Derwent London Plc · LSE:DLN
Derwent London — Investor Day (October 2015)
67 slides from Derwent London's investor day presentation, Oct 14, 2015
Slide 1: Derwent London Presentations and Property Tour
DERWENT LONDON PRESENTATIONS AND PROPERTY TOUR 14 O C TO B E R 2 015
Slide 2: Timetable
T I M E TA B L E 1 11.15 Arrival at Middlesex House 11.30 1. Favourable market conditions John Burns, Chief Executive, Derwent London 2. Fitzrovia - our most important village Nigel George, Director, Derwent London 3. Working the core portfolio: 1-2 Stephen Street Simon Silver, Director, Derwent Lon
Slide 3: 1. Favourable Market Conditions
2 1. FAVOURABLE MARKET CONDITIONS JOHN BURNS
Slide 4: Agenda
AGENDA 3 1. Favourable market conditions John Burns 2. Fitzrovia - our most important village Nigel George 3. Working the core portfolio: 1-2 Stephen Street Simon Silver 4. Creating special space Paul Williams 5. Acquisitions and disposals David Silverman
Slide 5: Middlesex House - A Derwent London Classic
M I D D LESE X HOUSE - A D ERWENT LON DON CL A S SI C 4 1. Improving ownership - Acquisition of freehold. 2. Good bones - Office conversion. 3. Major reconfiguration. 4. Update and reposition ancillary space. 5. Mid-market rents - Reversionary potential.
Slide 6: Letting Demand - Still Good
LETTING DEMAND - STILL GOOD 5 DERWENT LONDON LET TING ACTIVIT Y £30 Pre-lets Non pre-lets Excellent letting activity year to date: £25 - £25.5m pa of income (£9.1m in H2 so far) - 488,600 sq ft £20 Rental income (£m pa) - 63 transactions - 10.2% above Dec 2014 ERV. £15 £5.2m pa of lettings since 10
Slide 7: Development Supply
D E V E LO P M E N T S U P P LY 6 CBRE CENTR AL LONDON OFFICE COMPLETIONS 9,000,000 Central London office vacancy rate of 2.8%. Docklands, Midtown, Southbank 8,000,000 City West End Sustained additional supply potential: 7,000,000 6,000,000 - Possible delays. 5,000,000 After 2016, supply focussed in
Slide 8: Investment Demand
INVESTMENT DEM AND 7 £8.2bn of transactions in H1. Significant stock on the market: - £3.7bn in the City - £1.5bn in the West End. Unlikely to be many forced sellers. Yield levels appear comfortable whilst rents rise. CBRE CENTR AL LONDON INVESTMENT P R O P E R T Y Y I E L D S , E Q U I T I E S & G
Slide 9: Business Model
BUSINESS MODEL 8 Derwent London’s business model is designed to: - Take full advantage of current demand - Be flexible enough to cope if conditions change. OUR BUSINESS MODEL
Slide 10: 2. Fitzrovia - Our Most Important Village
9 2. FITZROVIA - OUR MOST IMPORTANT VILLAGE NIGEL GEORGE
Slide 11: Fitzrovia - A Great Opportunity
FI T Z ROV I A - A G R E AT O P P O RT U N I T Y 10 S T PA N C R A S S TAT I O N FRANCIS CRICK INSTITUTE BT TOWER K I N G’S CROS S S TAT I O N BRITISH LIBR ARY EUS TO N S TAT I O N U CL H OS PI TA L WELLCOME TRUST FITZROY SQ UARE TO TT EN H A M FITZROY PL ACE CHARLOT TE STREET C O U RT RO A D BERNER
Slide 12: Fitzrovia - Our Estate
F I T Z R O V I A1 - O U R E S TAT E EUST ON R 11 OAD WAR REN STRE WARREN ET STREET Key Fitzrovia accounts for 36% of the Derwent London portfolio: URT ROAD ET Core income FITZROY T RE SQUARE DS On site / H2 2015 start - £1.7bn capital value GRAFTON WAY LAN Consented ORT TOTTENHAM CO - 1.8m sq ft fl
