Derwent London Plc · LSE:DLN
Derwent London — H1 2019 Earnings Presentation
91 slides from Derwent London's earnings presentation, Aug 8, 2019
Slide 1: Interim Results 2019
Interim Results 2019
Slide 2: Contents
CONTENTS Presenters Contents Paul Williams Introduction and overview 01 Damian Wisniewski Results and financial review 09 Nigel George Valuation and portfolio analysis 18 David Silverman Leasing, asset management and investment 24 Simon Silver Projects 32 Summary 47 Appendices 49 Disclaimer 89 Derwe
Slide 3: Introduction and Overview
INTRODUCTION AND OVERVIEW PAUL WILLIAMS Derwent London plc Interim Results 2019 1
Slide 4: Good Progress in the First Half
GOOD PROGRESS IN THE FIRST HALF • Total return 3.3%: le ed • NAV per share +2.0% % et t 98 pl m Co • Interim dividend raised 9.9% • New lettings £18.1m: • 7.5% above Dec 2018 ERV • Added 410,000 sq ft of development: • Soho Place W1 • The Featherstone Building EC1 • EPRA vacancy rate down to 1.6% •
Slide 5: Central London Occupier Demand
CENTRAL LONDON OCCUPIER DEMAND Central London take-up Active ongoing demand • 5.8m sq ft of central London take-up in H1 2019: • Active demand increased 9% in H1 from 8.9m sq ft • 9.0% below the half year average to 9.7m sq ft, 9% above average and the highest for a year • Business services represen
Slide 6: Supply Remaining Constrained
SUPPLY REMAINING CONSTRAINED Existing supply CENTRAL LONDON OFFICE AVAILABILITY Vacancy rate (%) • Completions of 1.8m sq ft in H1, 24% below average 16 West End City 14 Central London • Central London vacancy rate of 4.2% at the half year: 12 West End average City average • Down from 4.5% six month
Slide 7: Central London Office Investment Market
CENTRAL LONDON OFFICE INVESTMENT MARKET First half activity CENTRAL LONDON OFFICE INVESTMENT Value of investment transactions (£bn) 9 • CBRE reported £4.2bn of central London transactions in H1: Quarter total 4 quarter average 8 • 32% below the half year average 7 • UK investors more active with 40%
Slide 8: Central London Office Outlook
CENTRAL LONDON OFFICE OUTLOOK CENTRAL LONDON OFFICE DEMAND CENTRAL LONDON OFFICE INVESTMENT Demand (million sq ft) Value of investment transactions (£bn) 30 Potential demand 22 Active demand 20 25 18 16 20 14 Average 12 15 10 10 8 6 5 4 2 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 0 2001 20
Slide 9: Progressing Our Opportunities
PROGRESSING OUR OPPORTUNITIES DEVELOPMENT COMPLETIONS - JUN 2018 DEVELOPMENT COMPLETIONS - AUG 2019 Commercial floorspace (million sq ft) Commercial floorspace (million sq ft) 0.40 H1 2019 H1 2020 2022 0.40 H1 2019 H1 2020 2022 Uncommitted projects Completion Committed projects 0.35 0.35 8% 17% 0.30
Slide 10: Progressing the Business
PROGRESSING THE BUSINESS Derwent London’s business characteristics Recent initiatives • Innovative design-led projects • Changes to senior management roles: • Reversionary portfolio let at middle-market rents • Nigel George adds responsibility for the development department to his role • Growing ear
Slide 11: Results and Financial Review
RESULTS AND FINANCIAL REVIEW DAMIAN WISNIEWSKI Derwent London plc Interim Results 2019 9
Slide 12: Headline Numbers
HEADLINE NUMBERS Jun 2019 % change Dec 2018 Jun 2018 Net asset value (NAV) £4,349.7m 2.0* £4,263.4m £4,197.1m EPRA NAV per share1,2 3,852p 2.0* 3,776p 3,713p EPRA triple NAV per share 1,2 3,758p 1.7* 3,696p 3,626p EPRA total return 3.3% n/a 5.3% 3.1% Gross property income £93.6m (12.6) £196.0m £107.
