Derwent London Plc · LSE:DLN
Derwent London — FY2021 Earnings Presentation
102 slides from Derwent London's earnings presentation, Feb 24, 2022
Slide 1: Annual Results 2021
Annual Results 2021
Slide 2: Contents
CONTENTS Presenters Contents Paul Williams Introduction and overview 01 Damian Wisniewski Developments 08 Nigel George Results and financial review 16 Emily Prideaux Valuation and portfolio analysis 30 David Silverman Occupier market, leasing and asset management 35 Investment 43 Summary 50 Appendic
Slide 3: Introduction and Overview
INTRODUCTION AND OVERVIEW PAUL WILLIAMS 1
Slide 4: Introduction and Guidance
INTRODUCTION AND GUIDANCE Confidence building PORTFOLIO GUIDANCE • London office market recovered as year progressed • Strong second half; momentum maintained in 2022 ERV guidance Investment yields • Positive employment and economic outlook • Occupiers want more from their space 0% to +3% Remain fir
Slide 5: Restocking the Pipeline
RESTOCKING THE PIPELINE • Most active year for acquisitions for many years • Expanding longer-term pipeline • Extending development returns • Adding future ‘super-sites’ • Potential to deliver 1.1m+ sq ft (DL share) Baker Street W1 JV 230 Blackfriars Road SE11 The Moorfields Estate EC12 • Further in
Slide 6: Reshaping the Portfolio
RESHAPING THE PORTFOLIO • Delivering our strategy • Retain tier one properties for longer • Dispose of assets with lower forward return prospects • Quality of core income has risen • Maintain balance of ‘Core income’ to ‘Opportunities’ • We expect stronger rental growth for these buildings over the
Slide 7: Changing Workplace - Key Market Drivers
CHANGING WORKPLACE - KEY MARKET DRIVERS HYBRID FLIGHT TO FLEXIBILITY WORKING QUALITY Derwent London plc - Annual Results 2021 5
Slide 8: Investment - London's Global Appeal
INVESTMENT - LONDON’S GLOBAL APPEAL Liquidity & Weight of London’s yield Security of Geopolitical transparency global capital premium income instability London offices attractive Derwent London plc - Annual Results 2021 6
Slide 9: Responsible Business
RESPONSIBLE BUSINESS Environmental PORTFOLIO EPC COMPLIANCE • £650m ‘green’ debt facilities ERV % • External consultant report on EPC upgrade capex 100 • Expected capex c.£97m, prior to service charge recovery 90 • Active with stakeholders and industry in journey to COP26 2023 compliant • Net zero c
Slide 10: Developments
DEVELOPMENTS PAUL WILLIAMS 8
Slide 11: Development Pipeline
DEVELOPMENT PIPELINE 1. Soho Place W1 285,000 sq ft 1 2 2. The Featherstone Building EC1 125,000 sq ft Total proposed H1 2022 completions floorspace Proposed: 410,000 sq ft c.3m sq ft 3 4 5 3. 19-35 Baker Street W1 298,000 sq ft 4. Network Building W1 137,000 sq ft1,4 Next phase 5. Bush House WC2 c.
Slide 12: H1 2022 Completions
H1 2022 COMPLETIONS t le e e- bl pr ai la % Av 87 Soho Place W1 The Featherstone Building EC1 • 285,000 sq ft mixed-use scheme • 125,000 sq ft office scheme • 100% of offices pre-let or pre-sold • Speculative development – ERV £8.6m/£72.50 psf • 36,000 sq ft retail available with ERV of £3.1m • Mult
Slide 13: The Featherstone Building EC1 - High Quality Tech Belt Space
THE FEATHERSTONE BUILDING EC1 - HIGH QUALITY TECH BELT SPACE Derwent London plc - Annual Results 2021 • Appendices 42 and 44 11
Slide 14: 19-35 Baker Street W1 - Our Newest Major Development
19-35 BAKER STREET W1 - OUR NEWEST MAJOR DEVELOPMENT • Completion H1 2025 • Scheme ERV £18.4m • Office ERV £90 psf • Capex to complete £266m • 97% of office capex fixed Derwent London plc - Annual Results 2021 • Appendices 42 and 44 12
Slide 15: Network Building W1 - Planning Success in H2 2021
NETWORK BUILDING W1 - PLANNING SUCCESS IN H2 2021 • Dual planning consent secured1 • Offices (137,000 sq ft) • Life Sciences (112,000 sq ft) • Up to 96% uplift in existing floorspace T EUST 19 REE O N RO AD T ER S WAR REN STRE WARREN SOV ET STREET • Planned commencement in H2 2022 with T REE BOL com
Slide 16: Bush House WC2
BUSH HOUSE WC2 • Existing area 103,700 sq ft • Refurbishment and potential extension subject to planning • Proposed floorspace of c.130,000 sq ft • Potential start in 2022 Derwent London plc - Annual Results 2021 • Appendix 43 14
Slide 17: Future Projects
FUTURE PROJECTS SUPER-SITES Baker Street W1 JV 230 Blackfriars Road SE1 The Moorfields Estate EC1 • Existing 122,200 sq ft • Existing 60,300 sq ft • Preferred bidder status • Proposed c.240,000 sq ft • Proposed 200,000+ sq ft • Existing c.400,000 sq ft • Timing: medium-term • Timing: longer-term • P
Slide 18: Results and Financial Review
RESULTS AND FINANCIAL REVIEW DAMIAN WISNIEWSKI 16
Slide 19: Financial Highlights
FINANCIAL HIGHLIGHTS EPRA NTA per share1, 2 EPRA earnings per share2 Cash and undrawn facilities 3,959p 108.79p £608m 2020: 3,812p 2020: 99.19p Jun 2021: £527m +3.9% +9.7% Dec 2020: £476m Gross rental income Net rental income Interest cover ratio (ICR)3 £194.2m £178.2m 464% 2020: £202.9m 2020: £174.
