Derwent London Plc · LSE:DLN
Derwent London — FY2017 Earnings Presentation
98 slides from Derwent London's earnings presentation, 2018
Slide 1: Annual Results 2017 Derwent London plc
ANNUAL RESULTS 2017 DERWENT LONDON PLC
Slide 2: Contents
CONTENTS Presenters Contents John Burns Introduction and overview 01 Simon Silver Results and financial review 06 Damian Wisniewski Valuation and portfolio analysis 16 Nigel George Developing a product 22 Paul Williams Building relationships 35 David Silverman The evolving needs of the occupier 42 S
Slide 3: Introduction and Overview
INTRODUCTION AND OVERVIEW John Burns Derwent London plc Annual Results 2017 1
Slide 4: Highlights 2017
HIGHLIGHTS 2017 OPERATIONAL Rental income (£m pa) LETTINGS 45 Pre-lets ■■ £41.5m1 pa of lettings, 1.3% above Dec 16 ERV Non pre-lets 40 ■■ Two major pre-lets to Arup and The Boston Consulting Group at 35 80 Charlotte Street W1 30 ■■ EPRA vacancy rate of 1.3% 25 ■■ £483m (net) of property disposals 2
Slide 5: Central London Office Outlook
CENTRAL LONDON OFFICE OUTLOOK Rents Yields ERV 2018 estimate +2% to -3% Broadly flat in 2018 ■■ Economy: Growing slowly ■■ London remains attractive to global investors ■■ Supply: Under construction peaking ■■ High levels of investor demand ■■ Vacancy: Rising to average levels ■■ Increased supply, e
Slide 6: Derwent London Maintaining a Growth Profile
DERWENT LONDON MAINTAINING A GROWTH PROFILE CAPTURING REVERSION £m 300 Soho ■■ Reversion to be captured through contractual uplifts, Soho Place £22.0m Place developments, vacant space, reviews and renewals Lease events £14.3m 250 Developments £24.5m Vacant £2.8m ■■ Contractual rent including pre-let
Slide 7: Building a Brand for Long Term Success
BUILDING A BRAND FOR LONG TERM SUCCESS ■■ Keeping close to our occupiers and our market experience Knowledge ■■ Buying in the right areas, Crossrail and clusters Location ■■ Relevant to today’s users ■■ Not over specified means not overly costly Product ■■ Selling mature assets ■■ Enhancing our know
Slide 8: Results and Financial Review
RESULTS AND FINANCIAL REVIEW Damian Wisniewski Derwent London plc Annual Results 2017 6
Slide 9: Headline Numbers
HEADLINE NUMBERS Dec 2017 Dec 2016 % change Net asset value £4,193.2m £3,999.4m 4.8 EPRA net asset value per share1,2 3,716p 3,551p 4.6 EPRA triple NAV per share1,2 3,617p 3,450p 4.8 EPRA total return 7.7% 1.7% - Gross property income £172.2m £156.0m 10.4 Net rental income £161.1m £145.9m 10.4 EPRA
Slide 10: Net Assets and Earnings
NET ASSETS AND EARNINGS NET ASSETS, DEBT AND GEARING ■■ EPRA NAV per share up 4.6%: £m % ■■ 3,716p from 3,551p 4,500 Net assets1 45 Net debt 4,128 4,000 40 ■■ Split 0.9%/3.7% in H1/H2 LTV ratio 3,923 3,932 3,500 35 3,000 3,012 30 ■■ Equity shareholders’ funds increase to £4,128m 2,500 25 2,000 20 ■■
Slide 11: EPRA NAV Movement
EPRA NAV MOVEMENT ■■ Revaluation surplus: EPRA NAV PER SHARE Investment properties £147.9m Pence Owner-occupied property £1.8m 3,900 Trading property adjustment1 £1.0m 94 (56) Share of JV revaluation surplus £3.9m 3,800 183p £154.6m 138p 45 (52) (4) 3,716 3,700 138 ■■ Included in the revaluation sur
Slide 12: EPRA Earnings
EPRA EARNINGS1 ■■ EPRA earnings £105.0m, up 22.5% from EPRA EARNINGS £85.7m in 2016 £m 120 ■■ Gross property income analysis on slide 11 2.7 0.7 1.0 0.3 105.0 ■■ Admin costs fell by 8.7% to £28.2m 100 16.2 (1.6) ■■ Capitalised interest fell to £9.4m from £13.0m 85.7 in 2016 on lower capex spend 80 ■
Slide 13: Gross Property Income
GROSS PROPERTY INCOME ■■ Lettings and reviews include: MOVEMENTS IN GROSS PROPERTY INCOME 2016 £m 2017 2017 lettings & 200 lettings reviews reviews White Collar Factory EC1 £11.2m - - 11.3 (11.1) The White Chapel Building E1 £1.4m - £4.7m 180 3.3 (1.7) (3.6) 20 Farringdon Road EC1 £0.4m £0.4m £1.6m