Slide 13: EPRA NAV Movement
EPRA NAV MOVEMENT • EPRA NAV per share up 2.0% to 3,852p from EPRA NAV PER SHARE 3,776p, after the payment of 47p of dividends Pence 4,000 • Total accounting return (EPRA basis) of 3.3% 3,900 51 4 (47) • Revaluation surplus: (1) 3,852 69 Investment properties £75.0m 3,800 Owner-occupied property (£0
Slide 14: EPRA and Underlying Earnings
EPRA AND UNDERLYING EARNINGS1 • Two adjustments to prior period EPRA earnings MOVEMENTS IN EARNINGS to derive underlying earnings: £m 80 • £1.1m of surrender premiums received were deferred to H2 2018 74.6 • Access rights receipt of £15.8m was 70 excluded • EPRA and underlying earnings were £57.3m i
Slide 15: Gross Rental Income
GROSS RENTAL INCOME • Gross rental income increased by 7.1% to £93.1m in MOVEMENTS IN GROSS RENTAL INCOME H1 2019 £m 100 0.7 1.0 2.4 • Lettings and asset management (reviews, regears 1.6 1.6 (1.1) 93.1 and renewals) include: 86.9 2019 2018 lettings & lettings & 80 AM1 AM1 £6.3m Tea Building E1 £0.8m
Slide 16: Cash Flow
CASH FLOW • Increase in net debt of £46.6m to £1,003.5m • Decrease in cash from operations due to letting fees paid in H1 2019 and prior period benefitted from £22.1m of premiums and other property income received NET CASH FLOW MOVEMENTS H1 2019 H1 2018 FORECAST CAPITAL EXPENDITURE £m £m On-site pro
Slide 17: Proforma Impact of Major Projects and Disposals
PROFORMA IMPACT OF MAJOR PROJECTS AND DISPOSALS • Assumes no further lettings other than those already contracted • Shows impact of estimated remaining capital expenditure on both completed and on-site projects PROFORMA IMPACT OF COMPLETED PROJECTS PROFORMA IMPACT OF ON-SITE PROJECTS AND DISPOSALS S
Slide 18: Debt Summary
DEBT SUMMARY • £250m US private placement (USPP) notes drawn in Jun 2019 Dec 2018 Jan 2019, with a weighted average interest rate of Total facilities £1,443m £1,166m 2.89% and maturity of 10.8 years Unutilised facilities and cash £495m £274m • Repurchase of 2019 convertible bonds and new issue in Ju
Slide 19: Debt Facilities
DEBT FACILITIES Jun 2019 Dec 2018 MATURITY PROFILE OF DEBT FACILITIES £m Average spot interest rate 0 50 100 150 200 250 300 350 400 450 500 550 600 3.56% 3.43% (cash basis) 2019 2.3 Average spot interest rate 2020 3.70% 3.68% (IFRS basis) 2021 2022 90 463 Marginal interest rate 1.50% 1.60% 2023 Per
Slide 20: Valuation and Portfolio Analysis
VALUATION AND PORTFOLIO ANALYSIS NIGEL GEORGE Derwent London plc Interim Results 2019 18
Slide 21: Valuation
VALUATION Investment portfolio valued at £5.4bn Four developments drove performance • Underlying capital growth 1.9% H2 2018: 0.9%: • Valued at £899m, uplift of 13.6%: • West End 2.9% H2 2018: 1.5% • Brunel Building W2 (98% let)2 21.4% • City Borders 0.5% H2 2018: 0.4% • 80 Charlotte Street W1 (92%
Slide 22: Property Return
PROPERTY RETURN Total property returns H1 2019 CUMULATIVE TOTAL PROPERTY RETURN Index (31 Dec 2007=100) • Derwent London 3.6% 300 Derwent London 175% • MSCI IPD Central London Offices1 1.9% MSCI IPD Central London Offices MSCI IPD UK All Property • MSCI IPD UK All Property1 0.8% 250 134% 200 84% TOT
Slide 23: Movement in Yields
MOVEMENT IN YIELDS EPRA yields TRUE EQUIVALENT YIELD MOVEMENT1 True equivalent yield (%) • Net initial yield 3.3% (Dec 2018: 3.4%): 7.5 • ‘Topped-up’ net initial yield 4.7% 15 (Dec 2018: 4.6%) 7.0 • Locking in the reversion (83) 6.5 • True equivalent yield 4.74% (Dec 2018: 4.73%) 6.0 (55) (12) (12)
Slide 24: Rental Value Growth
RENTAL VALUE GROWTH • Underlying rental growth of 0.4%: RENTAL VALUE GROWTH Half-yearly rental value growth (%) • City Borders 0.9% 12 • West End 0.0% 9 6 4.8 5.2 6.6 4.1 3.8 4.2 4.1 • Good demand for pre-lets and mid-market 3 2.6 2.8 2.1 2.8 2.6 3.0 1.0 1.1 0.6 0.5 0.6 0.4 priced office space 0 (2.
