCE London’s leading position 76% • A vibrant global city pre-let/ sold • Broad appeal to diverse range of businesses • Attractive growth prospects Second highest letting activity on record in H1 • H1: £19.3m of new leases, average 7.3% above ERV • H2: £7.0m lettings to date, avera
Slide 5: Our Consistent Strategy
OUR CONSISTENT STRATEGY Focused on quality – retain modern prime buildings • 72% of portfolio in West End • 7.2 year ‘topped-up’ WAULT • High sustainability credentials: 67.6% EPC A/B Meeting evolving occupier requirements • Importance of brand • Best-in-class amenity and service • DL/Members: Loung
Slide 6: London: A Global City
LONDON: A GLOBAL CITY • 24% of UK GDP • Global/European HQ location • Diverse range of sectors • Deep talent base and world class universities • 240,000 new jobs by 2028 • High quality transport infrastructure LONDON VS UK GDP GROWTH GDP index (Dec 2012=100) 150 % pa 2013-22 2023-27 London 2.8% 2.0%
Slide 7: Capital Allocation
CAPITAL ALLOCATION • Experienced management team Developments • Long track record of value creation • Sold assets with limited development upside: £900m1 • Bought buildings with repositioning potential: >£500m1 • Developed prime green buildings: >£900m1 • Acquisition opportunities expected to emerge
Slide 8: Results and Financial Review
RESULTS AND FINANCIAL REVIEW DAMIAN WISNIEWSKI 6
Slide 9: Financial Highlights
FINANCIAL HIGHLIGHTS EPRA NTA per share1, 2 EPRA earnings per share2 Cash and undrawn facilities4 3,444p 49.51p £562m Dec 2022: 3,632p H1 2022: 53.22p 3 Jun 2022: £452m -5.2% -7.0% Dec 2022: £577m Gross rental income Net rental income Interest cover ratio (ICR)5 £105.9m £90.9m 411% H1 2022: £101.9m
Slide 10: EPRA NTA Movement
EPRA NTA MOVEMENT Pence EPRA NTA PER SHARE 4,000 3,750 50 (55) 3,632 -5.2% 3,500 (178) (4) (1) 3,444 Investment properties (£196.7m) (175p) 3,250 Trading properties (£1.3m) (1p) Owner-occupied property (£2.6m) (2p) Total (£200.6m) 3,000 2,750 2,500 31 Dec EPRA Dividends Revaluation Revaluation Other
Slide 11: EPRA Earnings
EPRA EARNINGS1 £m EPRA EARNINGS 140 Slide Slide 120 10 11 2.4 105.9 100 (13.0) 80 (19.2) (19.6) 0.0 1.0 60 (1.9) 55.6 49.51p per share 40 20 0 Gross Premiums Other Admin Net Waivers Tax JVs/other EPRA rental & other property expenses finance & charge earnings income income expenditure costs impairme
Slide 12: Gross Rental Income
GROSS RENTAL INCOME £m MOVEMENT IN GROSS RENTAL INCOME 140 LIKE-FOR-LIKE 120 2.9 6.3 (2.6) (2.6) Gross rental income 105.9 H1 2022: 1.9% 100 101.9 Soho Place W1 £3.5m New River Yard EC1 (£1.6m) H2 2022: 1.4% Francis House SW1 £1.2m 19 Charterhouse Street EC1 (£1.0m) 80 The Featherstone Building EC1
Slide 13: Property Expenditure
PROPERTY EXPENDITURE • Other property expenditure (£13.0m, up 57% over H1 2022) H1 2022 H2 2022 H1 2023 £m £m £m Irrecoverable service charges Voids 0.9 3.1 2.4 Capped service charge 0.3 0.4 1.0 Balancing service charge & other 0.3 0.1 1.1 1.5 3.6 4.5 Repairs and dilaps 0.1 0.1 0.7 Legal fees 0.7 1.