Slide 20: EPRA NTA Movement
EPRA NTA MOVEMENT Pence Investment property disposals £10.5m 10p EPRA NTA PER SHARE 4,100 Trading property disposals (£0.8m) (1p) Total EPRA profit on disposals £9.7m 109 4,000 (75) +3.9% 9 (12) 3,959 (3) 119 Revaluation deficit (£14.2m) (13p) 3,900 Operating profit £0.3m 1p Total results from JVs (
Slide 21: EPRA Earnings
EPRA EARNINGS1 £m EPRA EARNINGS 250 Slide Slide 20 22 (£71.4m) 9.1 (14.3) 200 194.2 (0.8) (37.1) 150 (28.1) (0.2) (0.8) 122.0 108.79p 100 per share 50 0 Gross Waivers Premiums Other Admin Net Tax Other EPRA rental & & other property expenses finance (credit)/ earnings income impairments income expen
Slide 22: Rental Income
RENTAL INCOME £m MOVEMENT IN GROSS RENTAL INCOME LIKE-FOR-LIKE 1 225 0.7 Gross rental income 9.5 202.9 (9.4) (9.5) (4.3%) 2021: -3.9% 200 80 Charlotte Street W1 £9.5m 194.2 2020: -0.9% Johnson Building EC1 (£8.2m) Angel Square EC1 (£2.3m) 175 Other £1.0m Total (£9.5m) Net rental income 2021: 2.7% 15
Slide 23: Rent Collection
RENT COLLECTION • 98% of the Group’s 2021 rental income 98% (i.e. Dec 2020 to Sep 2021 quarter days) % 97% 96% 98% 99% 97% collected to date 100 5 9 3 14 9 • 97% of Dec 2021 quarter day rents collected 90 (i.e. quarter ending Mar 2022) for the Group, plus 1% due later in the quarter 80 70 • 98% of o
Slide 24: Impact of Waivers and Impairments
IMPACT OF WAIVERS AND IMPAIRMENTS 2021 2020 Variance £m £m £m • Trade receivables down to £6.9m from £27.5m in Gross rental income 194.2 202.9 (8.7) 2020 as deferred rents received during 2021 Property costs (15.2) (14.4) (0.8) Net rental income before waivers and 179.0 188.5 (9.5) • Waivers and imp
Slide 25: Cash Flow Movement
CASH FLOW MOVEMENT £m 300 200 192.7 (14.3) (34.7) Acquisitions (£251.8m) (25.0) 7.0 Capex (£172.1m) Total (£423.9m) 100 (84.3) Cash from 0 operations £125.7m 297.3 (100) (64.1) (53.4) 1.2 (201.5) (200) (300) (423.9) (400) Receipts Property Admin Finance Other Ordinary Acquisitions Disposals Investme
Slide 26: Committed Capital Expenditure
COMMITTED CAPITAL EXPENDITURE 0 50 100 150 200 250 2021 162 12 174 Actual spend Forecast spend 2022 79 10 50 12 46 6 203 2023 103 22 21 6 152 2024+ 113 70 14 11 208 Soho Place W1 The Featherstone Building EC1 19-35 Baker Street W1 Network Building W1 Other Capitalised interest • 19-35 Baker Street W
Slide 27: EPC 2030 Costed Plans
EPC 2030 COSTED PLANS Report’s coverage Key findings • Detailed cost report commissioned with • In line with previous guidance of £5-10m pa consultants in 2021 • No ‘stranded assets’ • Almost 60% of our portfolio already EPC ‘B’ • Large variation in costs between buildings, average of compliant incl
Slide 28: Impact of Major Projects, Acquisitions and Disposals
IMPACT OF MAJOR PROJECTS, ACQUISITIONS AND DISPOSALS • Assumes no further lettings other than those already contracted • Shows impact of estimated remaining capital expenditure on both on-site and committed projects IMPACT OF ACQUISITIONS, DISPOSALS, ON-SITE PROJECTS AND NETWORK BUILDING Acquisition
Slide 29: Active Year of Refinancing
ACTIVE YEAR OF REFINANCING Green bond issuance • £350m green bond issued, on a 10-year term maturing in 2031 green • Fixed coupon of 1.875% finance • Proceeds to be used to fund qualifying ‘green’ expenditure in framework accordance with the Green Finance Framework • Total green facilities now £650m
Slide 30: Green Expenditure