Slide 25: Build-up of Portfolio ERV
BUILD-UP OF PORTFOLIO ERV • Portfolio reversion of £140.1m1: £m BUILD-UP OF ERV4 £3.4m £1.7m 350 let in let in • £71.8m (51%) contracted, including: Q3 Q3 6.6 1.5 • Brunel Building W2 £15.1m 300 3.8 303.3 26.1 • Angel Building EC1 £11.0m 30.3 250 • White Collar Factory EC1 £8.3m £56.4m 71.8 on-site
Slide 26: Leasing, Asset Management & Investment
LEASING, ASSET MANAGEMENT & INVESTMENT DAVID SILVERMAN Derwent London plc Interim Results 2019 24
Slide 27: Letting Activity 2019
LETTING ACTIVITY 2019 DERWENT LONDON LETTING ACTIVITY • 272,200 sq ft of lettings in H1 at a rent of £18.1m pa: Rental income (£m pa) 45 Non pre-lets • Major pre-let to G-Research at Soho Place W1 Pre-lets for £9.7m pa 40 Average • Office lettings concluded at Brunel Building W2 35 • Transactions 7.
Slide 28: Brunel Building W2: A Product Driven Market
Maida Vale Euston BRUNEL BUILDING W2: A PRODUCT DRIVEN MARKET Up pe rW ob urn Heathrow Airpor t | Maidenhead Pl Great Regent’s Portland Street Wo Warren Street b Park urn Baker Street Pl Russell Square Marylebone Cro ssra il Westbourne Park Portl Edgware Road and Pl St Qu intin Goodge St Ave Royal O
Slide 29: Derwent London Plug and Play Space
DERWENT LONDON PLUG AND PLAY SPACE • Meeting occupiers’ space requirements in a swift and convenient way • The units are fully fitted out, vary in size and available on flexible terms – not fully serviced • To date nine units, totalling 20,300 sq ft, have been rolled out with an average size of 2,25
Slide 30: Asset Management Activities
ASSET MANAGEMENT ACTIVITIES • 478,000 sq ft of lease renewals, rent reviews and lease ASSET MANAGEMENT H1 2019 regears completed in H1 2019 £m 25 Previous rent Dec ERV New rent • Income up 21.4%, from £20.1m pa to £24.3m 20 • Performance against previous rent: 15 • Lease renewals +46.8% • Rent revie
Slide 31: Asset Management: 19-35 Baker Street W1
ASSET MANAGEMENT: 19-35 BAKER STREET W1 Current position • 143,000 sq ft of existing buildings held in a jointSventure Portman quare (JV) with The Portman Estate (DL share 55%) • 71-year leasehold interest with a nominal ground rent • Full planning permission granted in Mar 2019: • 293,000 sq ft sch
Slide 32: Acquisition H1 2019: 3-5 Rathbone Place W1
ACQUISITION H1 2019: 3-5 RATHBONE PLACE W1 30 • £21.0m acquisition after costs: • 17,800 sq ft office, retail and leisure 1 to 92 1-2 • £0.9m pa rental income GR 15 to ES SE Stephen Street 7 ST RE • 4.2% net initial yield ET 25 24 16 6 • Close to existing holdings: 15 14 o5 1t 17 E • Rathbone Studio
Slide 33: Disposals 2019 YTD
DISPOSALS 2019 YTD Premier House SW1 9 Prescot Street E1 • £50.0m before costs in Q1: • £53.8m before costs in Q2: • 10% premium to Dec 2018 • 2% premium to Dec 2018 BV book value (BV) • 50:50 joint venture (DL share • 60,700 sq ft freehold office £26.9m) The Buckley Building EC1 • Vacant possession
Slide 34: Projects
PROJECTS SIMON SILVER Derwent London plc Interim Results 2019 32
Slide 35: Project Update: A Busy Start to the Year
PROJECT UPDATE: A BUSY START TO THE YEAR • One major completion: • Brunel Building W2 – 243,200 sq ft – Offices 100% let and remaining 5,500 sq ft retail unit under offer • Three major projects on site: • 80 Charlotte Street W1 – 380,000 sq ft mixed-use scheme • Soho Place W1 – 285,000 sq ft of offi
Slide 36: H1 2019 Completion: Brunel Building W2