Slide 14: H1 2023 Project Expenditure
H1 2023 PROJECT EXPENDITURE Investment Trading Trading Other property property stock Investments receivables Total 25 Baker Street W1 28.4 6.8 1.9 - - 37.1 Network W1 9.4 - - - - 9.4 On-site major projects 37.8 6.8 1.9 - - 46.5 Completed major projects 1.5 - - - - 1.5 Old Street Quarter EC1 - - - -
Slide 15: Estimated Future Expenditure
ESTIMATED FUTURE EXPENDITURE FUTURE SPEND1 EPC upgrades • £100m estimated cost to upgrade to EPC ‘B’ by 2030 H2 2023 5 51 16 4 20 3 101 • £51.6m specifically provided for in the Jun 2023 external valuation, plus further allowance for general upgrades 2024 110 46 4 59 11 230 • Portfolio by ERV 67.6%
Slide 16: Proforma Impact of Major Projects
PROFORMA IMPACT OF MAJOR PROJECTS • Assumes no further lettings, acquisitions or disposals other than those already contracted • Shows impact of estimated remaining capex on major projects, both completed and on-site • Excludes design fees and smaller refurbishment projects PROFORMA IMPACT OF COMPLE
Slide 17: Strong Balance Sheet
STRONG BALANCE SHEET MATURITY PROFILE OF DEBT FACILITIES Cash and undrawn Weighted average £m facilities1 maturity of borrowings 0 100 200 300 400 500 600 700 800 £562m 5.6 years 2023 2024 83 Jun 2022: £452m Jun 2022: 6.5 years 2025 175 Dec 2022: £577m Dec 2022: 6.2 years 2026 230 22 428 2027 5 95 2
Slide 18: Valuation and Investment
VALUATION AND INVESTMENT NIGEL GEORGE 16
Slide 19: Valuation
VALUATION Investment portfolio valued at £5.2bn • Underlying valuation -3.7% (H2 2022: -8.0%) • West End -2.4% (H2 2022: -7.0%) • City Borders -7.2% (H2 2022: -10.6%) • MSCI Central London Offices1 -4.9% Two on-site developments in H1 • Valued at £0.3bn, uplift of 10.6% Tea Building E1 • 25 Baker St
Slide 20: Valuation Themes
VALUATION THEMES • Developments delivering attractive returns VALUATION MOVEMENT BY VALUE Valuation movement in H1 2023 (%) 12 • Rents – flight to quality continues 10 10.6 • Location and product 8 6 • Yields – continued outward movement in H1 4 2 • West End more resilient – 72% of our portfolio 0 (
Slide 21: Rental Value and Yields
RENTAL VALUE AND YIELDS RENTAL VALUE GROWTH Rental growth (%) Rental values 15 • Rental values increased 1.0% in H1 10 • Offices: 93% of portfolio1 +1.0% • Retail: 7% of portfolio1 +1.3% 5 • Average office passing rent £49.06 psf 2 0 (Dec 2022: £48.37 psf) Derwent London H1 growth • Average ‘topped-
Slide 22: Build-up of Portfolio ERV
BUILD-UP OF PORTFOLIO ERV • Contracted rent roll of £203.3m BUILD-UP OF ERV2 £m • Portfolio reversion of £102.3m1 350 • £58.0m or 57% contracted, including 11.0 300 3.2 12.1 (3.7)3 305.6 • 80 Charlotte Street W1 £12.1m 47.3 21.7 3.73 10.7 • 25 Baker Street W1 (PIMCO) £10.7m4 250 43.6 • Soho Place W1
Slide 23: Disposal Activity
DISPOSAL ACTIVITY Disposal activity in H1 Total Net rental Area after costs Net yield income Property Date sq ft £m % £m pa 19 Charterhouse Street EC1 Q1 63,200 53.6 4.6 2.6 12-16 Fitzroy Street W1 Q2 8,600 6.7 6.9 0.5 Other - 2,200 5.3 - - Total 74,000 65.6 4.4 3.1 • £65.6m of disposals at an avera
Slide 24: Investment Market – Overview
INVESTMENT MARKET – OVERVIEW Activity Financing London’s deep & varied demand • Reduced investment volumes • Debt no longer accretive • Pricing more robust in West End than City • Elevated inflation • Equity buyers dominate • Value-add opportunities finding • Rising interest rates • Liquidity focuse
Slide 25: Sustainability
SUSTAINABILITY NIGEL GEORGE 23
Slide 26: Our Journey to Net Zero
OUR JOURNEY TO NET ZERO Energy intensity Self generating green electricity Embodied carbon • Intelligent Buildings implementation • 18.4MW solar park planning consent • On-site projects are low carbon on our Scottish estate • Rolled out across 7 buildings • Designed in line with 2025 target • >40% L
Slide 27: Leasing and Asset Management
LEASING AND ASSET MANAGEMENT EMILY PRIDEAUX 25
Slide 28: Occupational Market – Demand