Slide 13: Our Fitzrovia Estate - Opportunities Across the Portfolio
O U R FI T Z ROV I A ES TAT E 12 OPPORTUNITIES ACROSS THE PORTFOLIO Core income: Grafton Hotel F Qube 9% 8 Fitzroy Street On site Middlesex House 0.52m sq ft F 6% 75 Wells Street Consented 1-2 Stephen Street 0.35m sq ft F 14% On site: Under The Copyright Building appraisal 50% Existing 0.80m sq ft C
Slide 14: Fitzrovia: Core Income Properties
FITZROVIA: CORE INCOME PROPERTIES 13 Charlotte Building, 17 Gresse Street 1-2 Stephen Street Qube, 90 Whitfield Street FLOOR AREA SQ FT 2 6 7, 4 0 0 1 0 9, 9 0 0 4 7, 2 0 0 CURRENT RENT PSF £ 40-£82.50 £55-£65 £60-£82.50 J U N E 2 015 E R V P S F £ 4 7. 5 0 - £ 8 5 £60-£65 £65- £80 OMLP* PSF £ 75 -
Slide 15: Fitzrovia: Current & Consented Developments
FIT ZROV I A: CU R R ENT & CON SENTED D E V ELOPM ENTS 14 80 Charlotte Street 73 Charlotte Street 1 Oxford Street The Copyright Building
Slide 16: Fitzrovia: Under Appraisal - Holden House
FITZROVIA: UNDER APPR AISAL 15 Holden House, 54-68 Oxford Street Appraisal studies are underway that could see the floor area increased by over 50% to around 137,000 sq ft: - New destination retail store totalling 73,000 sq ft - 46m Oxford Street frontage with potential retail depth of 42m - Offices
Slide 17: Fitzrovia: Under Appraisal - Network Building
FITZROVIA: UNDER APPR AISAL 16 Network Building, 95-100 Tottenham Court Road Major future development opportunity. 0.5 acre site - similar to Qube next door. Potential to increase the floor area by 56% to c.100,000 sq ft. Earliest possession 2021. Low site coverage. Significant potential to increase
Slide 18: 3. Working the Core Portfolio: 1-2 Stephen Street
17 3.WORKING THE CORE PORTFOLIO: 1-2 STEPHEN STREET SIMON SILVER
Slide 19: 1-2 Stephen Street W1 - At Acquisition
1-2 S T E P H E N S T R E E T W1 - AT A C Q U I S I T I O N 18 251,000 sq ft freehold property acquired for £146m before costs (£582 psf) in July 2010. 216,000 sq ft offices, 24,000 sq ft retail and 11,000 sq ft cinema. Annual rent of £8.1m pa at an average rent of £34 psf. Significant opportunities
Slide 20: Office Refurbishment - Phase 1
OFFICE REFURBISMENT - PHASE 1 19 Phase 1 (18,300 sq ft) remodelled, extended and refurbished the office entrance and ground floor and basement studios. Created a new ‘streetscape’ for Stephen Street and Gresse Street with a 140m new frontage and double height office space. Architects: Orms. Entire e
Slide 21: Phase 1 - Upgraded Receptions
PHASE 1 - UPGR ADED RECEPTIONS 20
Slide 22: Phase 2 - Office Refurbishment
PHASE 2 - OFFICE REFURBISHMENT 21 84,900 sq ft office refurbishment delivered in Q3 2014: - 28,100 sq ft pre-let to Freud Communications at £65 psf - 6,500 sq ft let to Fremantle Media at £65 psf - 16,150 sq ft two upper floors let to AnaCap at £81.75 psf - 34,150 sq ft let to The Office Group at £6
Slide 23: Phase 2 - New Roof Terraces
PHASE 2 - NEW ROOF TERR ACES 22
Slide 24: Tottenham Court Walk W1 - Retail Regeneration
TOT T E N H A M CO U RT WA L K W1 - R E TA I L R EG E N E R AT I O N 23 Previously let to low grade electrical shops at £0.7m pa. Retail extended from 24,000 sq ft to 38,000 sq ft (+58%) - creation of more desirable larger units along this prominent 109 metre Tottenham Court Road frontage. Completed