H1 2019 COMPLETION: BRUNEL BUILDING W2 • 243,200 sq ft canalside offices • 237,700 sq ft let (98%) at £17.6m pa gross or £17.2m net • Seven office tenants with restaurant under offer • Next to Paddington Crossrail • Profit on cost 55% Derwent London plc Interim Results 2019 • Appendix 31 34
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Slide 38: Good Progress: 80 Charlotte Street W1
GOOD PROGRESS: 80 CHARLOTTE STREET W1 • 380,000 sq ft mixed-use scheme • Commercial space 92% pre-let at £24.3m pa • Completion H1 2020 • Capex to complete £69m Derwent London plc Interim Results 2019 • Appendices 32 to 34 36
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Slide 42: H1 2019 Start: Soho Place W1
H1 2019 START: SOHO PLACE W1 • Major new 285,000 sq ft mixed-use scheme: • 209,000 sq ft offices • 36,000 sq ft retail • 40,000 sq ft theatre1 • 50% pre-let • ERV £22.8m net • Construction underway • Completion H1 2022 • Capex to complete £262m2 1 Pre-let at a nominal ground rent 2 Includes remainin
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Slide 44: H1 2019 Start: The Featherstone Building EC1
H1 2019 START: THE FEATHERSTONE BUILDING EC1 • 125,000 sq ft of offices and retail • Demolition finishes early September • ERV £8m • Completion H1 2022 • Capex to complete £70m Derwent London plc Interim Results 2019 • Appendices 33 and 34 42
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Slide 46: 19-35 Baker Street W1
19-35 BAKER STREET W1 • 293,000 sq ft scheme: • 206,000 sq ft offices • 52,000 sq ft residential • 35,000 sq ft retail • Earliest possession 2021 Derwent London plc Interim Results 2019 • Appendix 35 44
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Slide 48: Looking to the Future
LOOKING TO THE FUTURE CONSENTED Existing 0.23m sq ft Proposed 0.44m sq ft 19-35 Baker Street W1 Holden House W1 UNDER APPRAISAL Existing 0.28m sq ft Francis House SW1 Network Building W1 Angel Square EC1 FUTURE APPRAISAL Existing 1.13m sq ft Bush House WC2 20 Farringdon Road EC1 19 Charterhouse Stre
Slide 49: Summary
SUMMARY PAUL WILLIAMS Derwent London plc Interim Results 2019 47
Slide 50: Summary
SUMMARY • Ongoing economic and political uncertainty • Good occupier demand with lower investment activity OUR MARKET • ERV guidance: +1% to -2% in 2019 • Investment yields expected to remain firm in 2019 • Derwent London product attractive to occupiers and investors DERWENT • Development ERV £56.4m
Slide 51: Appendices
APPENDICES Derwent London plc Interim Results 2019 49
Slide 52: Appendices
APPENDICES 01. Group balance sheet 51 20. Rent and tenant banding 70 02. Net asset value per share 52 21. Major tenants 71 03. Group income statement 53 22. Derwent London central London office rent profile 72 04. IFRS profit and EPRA/underlying earnings 54 23. Lease expiries, breaks and vacancy rat
Slide 53: Appendix 1 - Group Balance Sheet
APPENDIX 1 - GROUP BALANCE SHEET Jun 2019 Dec 2018 Jun 2018 £m £m £m Investment property 5,179.0 5,028.2 4,857.0 Owner-occupied property 46.5 47.0 47.0 Investment in joint ventures 2.8 29.1 41.6 Other non-current assets 144.3 129.5 115.2 5,372.6 5,233.8 5,060.8 Other current assets and liabilities (
Slide 54: Appendix 2 - Net Asset Value per Share
APPENDIX 2 - NET ASSET VALUE PER SHARE Jun 2019 Dec 2018 Diluted Diluted £m p £m p Net assets attributable to equity shareholders 4,290.9 3,833 4,201.9 3,759 Revaluation of trading properties net of tax 2.1 0.8 Fair value of secured bonds (36.5) (35.3) Fair value of unsecured convertible bonds 2019