OCCUPATIONAL MARKET – DEMAND CENTRAL LONDON TAKE-UP Take-up lower but under offers higher Take-up (million sq ft) 20 Q1 Q2 Q3 Q4 • Central London take-up 4.2m sq ft 18 • 36% below H1 2022 (6.5m sq ft) 16 14 • Pre-lets comprise 25% of total take-up 12 • 8 of the 10 largest deals 10 • Space under offe
Slide 29: Occupational Market – Supply
OCCUPATIONAL MARKET – SUPPLY Market vacancy CENTRAL LONDON AVAILABLE SPACE Available floorspace (million sq ft) • London vacancy elevated at 8.5% 30 New under – construction • Not evenly spread between sub-markets New – completed Secondhand (landlord controlled) West End (3.8%) < City (11.7%) < Dock
Slide 30: Occupier Strategies
OCCUPIER STRATEGIES • The hybrid balance is shifting back to offices TIME REQUIRED IN OFFICE • Occupiers planning for peak occupancy Flexible but office presence required • Change in messaging from employers Organisational workstyle three years from now?1 Hybrid 56 Minimum 3 days per week Office fir
Slide 31: More Expansion Than Contraction
MORE EXPANSION THAN CONTRACTION • The office remains central OCCUPIER FLOORSPACE INTENTIONS % • Post-Covid, 74% of take-up has seen occupiers take the same or more 1 100 floorspace 20 23 • Forward looking surveys by Derwent and Knight Frank: 90 • Similar proportion (c.80%) expect floorspace to incre
Slide 32: Derwent London Leasing Activity
DERWENT LONDON LEASING ACTIVITY Near record H1 letting activity Pre-lets • £19.3m of new leases • 8.9% above Dec 2022 ERV 1 • 11.0 year WAULT (to break) • 59% pre-lets • £100 psf/£4.9m • Includes 13 F+F units (10.9% above ERV) • 15 years (break at 10) Momentum maintained post-H1 • £7.0m of new lease
Slide 33: Derwent London Asset Management Activity
DERWENT LONDON ASSET MANAGEMENT ACTIVITY ASSET MANAGEMENT H1 2023 LEASE EXPIRY AND BREAK OUTCOME ANALYSIS % Previous New New rent vs 100 8 10 10 11 11 13 14 Area rent rent Uplift Dec 2022 ERV 23 21 90 27 7 ‘000 sq ft £m pa £m pa % % 14 6 80 26 22 35 Rent reviews 145.4 8.5 9.0 5.8 3.8 10 20 70 44 Lea
Slide 34: Delivering the Right Product
DELIVERING THE RIGHT PRODUCT EMILY PRIDEAUX 32
Slide 35: Brand and Product
BRAND AND PRODUCT INNOVATIVE DESIGN • Best-in-class architecture and engineering • Intelligent • Sustainable CUSTOMER-FOCUSED SERVICE AND AMENITY • DL/ Lounges • DL/ Experience • DL/ App OUR APPROACH TO FLEX • Serviced office providers • Furnished + Flexible • Portfolio amenity Derwent London plc -
Slide 36: Innovative Design
INNOVATIVE DESIGN WE CRAFT INSPIRING AND DISTINCTIVE SPACES • Volume and light • ‘Long life, low carbon’ • High quality materials Soho Place W1 Tea Building E1 Brunel Building W2 Angel Building EC1 • Generous amenity • Forward thinking architecture and engineering • Air quality and openable windows
Slide 37: Member Focused Service and Amenity
MEMBER FOCUSED SERVICE AND AMENITY DL/ MEMBERS DL/ LOUNGES DL/ APP DL/ EXPERIENCE DL/78.Fitzrovia W1 Rooftop Yoga DL/28.Old Street EC1 Terrarium Workshop Derwent London plc - Interim Results 2023 35
Slide 38: A Tailored Approach to Flex
A TAILORED APPROACH TO FLEX SERVICED OFFICE PORTFOLIO FURNISHED + PROVIDER AMENITY FLEXIBLE • 163,000 sq ft (3.0% of floorspace) • DL/ Lounges • 128,300 sq ft (2.4% of floorspace) • 5 different providers in 7 buildings • DL/ App • 48 units in 18 buildings • Asset amenities Fora, 6-8 Greencoat Place
Slide 39: Developments
DEVELOPMENTS PAUL WILLIAMS 37
Slide 40: On-site Projects – 435,000 sq ft
ON-SITE PROJECTS – 435,000 SQ FT 25 Baker Street W1 – completion H1 2025 Network W1 – completion H2 2025 17% profit on cost1 (FY 2022: 11%) 5.9% yield on cost1 (FY 2022: 5.4%) 298,000 sq ft 137,000 sq ft Offices Offices • 206,000 sq ft 25 Baker Street – 75% pre-let • 132,000 sq ft • 12,000 sq ft Glo
Slide 41: 25 Baker Street W1
25 BAKER STREET W1 • Scheme ERV £20.0m (net) • Office ERV £95 psf • Average rent to date £102 psf • Capex to complete £191m • 97% of construction costs agreed • 76% of commercial pre-let/sold Derwent London plc - Interim Results 2023 • Appendices 40 to 41 39