Slide 25: Tottenham Court Walk W1 - DF Mexico
TOT T EN H A M CO U RT WA L K W1 - D F M E X I CO 24
Slide 26: Tottenham Court Walk W1 - Hotel Chocolat
TOT T E N H A M CO U RT WA L K W1 - H OT E L C H O CO L AT 25
Slide 27: Tottenham Court Walk W1 - Leon
TOT T EN H A M CO U RT WA L K W1 - L EO N 26
Slide 28: 1-2 Stephen Street W1 - Conclusion
1-2 S T E P H E N S T R E E T W1 - C O N C L U S I O N 27 Based on new floor area: Acquired: £146.0m £545 psf Total capex: £46.8m £175 psf Total spend: £192.8m £720 psf June 2015 book value: £321.8m £1,200 psf ERV increased from £8.9m pa on acquisition to £15.1m pa in June 2015. Total property retur
Slide 29: 4. Creating Special Space
28 4. CREATING SPECIAL SPACE PAUL WILLIAMS
Slide 30: A Major Development Programme
A M A J OR D E V ELOPM ENT PROG R A M M E 29 Four completions in 2015: 230,000 sq ft Two major schemes under construction: 398,000 sq ft Two major schemes about to commence: 620,000 sq ft 500 Completed Estimated completions ('000 sq ft) Under construction 380 400 Potential starts 300 293 275 226 80
Slide 31: Construction Costs
CONSTRUCTION COSTS 30 Estimated total capex to complete £590m: - £480m on major developments - 57% from 80 Charlotte Street and Brunel Building. C A P E X T O C O M P L E T E ( J U N E 2 015 ) Construction costs rising fast: - 15% of capex fixed - Advanced discussions with three new contracts. Other
Slide 32: Guest Speakers
GUEST SPEAKERS 31 SEAN AFFLECK, M AKE K E I T H P R I E S T, F L E T C H E R P R I E S T P H I L I P T U R N E R A N D S T E V E TAY LO R , A H M M
Slide 33: 5. Acquisitions & Disposals
32 5. ACQUISITIONS & DISPOSALS DAVID SILVERMAN
Slide 34: Recent Acquisitions - Summary
RECENT ACQUISITIONS - SUMM ARY 33 Derwent London remain opportunistic buyers in a tough market. Three major Tech Belt acquisitions* exchanged or completed since Nov 2014: • 554,300 sq ft offices • c.£310m after costs • £560 psf capital value • Income at purchase £6.0m pa (gross) / £5.2m pa (net) Ang
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Slide 36: Acquisition - Angel Square EC1
ACQU I SITION - A N G EL SQUA R E EC1 35 At acquisition (Nov 2014): - 128,700 sq ft - £78.6m after costs (£620 psf) - £2.4m pa income - £21.68 psf on the let space - Majority of leases expired in March 2015 - Net initial yield of 3.0%. Post acquisition: - £4.0m pa* income (67% above total acquisitio
Slide 37: Acquisition - 20 Farringdon Road EC1
ACQ U I S I T I O N - 20 FA R R I N G D O N ROA D EC1 36 At acquisition (Feb 2015): - 170,600 sq ft long leasehold interest (175-year min term) - £92.7m after costs (£545 psf) - £3.6m pa gross / £3.2m pa (net) income, 10% ground rent - £21 psf on let space, excluding ground floor offices let at £2 p
Slide 38: Acquisition - 20 Farringdon Road EC1
ACQ U I S I T I O N - 20 FA R R I N G D O N ROA D EC1 37 Post acquisition: - 25,700 sq ft ground floor renewed at 1.1m pa (£42.50 psf) - 33,400 sq ft of refurbished space let at £1.5m pa / £45 psf - Further 50,000 sq ft under refurbishment with ERV £2.2m pa - Estimated total capex of c.£11m - Once f
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Slide 40: Acquisition - Aldgate Union E1