Slide 14: Cash Flow
CASH FLOW ■■ Decrease in net debt of £246.9m to £657.9m ■■ Cash from operations benefitted from the increase in cash receipts from tenants and a decrease in variable remuneration NET CASH FLOW MOVEMENTS 2017 2016 FORECAST CAPITAL EXPENDITURE1 £m £m On-site projects Soho Place Other projects Capitali
Slide 15: Proforma Impact of Major Projects and Disposals
PROFORMA IMPACT OF MAJOR PROJECTS AND DISPOSALS ■■ Assumes no disposals and no further lettings other than those already contracted ■■ Shows impact of estimated capital expenditure and special dividend of 75p per share PROFORMA IMPACT OF MAJOR PROJECTS AND SPECIAL DIVIDEND PROFORMA IMPACT OF SOHO PL
Slide 16: Debt Summary
DEBT SUMMARY ■■ Total facilities decreased due to cancellation of £100m Dec 2017 Dec 2016 of the £550m revolving bank facility Total facilities £1,166m £1,266m Unutilised facilities and cash £523m £383m ■■ £75m Wells Fargo revolving facility extended by one year to July 2022 Percentage of debt unsec
Slide 17: Debt Facilities
DEBT FACILITIES Dec 2017 Dec 2016 MATURITY PROFILE OF DEBT FACILITIES £m Average spot interest rate 3.80% 3.65% 0 50 100 150 200 250 300 350 400 450 500 550 600 (cash basis) 2018 Average spot interest rate 4.11% 3.90% 2019 150 (IFRS basis) 2020 Marginal interest rate 1.25% 1.10% 2021 Percentage of d
Slide 18: Valuation and Portfolio Analysis
VALUATION AND PORTFOLIO ANALYSIS Nigel George Derwent London plc Annual Results 2017 16
Slide 19: Valuation
VALUATION Investment portfolio valued at £4.9bn Developments outperformed ■■ Underlying growth 3.9% 2016: (0.2)%: ■■ Valued at £756m, uplift of 16.0% in 2017: ■■ West End 1.9% 2016: (0.7)% ■■ White Collar Factory EC1 (completed H1 2017) 17.7% ■■ City Borders 7.5% 2016: 1.0% ■■ 80 Charlotte Street W1
Slide 20: Property Return
PROPERTY RETURN Total property returns in 2017 10-YEAR CUMULATIVE TOTAL PROPERTY RETURN ■■ Derwent London 8.0% Index (31 Dec 2007=100) 300 Derwent London ■■ MSCI IPD Central London Offices1 7.1% MSCI IPD Central London Offices MSCI IPD All UK Property 150% ■■ MSCI IPD All UK Property1 10.2% 250 118%
Slide 21: Movement in Yields
MOVEMENT IN YIELDS EPRA yields TRUE EQUIVALENT YIELD MOVEMENT1 ■■ Net initial yield 3.4% (Dec 2016: 3.4%): True equivalent yield (%) 7.5 ■■ ‘Topped-up’ net initial yield 4.4% 15bp 97bp (Dec 2016: 4.1%) 7.0 83bp 6.5 ■■ True equivalent yield 4.73% (Dec 2016: 4.83%): 43bp ■■ 10 basis points tightening
Slide 22: Rental Value Growth
RENTAL VALUE GROWTH ■■ Underlying rental growth of 1.7%: RENTAL VALUE GROWTH Half-yearly rental value growth (%) ■■ City Borders 3.0%, West End 0.7% 12 9 8.1 ■■ Examples of performance: 6 4.8 5.2 6.6 4.6 4.2 ERV 4.1 3.8 4.1 3 1.3 2.6 2.8 2.6 3.0 1.0 Building uplift Comments 2.1 2.8 1.1 0.6 % 0 (2.9)
Slide 23: Build-up of Portfolio ERV
BUILD-UP OF PORTFOLIO ERV ■■ Net income of £160.1m: BUILD-UP OF ERV £m ■■ £18.4m captured in 2017 300 Annualised rent on straightline basis £173.4m 14.3 270.1 ■■ Significant potential reversion £110.0m1: 5.7 18.8 250 2.8 21.8 ■■ 62% (£68.4m) locked in, including: 44.2 2.4 200 ■■ White Collar Factory
Slide 24: Developing a Product
DEVELOPING A PRODUCT Simon Silver Derwent London plc Annual Results 2017 22
Slide 25: Current Projects
CURRENT PROJECTS Refurb Development Delivery sq ft sq ft 2018 The White Chapel Building E1 89,000 Johnson Building EC1 57,200 25 Savile Row W1 18,700 2019 Brunel Building W2 243,000 80 Charlotte Street W1 380,000 2021 Soho Place W1 285,000 164,900 908,000 Brunel Building W2 Derwent London plc Annual