Slide 55: Appendix 3 - Group Income Statement
APPENDIX 3 - GROUP INCOME STATEMENT Half year ended Year ended Half year ended Jun 2019 Dec 2018 Jun 2018 £m £m £m Gross property income 93.6 196.0 107.1 Write-down on trading properties - (0.2) (0.2) Other income 1.7 2.9 1.2 Property outgoings (6.8) (12.8) (4.7) Net property and other income 88.5 1
Slide 56: Appendix 4 - IFRS Profit and EPRA/Underlying Earnings
APPENDIX 4 - IFRS PROFIT AND EPRA/UNDERLYING EARNINGS Half year Year Half year ended ended ended Jun 2019 Dec 2018 Jun 2018 £m £m £m IFRS profit for the year attributable to shareholders 131.8 222.3 134.0 Revaluation surplus (75.0) (83.4) (54.0) Joint venture revaluation (surplus)/deficit (0.9) 0.1
Slide 57: Appendix 5 - Explanation of EPRA Adjustments
APPENDIX 5 - EXPLANATION OF EPRA ADJUSTMENTS Adjustments H1 2019 H1 2018 H1 2019 EPRA EPRA A B C IFRS basis basis £m £m £m £m £m £m Net property and other income 88.5 88.5 103.6 Administrative expenses (17.1) (17.1) (15.2) Revaluation surplus 75.0 (75.0) - - Profit on disposal of investment property
Slide 58: Appendix 6 - Reconciliation of Like-for-Like Income to IFRS Income
APPENDIX 6 - RECONCILIATION OF LIKE-FOR-LIKE INCOME TO IFRS INCOME Properties owned Development Acquisitions throughout Like-for-like Total property & disposals the period movement £m £m £m £m to H1 2019 H1 2019 Gross rental income 93.1 (2.7) (1.7) 88.7 Property expenditure (6.8) 1.3 0.2 (5.3) Net r
Slide 59: Appendix 7 - Debt Facilities
APPENDIX 7 - DEBT FACILITIES Drawn Undrawn Total Maturity £m £m £m 3.99% secured loan 83.0 - 83.0 October 2024 6.5% secured bonds 175.0 - 175.0 March 2026 1.125% unsecured convertible bonds 2019 2.3 - 2.3 July 2019 1.5% unsecured convertible bonds 2025 175.0 - 175.0 June 2025 2.68% unsecured private
Slide 60: Appendix 8 - Net Debt
APPENDIX 8 - NET DEBT Jun 2019 Dec 2018 £m £m Borrowings – current 2.3 148.4 Borrowings – non-current 971.0 766.1 Acquired fair value of secured bonds less amortisation (11.2) (11.8) Equity component of unsecured bonds 7.9 12.6 Unwinding of discount of unsecured bonds (0.3) (11.3) Unamortised issue
Slide 61: Appendix 9 - Fixed Rates and Hedging
APPENDIX 9 - FIXED RATES AND HEDGING Jun 2019 Dec 2018 Proportion of drawn facilities at fixed rates or hedged 94% 70% Weighted average duration of swaps1 0.7 years 1.2 years Mark-to-market cost of swaps and forward-start swaps £4.9m £3.6m Weighted average duration of fixed rate instruments 8.8 year
Slide 62: Appendix 10 - Valuation Performance by Village
APPENDIX 10 - VALUATION PERFORMANCE BY VILLAGE Valuation Valuation Weighting movement Jun 2019 Jun 2019 H1 20191 £m % % West End Central Fitzrovia2 1,688.4 31 1.4 Victoria 468.5 9 (0.2) Paddington 327.9 6 21.4 Baker Street/Marylebone 161.4 3 (4.5) Soho/Covent Garden 123.6 2 19.9 Mayfair 96.6 2 0.9 2
Slide 63: Appendix 11 - Rental Value Growth
APPENDIX 11 - RENTAL VALUE GROWTH RENTAL VALUE GROWTH1 H1 2018 H2 2018 2018 H1 2019 % % % % West End 0.4 0.2 0.6 0.0 City Borders 0.6 1.4 2.0 0.9 Central London 0.5 0.7 1.2 0.4 Provincial 0.1 (4.4) (4.3) 0.6 Underlying 0.5 0.6 1.1 0.4 1 On EPRA portfolio Derwent London plc Interim Results 2019 61
Slide 64: Appendix 12 - Valuation Yields