ACQ U I S I T I O N - A L D GAT E U N I O N E1 39 - 255,000 sq ft Whitechapel office building. - Exchanged in July for £139.3m after costs (£545 psf). - Completes in Dec 2015 with vacant possession. - Recently acquired 30,500 sq ft lower ground floor for £12m after costs which increases ownership to
Slide 41: 2015 Disposals - Part of Farringdon Road Swap
2 015 D I S P O S A L S - PA R T O F 2 0 FA R R I N G D O N R O A D S W A P 40 £114.7m of disposals in the year to date, 4% above June 2014 book value (4.2% net initial yield). ure nt t ve in jo 50% 22 Kingsway WC2 (91,400 sq ft) 9 & 16 Prescot Street E1 (53,700 sq ft) Mark Square House EC2 (61,700
Slide 42: Currently Marketed for Disposal - Covent Garden
C U R R E N T LY M A R K E T E D F O R D I S P O S A L - C O V E N T G A R D E N 41 Tower House and Davidson Building, Southampton Street WC2 - Two adjoining properties in Covent Garden - 94,500 sq ft. - Sold individually or together. - Offers in excess of £136m. Tower House WC2 (52,800 sq ft) David
Slide 43: Currently Marketed for Disposal - Portobello Dock W10
C U R R E N T LY M A R K E T E D F O R D I S P O S A L - P O R TO B E L LO D O C K W10 4 2 - Campus development. - 51,600 sq ft. - 51% of income secured against Innocent Drinks (Coca Cola). - Asset management opportunities. - £1.2m pa income. - Offers in excess of £30m. - Net initial yield of 4.23%.
Slide 44: Property Tour
43 PROPERTY TOUR
Slide 45: Itinerary
ITINER ARY 44 Map No. Property Page 1. Middlesex House W1 48 2. The Copyright Building W1 50 3. 73 Charlotte Street W1 52 4. 1-2 Stephen Street W1 54 Tottenham Court Walk W1 56 5. 40 Chancery Lane WC2 58 6. 19 Charterhouse Street EC1 60 7. 20 Farringdon Road EC1 36 8. Angel Square EC1 34 9. Angel Bu
Slide 46: Itinerary Map
Islington ITINER ARY M AP C arnegie 45 St Wharfdale Rd Angel Kings Cross 8 Regent’s Alba Park ny S S t Pancras 9 t International Th am Euston es lin k Euston Up Old pe rW ob Clerkenwell ur nP Warren Street l Great Regent’s Bloomsbury W Portland Street ob Park ur Street nP Russell Square Clerkenwell
Slide 47: Key Properties in Fitzrovia
KEY PROPERTIES IN FITZROVIA 46 Grafton Hotel 120-134 Tottenham Court Road 8 Fitzroy Street Qube 90 Whitfield Street 80 Charlotte Street1 Network Building 95-100 Tottenham Court Road 73 Charlotte Street1 1-2 Stephen Street & Tottenham Court Walk Charlotte Building 17 Gresse Street 1 CGI of proposed s
Slide 48: The Tech Belt
ry Road Rd Essex Road London T H E T E C H B E LT Fields 47 Islington Angel Building EC1 Tech Belt* Carnegie St 10-4 Pentonville Road N1 26 properties 35% portfolio by value Angel Square EC1 Wharfdale Rd 262,000 sq ft 2.1m sq ft Kings Cross 53,400 sq ft Angel 128,700 sq ft Rental income of c.£50m pa
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Slide 50: Middlesex House W1 65,700 sq ft
MIDDLESE X HOUSE W1 49 65,70 0 SQ F T 1987 Acquired the leasehold of this 1934 industrial building with milliners and garment makers still in situ – rents £6-10 psf. 1988 Acquired freehold and delivered first two phases of refurbishment. 2001 Fully redesigned by John McAslan & Partners to offer ligh
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Slide 52: The Copyright Building, 30 Berners Street W1