GREEN EXPENDITURE Eligible green projects (EGP) GREEN BORROWINGS AND QUALIFYING EXPENDITURE 1. 80 Charlotte Street W1 (completed Jun 2020) £m 800 Green RCF Green expenditure Available green headroom 2. Soho Place W1 Green Bond Drawn facilities 700 3. The Featherstone Building EC1 600 4. 19-35 Baker
Slide 31: Debt Summary
DEBT SUMMARY Dec 2021 Dec 2020 MATURITY PROFILE OF DEBT FACILITIES £m 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 Drawn facilities £1,248m £1,041m 2022 Unutilised facilities £540m £425m 2023 2024 83 Total facilities £1,788m £1,466m 2025 175 2026 10 230 540 2027 Unutilised facili
Slide 32: Valuation and Portfolio Analysis
VALUATION AND PORTFOLIO ANALYSIS NIGEL GEORGE 30
Slide 33: Valuation
VALUATION Investment portfolio valued at £5.7bn Valuation themes • Underlying valuation 3.5% (2020: -3.0%) • Impact of inputs • West End 3.9% (2020: -3.3%) ERV Yields Values Offices - high quality • City Borders 2.5% (2020: -2.1%) Offices - other Retail and hospitality2 • MSCI Central London Offices
Slide 34: Property Return
PROPERTY RETURN 2021 total property returns Total property return (%) TOTAL PROPERTY RETURN 18 Derwent London MSCI Central London Offices MSCI UK All Property • Derwent London 6.3% 16.5 15 • MSCI Central London Offices1 5.9% • MSCI UK All Property1 16.5% 12 10.2 9 • Outperformance due to: 8.0 7.4 7.
Slide 35: Rental Value and Yields
RENTAL VALUE AND YIELDS Rental values Rental growth (%) RENTAL VALUE GROWTH 15 • Rental values declined 0.2% in 2021 • Offices: 92% of portfolio1 0.2% 10 • Retail: 8% of portfolio -5.8% 1 5 • Average office passing rent low at £44.18 psf2 0 (Dec 2020: £42.30 psf) Derwent London H1 growth • Average ‘
Slide 36: Build-up of Portfolio ERV
BUILD-UP OF PORTFOLIO ERV • Portfolio reversion of £115.5m1 £m BUILD-UP OF ERV2 • £54.6m or 47% contracted, including 350 • 80 Charlotte Street W1 £12.8m 300 7.2 3.8 5.8 (5.9) 293.9 30.1 • Brunel Building W2 £6.5m 19.9 250 54.6 5.9 • £60.9m of further reversion 48.7 £50.0m on-site 200 • £19.9m of pr
Slide 37: Occupier Market, Leasing and Asset Management
OCCUPIER MARKET, LEASING AND ASSET MANAGEMENT EMILY PRIDEAUX 35
Slide 38: Occupational Market Overview
OCCUPATIONAL MARKET OVERVIEW • Monthly take-up strengthened as year progressed CENTRAL LONDON OFFICE TAKE-UP AND AVAILABILITY • Occupier sentiment improved significantly Monthly take-up (million sq ft) Availability (million sq ft) 2.5 Take-up (monthly) Availability 30 • Businesses now planning beyon
Slide 39: Constrained Development Pipeline and Rising Demand
CONSTRAINED DEVELOPMENT PIPELINE AND RISING DEMAND • 11.6m sq ft under construction for completion by 2024 CENTRAL LONDON DEVELOPMENT PIPELINE - POTENTIAL • 34% or 4.0m sq ft pre-let, 7.6m sq ft of speculative Proposed floor area (million sq ft) 12 Completed • Ongoing deferral of potential schemes U
Slide 40: Occupier Market Themes - A Flight to Quality
OCCUPIER MARKET THEMES - A FLIGHT TO QUALITY Hybrid working, dynamic lease structures, flexibility and a bespoke and HOSPITALITY personal approach & CUSTOMER SERVICE FLEXIBILITY & DIGITAL ADAPTABILITY STRATEGY QUALITY ESG/NET AMENITY ZERO CARBON WELLBEING Derwent London plc - Annual Results 2021 38
Slide 41: Digital Strategy and Customer Engagement
DIGITAL STRATEGY AND CUSTOMER ENGAGEMENT Informed digital strategy Community and enhanced amenity Hospitality and service • 3 core areas of focus • ‘Furnished & Flexible’ space • Linking occupiers into the Derwent Community • Reducing energy • Events consumption • Strong relationships with our • Off