APPENDIX 12 - VALUATION YIELDS YIELD PROFILE1 EPRA INITIAL YIELDS Yield (%) Net initial ‘Topped-up’ 8 Pre-EPRA EPRA yield initial yield % % 7 West End 3.2 4.6 City Borders 3.3 4.7 6 Central London 3.2 4.6 5 Provincial 6.7 7.2 EPRA portfolio 3.3 4.7 4 Reversionary yield 3 True equivalent yield Initia
Slide 65: Appendix 13 - Context to Yield Movement
APPENDIX 13 - CONTEXT TO YIELD MOVEMENT • Spread between true equivalent yield and VALUATION YIELDS1 10-year Gilt moved out to 390bp: Yield % or Gap between Derwent London True Equivalent Yield (TEY) and 10-year Gilt • Average gap 273bp 9 Derwent London TEY 10-year Gilt Derwent London Initial Yield
Slide 66: Appendix 14 - Evolution of Portfolio ERV
APPENDIX 14 - EVOLUTION OF PORTFOLIO ERV £m 350 Rent reviews and lease renewals Under refurbishment/development Available to occupy 300 Contractual rental uplifts (including pre-lets) Contractual rent 250 200 150 100 50 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 Derwent London plc Interi
Slide 67: Appendix 15 - Portfolio Statistics by Village
APPENDIX 15 - PORTFOLIO STATISTICS BY VILLAGE Net Vacant Floor Vacant contracted Average space Estimated area floor area 1 rental rental rental Lease Total rental Valuation Weighting ‘000 ‘000 income income value reversion5 reversion value £m % sq ft sq ft £m pa £ psf £m pa £m pa £m pa £m pa West En
Slide 68: Appendix 16 - Build-up of Portfolio ERV
APPENDIX 16 - BUILD-UP OF PORTFOLIO ERV Rent uplift pa Rent pa £m £m £m Contracted rental income, net of ground rents 163.2 Contractual rental uplifts Brunel Building W2 15.1 Angel Building EC1 11.0 White Collar Factory EC1 8.3 Horseferry House SW1 5.2 The White Chapel Building E1 4.3 1 Oliver’s Yar
Slide 69: 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 net 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 Comment Available to occupy (EPRA) Johnson Building EC1 39 - 39 1.7 - 1.7 - 1.7
Slide 70: Appendix 18 - Timing of the Reversion
25 20 9.4 APPENDIX 18 - TIMING OF THE REVERSION 15 33.2 9.7 0.3 10 • £102.1m of the reversion contracted: • £6.6m of the reversion from 5.7 reviews and expiries 13.5 0.2 9.3 • Fixed rental uplifts £71.8m 5 5.5 7.0 3.3 • Pre-let developments £30.3m 0 H2 2019 2020 2021 2022 2023 >2023 REVIEWS AND EXPI
Slide 71: Appendix 19 - Portfolio Summary
APPENDIX 19 - PORTFOLIO SUMMARY Floor area: 1.13m sq ft Rental income: £32.9m Income: 20% WAULT: 6.1 yrs Rent4: £38.54 ERV: £43.42 Future appraisal Potential projects Floor area: 0.28m sq ft 20% Floor area: 1.64m sq ft Rental income: £10.7m Rental income: £54.3m Income: 6% Income: 33% WAULT: 2.3 yrs
Slide 72: Appendix 20 - Rent and Tenant Banding
APPENDIX 20 - RENT AND TENANT BANDING CENTRAL LONDON ‘TOPPED-UP’ PROFILE OF TENANTS’ OFFICE RENT BANDING1 BUSINESS SECTOR2 £0-£30 ps f Other 8% Fintech 6% Financial 3% £30-£40 ps f 6% 3% Media, TV, marketing Flexible office and advertising providers 29% 6% £60+ ps f 40% Technology 6% £40-£50 ps f 17
Slide 73: Appendix 21 - Major Tenants
APPENDIX 21 - MAJOR TENANTS ‘Topped-up’ income1 % Existing Pre-let 01 Expedia 6.8 - 02 Burberry 5.5 - 03 Publicis Groupe 4.2 - 04 G-Research - 4.0 05 The Boston Consulting Group - 3.9 06 Arup 0.1 3.6 07 Government 3.7 - 08 The Office Group 2.6 - 09 WPP Group 2.2 - 10 Sony Pictures 1.8 - 11 Fremantle
Slide 74: Appendix 22 - Central London Office Rent Profile