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Slide 43: Network W1
NETWORK W1 • Scheme ERV £12.4m • Office ERV £90 psf • Capex to complete £98m • 99% of construction costs fixed Derwent London plc - Interim Results 2023 • Appendices 40 to 41 41
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Slide 45: Future Development Pipeline – 1.3m+ sq ft
FUTURE DEVELOPMENT PIPELINE – 1.3M+ SQ FT MEDIUM-TERM – c.390,000 sq ft LONGER-TERM – 950,000+ sq ft 50 BAKER STREET W1 OLD STREET QUARTER EC1 (50:50 JV) Target: 750,000+ sq ft Target: c.240,000 sq ft Start date 2027+ Start date 2024+ Existing: c.400,000 sq ft Existing: 122,300 sq ft Planning: Appli
Slide 46: Rolling Refurbishments
ROLLING REFURBISHMENTS • Upgrade multi-let buildings into next generation of prime • Reposition and improve amenity • Ensure compliance with EPC legislation • Capture rental uplifts 20 FARRINGDON ROAD EC1 1-2 STEPHEN STREET W1 MIDDLESEX HOUSE W1 166,300 sq ft 266,200 sq ft 66,500 sq ft Avg passing r
Slide 47: Summary
SUMMARY PAUL WILLIAMS 45
Slide 48: Summary
SUMMARY London • Broad occupier and investor appeal • Job creation and economic growth Occupational market • Occupiers expanding and recentralising • Constrained supply of prime – increased pre-letting activity Investment market • Near-term liquidity challenges • Opportunities expected to emerge Der
Slide 49: Appendices
APPENDICES 47
Slide 50: Appendices
APPENDICES Financials 49 Valuation 63 Portfolio income profile 70 Sustainability 79 London office market 83 Developments & refurbishments 93 48
Slide 51: Financials
FINANCIALS Appendices 01. Headline numbers 50 02. Group balance sheet 51 03. EPRA net asset value metrics 52 04. Group income statement 53 05. IFRS (loss)/profit and EPRA earnings 54 06. Explanation of EPRA adjustments 55 07. Group cash flow 56 08. Like-for-like income reconciliation 57 09. Accounti
Slide 52: Appendix 1 - Headline Numbers
APPENDIX 1 - HEADLINE NUMBERS Jun 2023 % change Dec 2022 Jun 2022 Net asset value (NAV) £3,869.2m (5.1)* £4,075.5m £4,518.8m EPRA net tangible assets per share 1,2 3,444p (5.2)* 3,632p 4,023p EPRA net disposal value per share1,2 3,609p (4.2)* 3,768p 4,069p EPRA total return -3.7% n/a -6.3% 3.0% Gros
Slide 53: Appendix 2 - Group Balance Sheet
APPENDIX 2 - GROUP BALANCE SHEET Jun 2023 Dec 2022 Jun 2022 £m £m £m Investment property 4,852.1 5,002.0 5,497.11 Owner-occupied property 47.4 50.0 50.0 Investment in joint ventures 39.2 43.9 51.3 Other non-current assets 207.1 198.6 188.2 5,145.8 5,294.5 5,786.6 Non-current assets held for sale - 5
Slide 54: Appendix 3 - EPRA Net Asset Value Metrics
APPENDIX 3 - EPRA NET ASSET VALUE METRICS Jun 2023 Dec 2022 EPRA NTA1 EPRA NDV2 EPRA NRV3 EPRA NTA1 EPRA NDV2 EPRA NRV3 £m £m £m £m £m £m Net assets attributable to equity shareholders 3,869.2 3,869.2 3,869.2 4,075.5 4,075.5 4,075.5 Revaluation of trading properties 3.6 3.6 3.6 4.8 4.8 4.8 Deferred
Slide 55: Appendix 4 - Group Income Statement
APPENDIX 4 - GROUP INCOME STATEMENT Half year ended Year ended Half year ended Jun 2023 Dec 2022 Jun 2022 £m £m £m Gross property income 105.9 208.4 102.31 Profit on disposal of trading properties - 0.2 0.3 Write-down of trading property (0.1) (0.2) - Other income 2.4 4.2 1.8 Movement in impairment
Slide 56: Appendix 5 - IFRS (Loss)/Profit and EPRA Earnings
APPENDIX 5 - IFRS (LOSS)/PROFIT AND EPRA EARNINGS Half year ended Year ended Half year ended Jun 2023 Dec 2022 Jun 2022 £m £m £m IFRS (loss)/profit for the period attributable to shareholders (143.2) (280.5) 135.3 Revaluation (surplus)/deficit 196.7 422.1 (73.3)1 Joint venture revaluation deficit 4.
Slide 57: Appendix 6 - Explanation of EPRA Adjustments
APPENDIX 6 - EXPLANATION OF EPRA ADJUSTMENTS Adjustments H1 2023 H1 2022 H1 2023 EPRA EPRA A B C IFRS basis basis £m £m £m £m £m £m Net property and other income 93.3 - 0.1 - 93.4 96.31 Administrative expenses (19.2) - - - (19.2) (17.8) Revaluation deficit (196.7) - 196.7 - - - Profit on disposal 1.