Slide 42: Net Zero Carbon
NET ZERO CARBON • Closing the gap between ambition and action on sustainability and the NZC agenda • Collective responsibility: A partnership approach between us, our customers and wider stakeholders NZC occupier survey “Looking forward to collaborating on a more strategic approach. It is good to kn
Slide 43: Derwent London's Leasing Activity & Vacancy
DERWENT LONDON’S LEASING ACTIVITY & VACANCY • EPRA vacancy rate of 1.6% (Dec 2020: 1.8%) Vacancy rate (%) EPRA VACANCY RATE PROGRESSION • H1 2022 scheme completions will impact vacancy rate 10 CBRE Central London (by floorspace) 9 Derwent London (by rental value) 8 • £13.7m of new lettings 7 • +3.6%
Slide 44: Asset Management Activity
ASSET MANAGEMENT ACTIVITY • Key focus was dealing with 2021 lease breaks/expiries Portfolio income subject to 2021 expiry/break (%) 2021 ASSET MANAGEMENT OUTCOME 30 • At Dec 2020 17% of income had a 2021 break/expiry 26 25 24 • Pre-emptively dealing with 2022 breaks/expiries 20 • Activity to date al
Slide 45: Investment
INVESTMENT DAVID SILVERMAN 43
Slide 46: Investment Market Overview
INVESTMENT MARKET OVERVIEW • £10.0bn of central London office investment • Prime yields contracted 25bps in 2021 transactions in 2021 • West End: 3.25% • 33% higher than 2020 but 16% below average • City: 3.75% • 61% by value in H2 with 36% in Q4 • Prime yields tightened in many key European cities
Slide 47: Acquisition Activity
ACQUISITION ACTIVITY Total Net rental Net rental Area after costs Net yield income income Property Date sq ft £m % £m pa £ psf H1 2021 Holford Works WC11 Q2 41,600 23.7 6.9 1.6 40.00 H2 2021 Bush House WC22 Q3 103,700 14.5 - - - JOINT VENTURE: 38-52, 54-60 & 66 BAKER STREET W1 250 Euston Road NW1 Q3
Slide 48: Super-Site: 230 Blackfriars Road SE1
SUPER-SITE: 230 BLACKFRIARS ROAD SE1 • £55.0m before costs • Net initial yield of 3.5% • 60,300 sq ft multi-let office building, a residential block and a car park Hoxton Hotel • 100-year leasehold interest • Ground rent fixed at £5,000 pa • Purchase completed in Q1 2022 • Major Southbank redevelopm
Slide 49: Super-Site: Baker Street W1 JV
SUPER-SITE: BAKER STREET W1 JV • 50:50 joint venture with Lazari Investments • Acquired 122,200 sq ft of multi-let properties • Rent of £5.2m pa or £42.50 psf (100% share) • Potential 240,000 sq ft scheme in late 2024 • Opposite our 19-35 Baker Street redevelopment 19-35 Baker Street 38-52 Baker Str
Slide 50: Super-Site: The Moorfields Estate EC1
SUPER-SITE: THE MOORFIELDS ESTATE EC1 • Selected as preferred bidder for this strategic Tech Belt site • Existing buildings c.400,000 sq ft • 2.5 acre major regeneration opportunity • Close to existing holdings around Old Street • Planning application to redevelop entire site due to be submitted in
Slide 51: Major Disposals
MAJOR DISPOSALS Net Net yield to Area proceeds purchaser Rent Date sq ft £m % £m EPC 2021 Johnson Building EC1 Q1 192,700 165.6 4.1 7.3 D Angel Square EC11 Q3 126,200 85.0 - - C-E The Portman Estate properties2 Q4 50,600 45.1 - - B-E 369,500 295.7 7.3 19-35 Baker Street W1 (headlease surrender) Q4 -
Slide 52: Summary
SUMMARY PAUL WILLIAMS 50
Slide 53: Summary
SUMMARY THE MARKET • London in demand • Improved confidence • Flight to quality DERWENT LONDON • Restocking the pipeline • Net Zero Carbon Pathway • Upgraded guidance: ERVs 0% to +3% 51
Slide 54: Appendices