APPENDIX 22 - DERWENT LONDON CENTRAL LONDON OFFICE RENT PROFILE £ psf 65 Average office rent Average ‘topped-up’ office rent 60 Average office ERV1 55 50 45 40 35 30 25 20 2015 2016 2017 2018 2019 1 Includes ERV of on-site schemes Derwent London plc Interim Results 2019 72
Slide 75: Appendix 23 - Lease Expiries, Breaks and Vacancy Rates
APPENDIX 23 - LEASE EXPIRIES, BREAKS AND VACANCY RATES • £7.4m of income subject to breaks/expiries in H1 2019: • EPRA vacancy rate of 1.6%2 at the half year (1.8% in Dec 2018, 4.2% in Jun 2018): • £2.2m from assets disposed • Group’s 10-year average of 2.4% • 92% of remainder retained or re-let LEA
Slide 76: Appendix 24 - Lease Expiry Profile and Lease Length
APPENDIX 24 - LEASE EXPIRY PROFILE AND LEASE LENGTH EXPIRIES AND BREAKS AS A PERCENTAGE OF PORTFOLIO INCOME1 West City End Borders Provincial H2 2019 2020 2021 2022 2023 Total Expiries 1 0 0 1 6 11 4 3 25 Rolling breaks 1 0 0 1 1 4 0 0 6 Single breaks 0 0 0 0 5 10 5 6 26 2 0 0 2 12 25 9 9 57 PROFILE
Slide 77: Appendix 25 - Central London Office Demand
APPENDIX 25 - CENTRAL LONDON OFFICE DEMAND Market statistics Take-up (million sq ft) OFFICE TAKE-UP 20 • Central London office take-up of 5.8m sq ft in H1 2019: Central London 18 • 9.0% below the half year average 16 • 9.1% below H1 2018 14 Annual average 12 • 28% business services, 25% banking & fi
Slide 78: Appendix 26 - Central London Office Secondhand Space Availability
APPENDIX 26 - CENTRAL LONDON OFFICE SECONDHAND SPACE AVAILABILITY Secondhand availability (million sq ft) Secondhand as a proportion of total (%) 20 100 Secondhand availability Secondhand as a proportion of total 18 90 16 80 14 70 12 60 10 50 8 40 6 30 4 20 2 10 0 2001 2003 2005 2007 2009 2011 2013
Slide 79: Appendix 27 - Central London Office Supply
APPENDIX 27 - CENTRAL LONDON OFFICE SUPPLY Market statistics OFFICE DEVELOPMENT PIPELINE • Vacancy rate stable - 4.2% at 30 June 2019, down from 4.5% at Floor area (million sq ft) Vacancy rate (%) 12 12 the start of the year: Central London Completed Completed average Under construction Vacancy rate
Slide 80: Appendix 28 - Central London Office Rental Growth
APPENDIX 28 - CENTRAL LONDON OFFICE RENTAL GROWTH • CBRE’s prime office rent index at 30 June was 1.9% pa CENTRAL LONDON OFFICE RENTAL GROWTH Rental growth (% pa) for central London with 3.2% pa in the City and 1.5% 40 West End pa in the West End City 30 Central London 20 • Since the EU referendum,
Slide 81: Appendix 29 - Central London Prime Office Rents by Sub-area
APPENDIX 29 - CENTRAL LONDON PRIME OFFICE RENTS BY SUB-AREA Prime rent (£ psf) 120 Q2 2009 Q2 2014 Q2 2019 100 80 60 40 20 0 Mayfair Knightsbridge Soho North of Fitzrovia Midtown King's Cross Covent Paddington Victoria City Southbank Docklands & St James' Oxford St Garden West Source: CBRE Derwent L
Slide 82: Appendix 30 - Soho Place W1
APPENDIX 30 - SOHO PLACE W1 • 285,000 sq ft office, retail and theatre scheme split between two buildings: • 102,600 sq ft pre-let to G-Research at £9.7m pa (£94.70 psf average) for 15 years (no breaks) • 40,000 sq ft theatre pre-let on a long lease at £0.1m pa to Nimax 10 9 8 8 7 G-RESEARCH 7 6 6 5
Slide 83: Appendix 31 - Brunel Building W2
APPENDIX 31 - BRUNEL BUILDING W2 • 243,200 sq ft project completed in H1 2019 • Offices: • 237,700 sq ft • 100% let at £17.6m pa (gross): HELLMAN & FRIEDMAN Rent Area £m pa sq ft SONY PICTURES 2018 Sony Pictures 4.9 68,200 Premier League 2.2 33,400 PAYMENTSENSE Hellman & Friedman 1.8 20,500 Coach 1.