Slide 26: 2018 Refurbishments: The White Chapel Building E1
2018 REFURBISHMENTS: THE WHITE CHAPEL BUILDING E1 ■■ 89,000 sq ft redevelopment ■■ Pre-let to Fotografiska as The London Museum of Photography ■■ Establishing a major new cultural landmark and a new building identity Derwent London plc Annual Results 2017 24
Slide 27: 2018 Refurbishments: Johnson Building EC1
2018 REFURBISHMENTS: JOHNSON BUILDING EC1 ■■ 57,200 sq ft refurbishment ■■ Flexible floorplates ■■ Repositioning the building Derwent London plc Annual Results 2017 25
Slide 28: 2018 Refurbishments: Savile Row W1
2018 REFURBISHMENTS: 25 SAVILE ROW W1 ■■ 18,700 sq ft scheme ■■ Refurbishment of upper floors with the addition of two new rooftop offices Derwent London plc Annual Results 2017 26
Slide 29: Brunel Building W2: 2019 Delivery
BRUNEL BUILDING W2: 2019 DELIVERY ■■ 243,000 sq ft canalside offices ■■ Striking external diagrid structure ■■ Opposite Paddington station ■■ 17,000 sq ft column-free floors with 3.5m floor to ceiling heights ■■ On-site restaurant ■■ Two large roof terraces ■■ 260 cycle spaces and 26 showers Derwent
Slide 30: TITLE
TITLE 1 Footnote Derwent London plc Annual Results 2017 ▪▪ Appendix x 28
Slide 31: 80 Charlotte Street W1: Fit for the Future
80 CHARLOTTE STREET W1: FIT FOR THE FUTURE ■■ Mixed-use scheme of 380,000 sq ft ■■ Large 40,000 sq ft flexible floorplates ■■ Extensive rooftop terraces with panoramic views ■■ Offices predominately pre-let to Arup and BCG Derwent London plc Annual Results 2017 ▪▪ Appendices 38 and 39 29
Slide 32: TITLE
TITLE 1 Footnote Derwent London plc Annual Results 2017 ▪▪ Appendix x 30
Slide 33: Soho Place W1: Our Next Major Project
SOHO PLACE W1: OUR NEXT MAJOR PROJECT ■■ 285,000 sq ft office-led scheme with 36,000 sq ft retail and a 40,000 sq ft West End theatre ■■ New public space linking to Soho Square ■■ Significant regeneration at this end of Oxford Street ■■ Directly above Tottenham Court Road station, including Elizabet
Slide 34: TITLE
TITLE 1 Footnote Derwent London plc Annual Results 2017 ▪▪ Appendix x 32
Slide 35: Making an Impact
MAKING AN IMPACT ■■ Two developments completed in 2017: ■■ White Collar Factory EC1 - 96% profit on cost ■■ The Copyright Building W1 - 23% profit on cost ■■ Two developments on site at year end: ■■ 623,000 sq ft with £40.6m ERV (£21.8m pre-let) ■■ £252m capex to complete ■■ Delivery 2019 ■■ Three c
Slide 36: Assured Pipeline into the Next Decade
ASSURED PIPELINE INTO THE NEXT DECADE ■■ 568,000 sq ft of planning consents: ■■ 86% uplift in existing floor area ■■ Two gained in 2017 (19-35 Baker Street and Holden House) 54 - 68 Oxford Street, London 10th February 201 Monmouth House EC1 19-35 Baker Street W12 Holden House W1 125,000 sq ft1 293,0
Slide 37: Building Relationships
BUILDING RELATIONSHIPS Paul Williams Derwent London plc Annual Results 2017 35
Slide 38: Staying Close
STAYING CLOSE Tenants and pre-lets Extended and regeared leases on 01 Expedia at least 231,400 sq ft at Angel Building EC1 02 Burberry Pre-let 153,400 sq ft at 80 Charlotte Street W1 03 Arup 04 Publicis Groupe Pre-let 123,500 sq ft at 05 The Boston Consulting Group 80 Charlotte Street W1 06 Governme
Slide 39: Results: Letting Activity and Asset Management
RESULTS LETTING ACTIVITY ASSET MANAGEMENT £m Other £8.22m pa 40 Full income Dec ERV 19% Previous income 30 20 Farringdon Road EC1 £0.63m pa 2% 20 The White Chapel Building E1 11% 2017 Lettings 80 Charlotte Street W1 £4.44m pa 53% £41.5m pa £21.8m pa 2% 10 The Copyright Building W1 £0.97m pa 13% 0 20
Slide 40: Existing Relationships