APPENDICES 52
Slide 55: Appendices
APPENDICES 01. Headline numbers 54 24. Portfolio EPC profile 77 02. Group balance sheet 55 25. EPC rating by portfolio classification 78 03. EPRA net asset value metrics 56 26. Rent and tenant banding 79 04. Group income statement 57 27. Major tenants 80 05. IFRS profit and EPRA earnings 58 28. Rent
Slide 56: Appendix 1 - Headline Numbers
APPENDIX 1 - HEADLINE NUMBERS Dec 2021 Dec 2020 % change Net asset value (NAV) £4,441.8m £4,315.1m 2.9 EPRA net tangible assets per share 1,2 3,959p 3,812p 3.9 EPRA net disposal value per share1,2 3,884p 3,682p 5.5 EPRA total return 5.8% (1.8%) n/a Gross rental income £194.2m £202.9m (4.3) Net renta
Slide 57: Appendix 2 - Group Balance Sheet
APPENDIX 2 - GROUP BALANCE SHEET Dec 2021 Dec 2020 £m £m Investment property 5,359.9 5,029.1 Owner-occupied property 49.3 45.6 Investment in joint ventures 51.1 0.9 Other non-current assets 166.1 151.0 5,626.4 5,226.6 Non-current assets held for sale 102.8 165.0 Other current assets and liabilities
Slide 58: Appendix 3 - EPRA Net Asset Value Metrics
APPENDIX 3 - EPRA NET ASSET VALUE METRICS Dec 2021 Dec 2020 EPRA NTA1 EPRA NDV2 EPRA NRV3 EPRA NTA1 EPRA NDV2 EPRA NRV3 £m £m £m £m £m £m Net assets attributable to equity shareholders 4,441.8 4,441.8 4,441.8 4,263.2 4,263.2 4,263.2 Revaluation of trading property 1.9 1.9 1.9 1.4 1.4 1.4 Deferred ta
Slide 59: Appendix 4 - Group Income Statement
APPENDIX 4 - GROUP INCOME STATEMENT Year ended Year ended Dec 2021 Dec 2020 £m £m Gross property income 199.8 204.7 Profit on disposal of trading properties 0.7 5.2 Write-down of trading property (1.4) (1.8) Other income 3.5 3.5 Waivers and impairment of receivables (0.8) (14.2) Other property outgo
Slide 60: Appendix 5 - IFRS Profit and EPRA Earnings
APPENDIX 5 - IFRS PROFIT AND EPRA EARNINGS Year ended Year ended Dec 2021 Dec 2020 £m £m IFRS profit/(loss) for the year attributable to shareholders 252.3 (77.6) Revaluation (surplus)/deficit (130.8) 196.1 Joint venture revaluation deficit 14.2 - Profit on disposal (10.4) (1.7) Profit on disposal o
Slide 61: Appendix 6 - Explanation of EPRA Adjustments
APPENDIX 6 - EXPLANATION OF EPRA ADJUSTMENTS Adjustments 2021 2020 2021 EPRA EPRA A B C IFRS basis basis £m £m £m £m £m £m Net property and other income 187.5 (0.7) 1.4 - 188.2 179.6 Administrative expenses (37.1) - - - (37.1) (37.8) Revaluation surplus 130.8 - (130.8) - - - Profit on disposal 10.4
Slide 62: Appendix 7 - Cash Flow
APPENDIX 7 - CASH FLOW Year ended Year ended Dec 2021 Dec 2020 £m £m Property income 192.7 164.6 Property expenses (14.3) (19.1) Other income 4.1 3.5 Administrative expenses (34.7) (35.5) Finance costs (25.0) (28.1) Trading property disposals 5.0 31.7 Trading property expenditure (1.6) (1.2) Tax pai
Slide 63: Appendix 8 - Rent Collection
APPENDIX 8 - RENT COLLECTION1 Dec 2021 quarter Retail/ Office hospitality Total Current position % % % Rent received to date 98 83 97 Due later in the quarter 2 1 4 1 Outstanding 1 13 2 Rent-free granted - - - 100 100 100 Total £40.3m £2.3m £42.6m Dec 2020 quarter Mar 2021 quarter Jun 2021 quarter S
Slide 64: Appendix 9 - Reconciliation of Like-for-Like Income to IFRS Income
APPENDIX 9 - RECONCILIATION OF LIKE-FOR-LIKE INCOME TO IFRS INCOME Like-for-like Development Acquisitions portfolio property & disposals Total £m £m £m £m 2021 Gross rental income 163.4 24.6 6.2 194.2 Other property expenditure (11.6) (2.5) (1.1) (15.2) Write-off/impairment of receivables (0.8) - -