Slide 84: Appendix 32 - 80 Charlotte Street W1 (Island Site)
APPENDIX 32 - 80 CHARLOTTE STREET W1 (ISLAND SITE) ARUP THE BOSTON CONSULTING GROUP • 133,600 sq ft pre-let in 2017 • 123,500 sq ft pre-let in Q3 2017 plus 40,650 sq ft in Q3 2019 (option space) • £9.7m pa with annual increases of 2.25% for the first 15 years • £13.9m pa • Average rent of £75 psf on
Slide 85: Appendix 33 - On-site Developments: Profit on Cost
APPENDIX 33 - ON-SITE DEVELOPMENTS: PROFIT ON COST e- le t e- le t Summary pr pr % % End value 1,296 92 50 Less: Total cost1 1,061 Project surplus 235 Less: Booked to Jun 19 84 Surplus to come 151 Profit on total cost 22% Profit to come on total cost 14% Yield on cost 5.7% Completion H1 2020 H1 2022
Slide 86: Appendix 34 - Project Summary: Current Projects
APPENDIX 34 - PROJECT SUMMARY: CURRENT PROJECTS Current Pre Total Current net scheme Proposed H2 2019 2020 2021+ capex to office income area area capex capex capex complete Delivery c.ERV Property £m pa ‘000 sq ft ‘000 sq ft £m £m £m £m date psf On site 80 Charlotte Street W1 - 234 380 40 29 - 69 H1
Slide 87: Appendix 35 - Project Summary: Future Projects
APPENDIX 35 - 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 19-35 Baker Street W11 4.2 143 293 2021 Joint venture - The Portman Estate Holden House W1 6.6 90 150 2021 Eastern end of O
Slide 88: Appendix 36 - Project Pipeline
APPENDIX 36 - PROJECT PIPELINE On-site H1 2019 Consented Under Potential developments + starts + projects 0.44m sq ft + appraisal = pipeline 0.38m sq ft 0.41m sq ft 0.36m sq ft 1.59m sq ft 0.79m sq ft 0.80m sq ft 80 Charlotte Street W1 Soho Place W1 19-35 Baker Street W11 Holden House W1 ed d e ar t
Slide 89: Appendix 37 - Portfolio Map
Kentish Town Highbury & Islington APPENDIX 37 - PORTFOLIO MAP Chalk Farm Caledonian Road Camden Road Essex Road London Fields Camden Town Primrose Hill Carnegie St Islington TEC Wharfdale Rd Angel Kings Cross HB ELT Albany Regent’s Park St Pancras Hoxton St International Th Maida Vale am es lin k Eu
Slide 90: Appendix 38 - Executive Committee and Senior Management
APPENDIX 38 - EXECUTIVE COMMITTEE AND SENIOR MANAGEMENT Paul Williams* Chief Executive Damian Wisniewski* Chief Financial Officer Simon Silver* Property Director Nigel George* Property Director David Silverman* Property Director David Lawler* Company Secretary Richard Baldwin* Head of Development Ri
Slide 91: Disclaimer
DISCLAIMER This presentation has been prepared by Derwent London plc (the apparent. Past performance is not indicative of future results “Company”). No representation or warranty (express or implied) of and forward-looking statements are not guarantees of future any nature is given nor is any respon