TH E COPYRI GHT BU I LD I NG, 30 B ERN ERS STREE T W1 51 10 5, 0 0 0 S Q F T - O N S I T E 2012 Acquired the long leasehold interests in 25 & 29 Berners Street from the owner occupier, PRS for Music, for £35.0m before costs (£440 psf) in December. Both buildings were eight floors. 25 Berners Street
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Slide 54: 73 Charlotte Street W1
73 C H A R LOT T E S T R EE T W1 53 15 , 5 0 0 S Q F T - R E C E N T LY C O M P L E T E D 2007 13,000 sq ft freehold office building. 2012 Planning permission granted in November for 13,600 sq ft of residential (9 private, 2 affordable) and 1,900 sq ft of offices. Architects: DSDHA. Enablement schem
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Slide 56: 1-2 Stephen Street W1
1-2 S T E P H E N S T R E E T W1 55 2 6 7, 4 0 0 S Q F T - C O R E I N C O M E 2010 Acquired this 251,000 sq ft freehold property for £146m before costs (£582 psf) in July - 216,000 sq ft offices, 24,000 sq ft retail and 11,000 sq ft cinema. Annual rent of £8.1m pa from 10 tenants at an average rent
Slide 57: Nine retail units, seven let
56 • Nine retail units (38,000 sq ft) • Seven let - 26,600 sq ft at £1.8m pa
Slide 58: Tottenham Court Walk W1
TOT T E N H A M C O U R T WA L K W1 ( PA R T O F 1-2 S T E P H E N S T ) 57 3 8 , 0 0 0 S Q F T - R E C E N T LY C O M P L E T E D 2010 Retail totalled 24,000 sq ft and produced £0.7m pa. Tottenham Court Road frontage of 109m. 2014 Commenced 38,000 sq ft retail extension in March - nine units. Archi
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Slide 60: 40 Chancery Lane WC2
40 CHANCERY L ANE WC2 59 10 2, 0 0 0 S Q F T 1999 Property acquired for £9.9m after costs. Low average rent of £14 psf. 2001 Rolling refurbishment commenced. £34 psf achieved. 2008 Planning permission achieved for 102,000 sq ft office and retail development. 2012 Ownership re-geared to unlock this s
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Slide 62: 19 Charterhouse Street EC1
19 C H A R T E R H O U S E S T R E E T E C 1 61 63,70 0 SQ F T - EAR M ARKED FOR APPR AISAL 2013 Six-storey freehold office building acquired in November for £41.3m after costs (£648 psf) at a net initial yield of 4.1%. Corner position on Farringdon Road and Charterhouse Street, opposite Farringdon
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Slide 64: Angel Building EC1 262,000 sq ft
A N G EL B U I LD I N G EC1 63 262,0 0 0 SQ F T 2007 Vacant office property (162,500 sq ft) let on a long lease. 2008 Planning consent granted for office/retail remodelling and extension to 262,000 sq ft – a 61% floorspace gain. As part of the lease surrender terms tenant agrees to pay rent (£4.2m p
Slide 65: Derwent London Attendees
D E RW E N T LO N D O N AT T E N D E ES 64 J O H N BU R NS * Chief Executive Officer SIMON SILVER* Property Director DAMI AN W I S NIE W S K I* Finance Director N IGEL GEORGE* Property Director PAU L W I L L I AM S * Property Director DAVID SILVERMA N* Property Director R I CH AR D BA LDW IN* Head o
Slide 66: Disclaimer
DISCL AIMER 65 This presentation has been prepared by Derwent London plc (the “Company”). No representation or warranty (express or implied) of any nature is given nor is any responsibility or liability of any kind accepted by the Company or any of its directors, officers, employees, advisers, repre
Slide 67: Derwent London
66 DERWENT LONDON