Slide 58: Appendix 7 - Group Cash Flow
APPENDIX 7 - GROUP CASH FLOW Half year ended Year ended Half year ended Jun 2023 Dec 2022 Jun 2022 £m £m £m Property income 99.2 194.4 94.2 Property expenses and service charge balance movement (9.5) (19.5) (6.1) Tenant deposit movement (0.3) 9.7 10.81 Other income 3.9 4.2 1.5 Administrative expense
Slide 59: Appendix 8 - Like-for-like Income Reconciliation
APPENDIX 8 - LIKE-FOR-LIKE INCOME RECONCILIATION Like-for-like Like-for-like Development Acquisitions movement to portfolio property & disposals Total H1 2023 £m £m £m £m H1 2023 Gross rental income 95.1 9.5 1.3 105.9 Other property expenditure (9.4) (3.3) (0.4) (13.1) Write-off/impairment of receiv
Slide 60: Appendix 9 - Accounting Policy Changes
APPENDIX 9 - ACCOUNTING POLICY CHANGES • Impact of H1 2022 restatements as a result of the change in accounting policy 30 Jun 30 Jun Restatement1 Restatement2 Restated £m £m £m £m Group balance sheet (extract) Investment property 5,495.9 1.2 - 5,497.1 Other receivables 175.8 (0.7) - 175.1 Trade and
Slide 61: Appendix 10 - Green Debt Facilities and Expenditure
APPENDIX 10 - GREEN DEBT FACILITIES AND EXPENDITURE Green debt facilities GREEN BORROWINGS AND QUALIFYING EXPENDITURE £m • £300m green tranche within £450m revolving credit facility 800 Green RCF Green expenditure Available green headroom • £350m green bond Green bond Drawn green facilities 700 • Pr
Slide 62: Appendix 11 - Debt Summary
APPENDIX 11 - DEBT SUMMARY MATURITY PROFILE OF FIXED RATES Jun 2023 Dec 2022 £m 0 50 100 150 200 250 300 350 400 450 500 Bank facilities drawn £27m - 2023 Fixed rates borrowings £1,238m £1,238m 2024 83 Drawn facilities £1,265m £1,238m 2025 175 2026 230 Unutilised facilities and cash1 £562m £577m 202
Slide 63: Appendix 12 - Debt Facilities
APPENDIX 12 - DEBT FACILITIES Drawn Undrawn Total Maturity £m £m £m 1.5% unsecured convertible bonds 175.0 - 175.0 June 2025 6.5% secured bonds 175.0 - 175.0 March 2026 1.875% unsecured green bonds 350.0 - 350.0 November 2031 2.68% unsecured private placement notes 55.0 - 55.0 January 2026 3.46% uns
Slide 64: Appendix 13 - Net Debt
APPENDIX 13 - NET DEBT Jun 2023 Dec 2022 £m £m Borrowings – current 20.0 19.7 Borrowings – non-current 1,258.3 1,229.4 Acquired fair value of secured bonds less amortisation (5.8) (6.5) Unamortised discount on unsecured green bonds 1.6 1.7 Equity component of convertible bonds 7.7 7.7 Unwinding of d
Slide 65: Valuation
VALUATION Appendices 14. Property return 64 15. Valuation performance by village 65 16. Rental value growth and average rents 66 17. Valuation yields 67 18. Context to yield movement 68 19. Portfolio statistics by village 69 63
Slide 66: Appendix 14 - Property Return
APPENDIX 14 - PROPERTY RETURN TOTAL PROPERTY RETURN • Derwent London H1 total property return -2.0% Total return (%) 18 • MSCI Central London Offices1 -3.2% 15 16.5 • Outperformance within central London due to: 12 • On-site development progress 9 7.4 6 6.3 5.9 • Asset locations – 72% of portfolio i
Slide 67: Appendix 15 - Valuation Performance by Village
APPENDIX 15 - VALUATION PERFORMANCE BY VILLAGE Valuation Valuation Weighting movement Jun 2023 Jun 2023 H1 20231 £m % % West End Central Fitzrovia 1,735.2 34 (2.5) Victoria 472.7 9 (4.5) Soho/Covent Garden 393.0 8 (0.5) Paddington 356.8 7 (4.2) Marylebone 287.0 5 10.0 Mayfair 101.0 2 (3.8) 3,345.7 6
Slide 68: Appendix 16 - Rental Value Growth and Average Rents
APPENDIX 16 - RENTAL VALUE GROWTH AND AVERAGE RENTS RENTAL VALUE GROWTH1 H1 2022 H2 2022 2022 H1 2023 % % % % West End 0.5 0.7 1.2 1.0 City Borders 1.6 0.0 1.6 1.2 Central London 0.9 0.5 1.4 1.0 Provincial (0.3) 0.4 0.1 0.0 Underlying 0.8 0.5 1.3 1.0 AVERAGE RENTS - CENTRAL LONDON OFFICES ‘Topped-up