Slide 65: Appendix 10 - Debt Facilities
APPENDIX 10 - 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 66: Appendix 11 - Net Debt
APPENDIX 11 - NET DEBT Dec 2021 Dec 2020 £m £m Borrowings - non-current 1,249.4 1,033.2 Acquired fair value of secured bonds less amortisation (8.0) (9.3) Unamortised discount on unsecured green bonds 1.8 - Equity component of convertible bonds 7.7 7.7 Unwinding of discount of convertible bonds (3.2
Slide 67: Appendix 12 - Fixed Rates and Hedging
APPENDIX 12 - FIXED RATES AND HEDGING Dec 2021 Dec 2020 Proportion of drawn facilities at fixed rates or hedged 99% 85% Mark-to-market cost of swaps and forward-start swaps £0.8m £5.6m Weighted average duration of fixed rate instruments 7.2 years 7.2 years HEDGING PROFILE 1 MATURITY PROFILE OF FIXED
Slide 68: Appendix 13 - Valuation Performance by Village
APPENDIX 13 - VALUATION PERFORMANCE BY VILLAGE Valuation Valuation Weighting movement Dec 2021 Dec 2021 20211 £m % % West End Central Fitzrovia2 1,909.8 33 1.0 Victoria 521.1 9 8.7 Paddington 393.9 7 9.3 Soho/Covent Garden 383.1 7 8.1 Baker Street/Marylebone 169.5 3 0.1 Mayfair 106.2 2 9.4 3,483.6 6
Slide 69: Appendix 14 - Rental Value Growth and Average Rents
APPENDIX 14 - RENTAL VALUE GROWTH AND AVERAGE RENTS RENTAL VALUE GROWTH1 2020 H1 2021 H2 2021 2021 % % % % West End (3.3) (0.4) (0.1) (0.5) City Borders (1.8) (0.1) 0.4 0.3 Central London (2.7) (0.3) 0.1 (0.2) Provincial (7.8) 0.0 0.1 0.1 Underlying (2.8) (0.3) 0.1 (0.2) AVERAGE RENTS - CENTRAL LOND
Slide 70: Appendix 15 - Valuation Yields
APPENDIX 15 - VALUATION YIELDS YIELD PROFILE1 EPRA INITIAL YIELDS Yield (%) Net initial ‘Topped-up’ 8 Reversionary yield yield initial yield True equivalent yield % % Initial yield 7 West End 3.1 4.3 City Borders 3.7 4.5 6 Central London 3.3 4.3 5 Provincial 8.1 8.7 EPRA portfolio 3.3 4.4 4 3 Pre-EP
Slide 71: Appendix 16 - Context to Yield Movement
APPENDIX 16 - CONTEXT TO YIELD MOVEMENT • The UK 10-year Gilt yield ended the year at 0.97%, up from VALUATION YIELDS1 Yield % or Gap between DL True Equivalent Yield (TEY) and 10-year Gilt • 0.75% in Jun 2021 9 Derwent London TEY Derwent London Initial Yield • 0.24% in Dec 2020 8 10-year Gilt • LTA
Slide 72: Appendix 17 - Evolution of Portfolio ERV
APPENDIX 17 - EVOLUTION OF PORTFOLIO ERV £m £m 350 400 ERV to capture Rent reviews and lease renewals Contractual pre-lets Under refurbishment/development Contractual rental uplifts (excl. pre-lets) Available to occupy 350 300 Contractual rent Contractual rental uplifts (including pre-lets) £293.9m
Slide 73: Appendix 18 - Portfolio Statistics by Village
APPENDIX 18 - 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 reversion5 reversion value £m % sq ft sq ft £m pa £ psf £m pa £m pa £m pa £m pa West End
Slide 74: Appendix 19 - Build-up of Portfolio ERV
APPENDIX 19 - BUILD-UP OF PORTFOLIO ERV Rent uplift pa Rent pa £m £m £m Contracted rental income, net of ground rents 178.4 Contractual rental uplifts 80 Charlotte Street W1 12.8 Brunel Building W2 6.5 Horseferry House SW1 5.2 Tea Building E1 4.7 1-2 Stephen Street W1 3.1 60 Whitfield Street W1 2.6
Slide 75: Appendix 20 - Available Space and Projects
APPENDIX 20 - AVAILABLE SPACE AND PROJECTS Vacant Pre-let Total Gross Net Pre-let area area area vacant Ground vacant net rent Total 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 The White Chapel Building E1 89 - 89 1.5 - 1.5 - 1.