Slide 69: Appendix 17 - Valuation Yields
APPENDIX 17 - VALUATION YIELDS YIELD PROFILE1 INITIAL YIELDS2 Yield (%) Net initial ‘Topped-up’ 8 Reversionary yield yield initial yield True equivalent yield Initial yield % % 7 West End 3.8 4.7 6 City Borders 4.0 4.9 Central London 3.8 4.8 5 Provincial 8.3 8.9 4 EPRA portfolio 3.9 4.8 3 2 2007 200
Slide 70: Appendix 18 - Context to Yield Movement
APPENDIX 18 - CONTEXT TO YIELD MOVEMENT • As at 30 June 2023 VALUATION YIELDS1 • Derwent London true equivalent yield 5.13% % 12 Derwent London true equivalent yield (+25bp in H1) 10-year UK Gilt BBB yield • BBB yield 6.67% (+50bp in H1) 10 • UK 10-year Gilt yield 4.39% (+72bp in H1) 8 • Capital val
Slide 71: Appendix 19 - Portfolio Statistics by Village
APPENDIX 19 - PORTFOLIO STATISTICS BY VILLAGE Net Vacant Floor Vacant contracted Average space Estimated area1 floor area rental rental rental Lease Total rental Valuation Weighting ‘000 ‘000 income income value reversion2 reversion value £m % sq ft sq ft £m pa £ psf £m pa £m pa £m pa £m pa West End
Slide 72: Portfolio Income Profile
PORTFOLIO INCOME PROFILE Appendices 20. Build-up of portfolio ERV 71 21. Available space and projects 72 22. Vacancy rate and lease expiry analysis 73 23. Lease expiry profile and lease length 74 24. Timing of the reversion 75 25. Portfolio summary 76 26. Major tenants 77 27. Rent and tenant banding
Slide 73: Appendix 20 - Build-up of Portfolio ERV
APPENDIX 20 - BUILD-UP OF PORTFOLIO ERV Rent uplift pa Rent pa £m £m £m Contracted rental income, net of ground rents 203.3 Contractual rental uplifts 80 Charlotte Street W1 12.1 Soho Place W1 6.0 Brunel Building W2 4.6 The Featherstone Building EC1 3.4 Francis House SW1 2.9 88 Rosebery Avenue EC1 2
Slide 74: Appendix 21 - Available Space and Projects
APPENDIX 21 - AVAILABLE SPACE AND PROJECTS Vacant Pre-let/ Total Gross Net Pre-let area sold area area vacant Ground vacant net rent Total net ‘000 ‘000 ‘000 ERV rent ERV £m ERV ERV sq ft sq ft sq ft £m pa £m pa pa £m pa £m pa Comment Available to occupy The White Chapel Building E1 158 - 158 4.5 -
Slide 75: Appendix 22 - Vacancy Rate and Lease Expiry Analysis
APPENDIX 22 - VACANCY RATE AND LEASE EXPIRY ANALYSIS Vacancy rate (%) VACANCY RATES • Derwent London EPRA vacancy rate1 of 4.5% at Jun 2023 10 Derwent London (by rental value) CBRE central London offices (by floorspace) • Down from 6.4% in Dec 2022 9 CBRE West End offices (floorspace) 8 • CBRE centr
Slide 76: Appendix 23 - Lease Expiry Profile and Lease Length
APPENDIX 23 - LEASE EXPIRY PROFILE AND LEASE LENGTH EXPIRIES AND BREAKS AS A PERCENTAGE OF PORTFOLIO INCOME1 West City End Borders Provincial H2 2023 2024 2025 2026 2027 Total Expiries 1 1 - 2 4 11 4 4 25 Rolling breaks 1 - - 1 1 - - - 2 Single breaks - 1 - 1 12 5 2 2 22 Total 2 2 - 4 17 16 6 6 49 P
Slide 77: Appendix 24 - Timing of the Reversion
APPENDIX 24 - TIMING OF THE REVERSION CONTRACTED UPLIFTS AND PRE-LETS: £58.0M REVIEWS AND EXPIRIES: £7.3M £m £m 5 Expiries 18 Future contracted growth above current ERV Reviews Contracted uplifts and pre-lets Future contracted growth above current ERV 4 16 0.3 3 3.3 14 0.1 0.3 2 12 1.4 0.9 1 1.2 1.4
Slide 78: Appendix 25 - Portfolio Summary
APPENDIX 25 - PORTFOLIO SUMMARY Proforma Pipeline for Old Street 46% Future Core Quarter EC1 income acquisition5 appraisal 54% Floor area: 1.39m sq ft 26% Rental income: £47.3m WAULT: 4.4 yrs Rent4: £48.62 ERV: £50.52 Core 58% 5.39m sq ft1 Floor area: 0.25m sq ft Potential projects Floor area: 1.84m
Slide 79: Appendix 26 - Major Tenants
APPENDIX 26 - MAJOR TENANTS ‘Topped-up’ income % 01 Expedia 6.1 02 Public sector1 5.7 03 Burberry 5.6 04 Boston Consulting Group 5.2 05 PIMCO (pre-let) 4.1 06 G-Research 4.1 07 Arup 3.7 08 Apollo 3.0 09 The Office Group/Fora 3.0 10 Sony Pictures 1.8 11 Fremantle 1.8 12 VCCP 1.7 13 Adobe 1.5 14 Publi
Slide 80: Appendix 27 - Rent and Tenant Banding
APPENDIX 27 - RENT AND TENANT BANDING CENTRAL LONDON ‘TOPPED-UP’ PROFILE OF TENANTS’ OFFICE RENT BANDING1 BUSINESS SECTOR2 £0-£30 psf Other 4% Flexible office providers 5% £80+ psf £30-£40 psf 4% Media 16% 8% Public sector 19% 5% Retail & hospitality £40-£50 psf 7% 13% £70-£80 psf Business 5.39m sq
Slide 81: Sustainability
SUSTAINABILITY Appendices 28. Portfolio EPC profile 80 29. EPC rating progression 81 30. Embodied carbon 82 79
Slide 82: Appendix 28 - Portfolio EPC Profile
APPENDIX 28 - PORTFOLIO EPC PROFILE Exempt Project A B C D E 0.3 ERV 11.2 9.8 46.3 18.4 9.2 4.8 2030 compliant: 67.6% 1.1 Floorspace 8.0 8.7 44.3 20.9 9.8 7.2 2030 compliant: 62.1% 0 10 20 30 40 50 60 70 80 90 100 London commercial portfolio (%) Derwent London plc - Interim Results 2023 80
Slide 83: Appendix 29 - EPC Rating Progression
APPENDIX 29 - EPC RATING PROGRESSION 1 London commercial portfolio by ERV (%) 100 99.9 100.0 100.0 Dec 2021 Dec 2022 Jun 2023 90 85.7 86.0 80 78.9 70 67.6 65.3 60 61.0 50 40 30 20 10 0 2023 compliant 2027 compliant 2030 compliant 1 London commercial portfolio and assumes projects have completed Derw
Slide 84: Appendix 30 - Embodied Carbon
APPENDIX 30 - EMBODIED CARBON Embodied Embodied carbon carbon footprint intensity Year Scheme tCO2e kgCO2e/sqm 2020 80 Charlotte Street W1 19,790 506 2021 19-23 Fitzroy Street W1 18 36 3-5 Rathbone Place W1 162 185 6-8 Greencoat Place SW1 763 191 DL/78.Fitzrovia W1 93 122 2022 1 Soho Place W1 16,401
Slide 85: London Office Market
LONDON OFFICE MARKET Appendices 31. Demand 84 32. Take-up by type 85 33. Space under offer 86 34. Supply 87 35. New construction starts 88 36. Availability 89 37. Prime office rents 90 38. Investment market 91 39. Investment demand 92 83
Slide 86: Appendix 31 - Demand
APPENDIX 31 - DEMAND Market statistics OFFICE TAKE-UP Take-up (million sq ft) • Central London 20 Central London 18 • 4.2m sq ft of take-up in H1 2023 16 • 36% below H1 2022 14 Annual average 12 • 32% below the LTA 10 • Pre-lets accounted for 25% of take-up, the highest 8 since 2018 6 • Activity by
Slide 87: Appendix 32 - Take-up by Type
APPENDIX 32 - TAKE-UP BY TYPE Central London office take-up (million sq ft) 18 Pre-let New completed Secondhand Grade A Secondhand Grade B/C 16 14 Annual average 12 10 8 6 4 2 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 H1 2023 Source: CBRE Derwent London plc - Interim Results 2023 85
Slide 88: Appendix 33 - Space Under Offer
APPENDIX 33 - SPACE UNDER OFFER Floorspace (million sq ft) 5.0 West End City Midtown Docklands Southbank 4.5 4.0 3.5 Average 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: CBRE Derwent London plc - Interim Results 2023 86
Slide 89: Appendix 34 - Supply
APPENDIX 34 - SUPPLY Existing supply OFFICE DEVELOPMENT PIPELINE • Central London vacancy rate 8.5% at H1 2023 Floor area (million sq ft) 12 Vacancy rate (%) 12 Central London Under construction available • Increased from 7.7% at Q4 2022 Under construction let/under offer 10 Completed 10 • LTA 5.3%
Slide 90: Appendix 35 - New Construction Starts
APPENDIX 35 - NEW CONSTRUCTION STARTS Central London office construction starts (million sq ft) 3.0 Construction starts 4-quarter rolling average 2.5 2.0 1.5 1.0 0.5 0.0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: CBRE Derwent London plc - Interim Results 2023 88