Slide 76: Appendix 21 - Lease Expiry Analysis and Vacancy Rate
APPENDIX 21 - LEASE EXPIRY ANALYSIS AND VACANCY RATE LEASE EXPIRY AND BREAK ANALYSIS1 EPRA VACANCY RATES % £6.4m £14.6m £10.4m £12.5m £19.7m Vacancy rate (%) 100 10 8 10 10 13 CBRE Central London (by floorspace) 90 23 9 Derwent London (by rental value) 7 14 80 22 8 35 70 7 30 60 6 50 5 40 4 57 76 83
Slide 77: Appendix 22 - Timing of the Reversion
APPENDIX 22 - TIMING OF THE REVERSION • £74.5m of the reversion contracted • £5.8m of the reversion from reviews and expiries • £54.6m of contracted uplifts • £17.0m from pre-let developments • £2.9m from pre-let refurbishments REVIEWS AND EXPIRIES 4 Future contracted growth above current ERV Expiri
Slide 78: Appendix 23 - Portfolio Summary
APPENDIX 23 - PORTFOLIO SUMMARY Floor area: 1.35m sq ft Rental income: £40.2m WAULT: 5.5 yrs Rent4: £48.15 Future ERV: £48.80 appraisal Potential projects 24% Floor area: 0.39m sq ft Floor area: 1.90m sq ft Rental income: £7.3m Rental income: £53.5m WAULT: 1.6 yrs WAULT: 4.6 yrs Rent4: £41.03 Rent4:
Slide 79: Appendix 24 - Portfolio EPC Profile
APPENDIX 24 - PORTFOLIO EPC PROFILE A B C D E F G Project Under review / Outstanding Exempt ERV 5 35 18 14 7 18 1 EPC A-B: 40% EPC A-E: 79% Area 4 32 19 13 11 16 2 EPC A-B: 36% EPC A-E: 79% 0 20 40 60 80 100 Derwent London plc - Annual Results 2021 77
Slide 80: Appendix 25 - EPC Rating by Portfolio Classification
APPENDIX 25 - EPC RATING BY PORTFOLIO CLASSIFICATION 6% 25% 41% 63% Consented/ Appraisal 34% Core income 5.57m sq ft 52% 12% On-site 14% EPC Rating EPC A-B 53% EPC C-E 100%* EPC Other * Target rating Derwent London plc - Annual Results 2021 78
Slide 81: Appendix 26 - Rent and Tenant Banding
APPENDIX 26 - RENT AND TENANT BANDING CENTRAL LONDON ‘TOPPED-UP’ PROFILE OF TENANTS’ OFFICE RENT BANDING1 BUSINESS SECTOR2 £0-£30 ps f Other 4% Fintech 5% £30-£40 ps f Flexible office 3% 8% providers Media £70+ ps f 4% 21% 27% Financial 6% £40-£50 ps f 14% Technology 8% Retail & hospitality 8% Busin
Slide 82: Appendix 27 - Major Tenants
APPENDIX 27 - MAJOR TENANTS ‘Topped-up’ income % Existing Pre-let 01 Expedia 6.2 - 02 Government1 5.9 03 Burberry 5.8 - 04 Boston Consulting Group 5.4 - 05 G-Research 0.4 3.8 06 Arup 3.8 - 07 Apollo - 3.1 08 The Office Group 2.2 - 09 Sony Pictures 1.9 - 10 FremantleMedia Group 1.8 - 11 Publicis Grou
Slide 83: Appendix 28 - Rent Profile and Portfolio Breakdown
APPENDIX 28 - RENT PROFILE AND PORTFOLIO BREAKDOWN DERWENT LONDON CENTRAL LONDON OFFICE RENT PROFILE PORTFOLIO BREAKDOWN NO of Weighting £ psf Valuation properties % 65 > £200m 7 45 Average office ERV1 £100m - £200m 13 32 Average topped-up office rent 60 £50m - £100m 10 12 Average office rent < £50m
Slide 84: Appendix 29 - Lease Expiry Profile and Lease Length
APPENDIX 29 - LEASE EXPIRY PROFILE AND LEASE LENGTH West City EXPIRIES AND BREAKS AS A PERCENTAGE OF PORTFOLIO INCOME1 End Borders Provincial 2022 2023 2024 2025 2026 Total Expiries 2 1 - 3 4 4 10 4 25 Rolling breaks 2 1 - 3 1 - - - 4 Single breaks 1 2 - 3 9 9 2 1 24 Total 5 4 - 9 14 13 12 5 53 PROF
Slide 85: Appendix 30 - Key Lettings
APPENDIX 30 - KEY LETTINGS Q2 Q4 Q3 20 Farringdon Road EC1 6-8 Greencoat Place SW1 Francis House SW1 • Depop • Fora • Edelman • 33,500 sq ft • Entire building of 32,400 sq ft • 38,200 sq ft • £1.8m pa at £52.50 psf • £2.2m pa at average rent of £69 psf • £2.9m pa at £76 psf • 5-year lease, break at
Slide 86: Appendix 31 - Key Asset Management Activity
APPENDIX 31 - KEY ASSET MANAGEMENT ACTIVITY w vie ar t re ge n Re Re Angel Building EC1 Charlotte Building W1 • Expedia • The & Partnership • 125,500 sq ft • Renewed 12,400 sq ft at £0.9m, with expiry moved from 2024 to 2027 • Rent review increased income from £5.85m to £7.49m • Let an additional 14
Slide 87: Appendix 32 - Lazari Acquisitions in Fitzrovia
APPENDIX 32 - LAZARI ACQUISITIONS IN FITZROVIA 250 Euston Road NW1 171-174 Tottenham Court Road W1 • Acquired for £190.3m after costs • Acquired for £24.3m after costs • Freehold 165,900 sq ft offices let to UCLH at £4.7m • Freehold 16,200 sq ft pa until 2039 • Multi-let at £0.6m pa • Fixed annual i
Slide 88: Appendix 33 - The Portman Estate Baker Street Holdings
APPENDIX 33 - THE PORTMAN ESTATE BAKER STREET HOLDINGS • At the end of Q3 2021, our Baker Street holdings with The Portman Estate (TPE) were restructured • Previously, properties in the Baker Street W1 area were held through a jointly owned company (Derwent London 55%: TPE 45%) • Derwent London (DL)