Slide 91: Appendix 36 - Availability
APPENDIX 36 - AVAILABILITY Available space (million sq ft) % 27 90 West End Tenant controlled % City Secondhand % 24 Docklands, Midtown & Southbank 80 21 70 18 60 15 50 12 40 9 30 6 20 3 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 H1 0 2023 Source: CBRE Derwent London
Slide 92: Appendix 37 - Prime Office Rents
APPENDIX 37 - PRIME OFFICE RENTS Prime offfice rent (£ psf) 140 140 Q2 2016 (EU referendum) Q4 2019 (pre-pandemic) Q2 2023 120 120 110 100 97.50 97.50 95 90 90 90 90 87.50 85 85 82.50 82.50 82.50 80 80 80 77.50 77.50 73 73 70 67.50 60 40 20 0 Mayfair Soho North of North of Midtown Victoria Paddingto
Slide 93: Appendix 38 - Investment Market
APPENDIX 38 - INVESTMENT MARKET CENTRAL LONDON OFFICE INVESTMENT • £2.9bn of investment transactions in H1 2023 Investment transactions (£bn) 22 H1 H2 • 50% below the LTA 20 • 63% below H1 2022 18 16 • An improvement on the £0.7bn in Q4 2022 with £1.7bn 14 in Q1 and £1.2bn in Q2 12 Annual average 10
Slide 94: Appendix 39 - Investment Demand
APPENDIX 39 - INVESTMENT DEMAND SOURCES OF INVESTMENT CENTRAL LONDON OFFICE YIELDS Prime office yield (%) 7.0 West End City West End average City average Middle 6.5 East 9% 6.0 North America UK & 5.5 12% Europe 5.0 34% 4.5 £27.5bn 4.0 SE Asia 15% 3.5 3.0 2001 2003 2005 2007 2009 2011 2013 2015 2017
Slide 95: Developments & Refurbishments
DEVELOPMENTS & REFURBISHMENTS Appendices 40. Developments on site: profit on cost 94 41. Project summary: current projects 95 42. Project summary: future projects 96 43. Portfolio map 97 93
Slide 96: Appendix 40 - Developments on Site: Profit on Cost
APPENDIX 40 - DEVELOPMENTS ON SITE: PROFIT ON COST Summary £m End value 856 Less: Total cost1 729 Project surplus 127 Less: Booked to Jun 23 35 Surplus to come 92 Profit on total cost 17% Yield on cost2 5.9% Completion H1 2025 H2 2025 Commercial area (sq ft) 383,000 246,0003 137,000 Residential area
Slide 97: Appendix 41 - Project Summary: Current Projects
APPENDIX 41 - PROJECT SUMMARY: CURRENT PROJECTS Current Pre H2 Total net scheme Proposed 2023 2024 2025+ 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 major projects 25 Baker Street W1 - 143 298 51
Slide 98: Appendix 42 - Project Summary: Future Projects
APPENDIX 42 - PROJECT SUMMARY: FUTURE PROJECTS Current Pre- net scheme Proposed Earliest income area area possession Property £m pa ‘000 sq ft ‘000 sq ft year Comment Consented Holden House W1 3.7 91 150 2025 Strathkelvin Retail Park 0.9 108 130 2023 B&Q sub-division 4.6 199 280 Under appraisal 1 50
Slide 99: Appendix 43 - Portfolio Map
Caledonian Road Camden Road APPENDIX 43 - PORTFOLIO MAP Essex Road London Fields Camden Town Primrose Hill Carnegie St Islington The Knowledge Kings Cross Wharfdale Rd Angel TECH BEL T Quarter Albany Regent’s Park St Pancras Hoxton St International Th Maida Vale am es lin k Euston Up pe rW ob Old St
Slide 100: Executive Committee and Senior Management
EXECUTIVE COMMITTEE AND SENIOR MANAGEMENT Executive Committee Senior Management Paul Williams Chief Executive Lesley Bufton Head of Marketing Damian Wisniewski Chief Financial Officer Matt Cook Head of Digital Innovation & Technology Nigel George Executive Director Tim Hyman Group Architect Emily Pr
Slide 101: Disclaimer
DISCLAIMER This presentation has been prepared by Derwent London plc (the This presentation is for information purposes only and does not constitute “Company”). No representation or warranty (express or implied) of any an offering document or an offer of transferable securities to the public nature