Slide 89: Appendix 34 - Central London Office Demand
APPENDIX 34 - CENTRAL LONDON OFFICE DEMAND Market statistics Take-up (million sq ft) OFFICE TAKE-UP • Central London office take-up of 9.1m sq ft in 2021 20 Central London 18 • 63% above 2020 16 • 26% below Long Term Average (LTA) 14 Annual average • Activity by sector: 22% creative industries, 21%
Slide 90: Appendix 35 - Central London Office Supply
APPENDIX 35 - CENTRAL LONDON OFFICE SUPPLY Existing supply OFFICE DEVELOPMENT PIPELINE • Central London vacancy rate of 9.3% at year end Floor area (million sq ft) 12 Vacancy rate (%) 12 Completed Central London • Highest level for 17 years (LTA of 5.2%) Under construction Proposed 10 10 Completed a
Slide 91: Appendix 36 - Central London Office Vacancy Rates
APPENDIX 36 - CENTRAL LONDON OFFICE VACANCY RATES Vacancy rate (%) 16 West End West End average City City average 14 Central London 12 10 8 6 4 2 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Source: CBRE Derwent London plc - Annual Results 2021 89
Slide 92: Appendix 37 - Available Space
APPENDIX 37 - AVAILABLE SPACE 30 Secondhand New completed New under construction 25 20 10-year average 15 10 5 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: CBRE Derwent London plc - Annual Results 2021 90
Slide 93: Appendix 38 - Central London Office Construction Starts
APPENDIX 38 - CENTRAL LONDON OFFICE CONSTRUCTION STARTS 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 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: CBRE Derwent London plc - Annual Results 2021 91
Slide 94: Appendix 39 - Central London Office Rental Growth
APPENDIX 39 - CENTRAL LONDON OFFICE RENTAL GROWTH • CBRE reported prime office rental growth of +7.4% in 2021, following a 7.6% decline in 2020 Prime rental growth (% pa) CENTRAL LONDON OFFICE PRIME RENTAL GROWTH 40 West End • West End: +14.1% (-9.7% in 2020) City 30 Central London • City: +0.0% (-4
Slide 95: Appendix 40 - Central London Office Investment Market
APPENDIX 40 - CENTRAL LONDON OFFICE INVESTMENT MARKET • CBRE reported £10.0bn of investment transactions in 2021 CENTRAL LONDON OFFICE INVESTMENT Value of investment transactions (£bn) • 33% above 2020 9 Quarter total 4 quarter average 8 • 16% below LTA 7 • 61% of transactions in second half of the
Slide 96: Appendix 41 - Investment Market Themes - London Is in Demand
APPENDIX 41 - INVESTMENT MARKET THEMES - LONDON IS IN DEMAND INVESTMENT DEMAND Yield (%) EUROPEAN PRIME OFFICE YIELDS 6.0 Cyclical low Middle Dec 20 yield East 5.5 5% Dec 21 yield South East Asia 5.0 12% East Asia 4.5 34% 4.0 North £40.1bn America at Q4 2021 3.5 17% 3.0 2.5 Amsterdam 2.0 Frankfurt W
Slide 97: Appendix 42 - Project Summary: Current Projects
APPENDIX 42 - PROJECT SUMMARY: CURRENT PROJECTS Current Pre Total Current net scheme Proposed 2022 2023 2024+ 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 projects Soho Place W11 - 107 285 79 - - 79 H1 20
Slide 98: Appendix 43 - Project Summary: Future Projects
APPENDIX 43 - 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 3.9 90 150 2025 3.9 90 150 Under appraisal 1 Bush House WC2 - 104 130 Vacant Refurbishment and potential ex
Slide 99: Appendix 44 - On-site Developments: Profit on Cost
APPENDIX 44 - ON-SITE DEVELOPMENTS: PROFIT ON COST 19-35 Baker Street W1 le e- d t/ Summary £m pr sol % e- 87 pr End value 1,203 Less: Total cost1 1,017 Project surplus 186 Less: Booked to Dec 21 58 Surplus to come 128 Profit on total cost 18% Profit to come on total cost 13% Yield on cost10 5.7% Co
Slide 100: Appendix 45 - Portfolio Map
APPENDIX 45 - PORTFOLIO MAP The Knowledge TECH BEL T Quarter Floorspace: Current 4.8m sq ft On site 0.8m sq ft Valuation £5.7bn Income pa £178.4m ERV £293.9m Derwent London plc - Annual Results 2021 98
Slide 101: Appendix 46 - Executive Committee and Senior Management
APPENDIX 46 - EXECUTIVE COMMITTEE AND SENIOR MANAGEMENT Executive Committee Senior Management Paul Williams Chief Executive Lesley Bufton Head of Property Marketing Damian Wisniewski Chief Financial Officer Matt Cook Head of Digital Innovation & Technology Nigel George Executive Director Philippa Da
Slide 102: 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