EXISTING RELATIONSHIPS Expedia @ Angel Building EC1 Mother @ Tea Building E1 ■■ Increased their occupancy in the building by 2.5 times ■■ Original anchor tenant in the building ■■ Option to be the sole tenant in the building ■■ Lease renewed for 10 years ■■ Lease extended from 2021 to 2030 ■■ Green
Slide 41: Existing Relationships (2)
EXISTING RELATIONSHIPS (2) Adobe @ White Collar Factory EC1 VCCP @ Greencoat & Gordon House SW1 ■■ Located on ‘Silicon Roundabout’ in the heart of the ■■ A history of expansion with us in Victoria: Tech Belt ■■ VCCP initially took 2,900 sq ft in 2005 ■■ Significant expansion to their London presence
Slide 42: Forging New Relationships
FORGING NEW RELATIONSHIPS Timing Product Location Pricing Flexibility Long term relationships 80 Charlotte Street W1 Clustering potential Derwent London plc Annual Results 2017 ▪▪ Appendix 30 40
Slide 43: Cementing Relationships
CEMENTING RELATIONSHIPS OCCUPIERS COMMUNITIES THIRD PARTY PROFESSIONALS ■■ Regular face-to-face meetings ■■ Fitzrovia and Tech Belt Community ■■ Close relationships with our Funds consultants and advisors - ■■ Property websites for our occupiers architects, agents, engineers, ■■ Staff volunteering s
Slide 44: The Evolving Needs of the Occupier
THE EVOLVING NEEDS OF THE OCCUPIER David Silverman Derwent London plc Annual Results 2017 42
Slide 45: Occupier Outlook
OCCUPIER OUTLOOK OFFICE TAKE-UP 2017 Take-up Take-up (million sq ft) 20 West End ■■ At 13.2m sq ft take-up was 7% above 2016, and above trend 18 Rest of central London Central London average ■■ West End take-up at 4.8m sq ft, the best year since 2007 16 14 12 Supply 10 ■■ Based on space under constr
Slide 46: Demand Outlook
DEMAND OUTLOOK ■■ 13.2m sq ft of take-up in 2017 ■■ Current large space requirements still dominate: ■■ 9.6m sq ft of active demand at the year end: ■■ 4.3m sq ft in the West End CENTRAL LONDON OFFICE DEMAND Demand (million sq ft) 30 Potential demand Active demand 25 20 15 10 5 0 2001 2003 2005 2007
Slide 47: Changing Working Practices
CHANGING WORKING PRACTICES Changing business practices Evolving serviced office model ■■ Increased economic and political uncertainty ■■ Simple ■■ Shift in the economy to creatives ■■ Full service ■■ Changing technology ■■ New focus on accommodation Take-up (million sq ft) % 20 20 18 18 16 16 14 14
Slide 48: Creating the Right Environments
CREATING THE RIGHT ENVIRONMENTS ■■ Amenities in our buildings: ■■ Cafés and restaurants ■■ Cycle storage and showers ■■ Connectivity ■■ WiredScore: ■■ 3.0m sq ft of our portfolio is Wired Certified ■■ Two buildings are Platinum rated ■■ Since initial survey 30% improved from Silver to Gold ratings D
Slide 49: Flexibility and Optionality
FLEXIBILITY AND OPTIONALITY Tea Building E1 The Office Group and Derwent London ■■ Short lease strategy since 2001 ■■ White Collar Factory EC1 - 41,300 sq ft ■■ 2 Stephen Street W1 - 34,200 sq ft ■■ Angel Square EC1 - 40,700 sq ft Derwent London plc Annual Results 2017 47
Slide 50: A Product Driven Market
A PRODUCT DRIVEN MARKET ■■ Occupier demand remains good ■■ Evolving expectations for office use ■■ Serviced office sector likely to continue to grow: ■■ 4% of London office space ■■ 5% of Derwent London’s ‘topped-up’ income ■■ Derwent London has always believed in creating great spaces The White Cha
Slide 51: Summary
SUMMARY John Burns Derwent London plc Annual Results 2017 49
Slide 52: Summary
SUMMARY ■■ Economic and political uncertainty continues Our ■■ Good occupier and investment demand market ■■ ERV guidance of +2% to -3% in 2018 ■■ Investment yields expected to be broadly stable in 2018 ■■ Good interest in the Derwent London product Derwent ■■ Growth potential enhanced by Soho Place
Slide 53: Appendices
APPENDICES Derwent London plc Annual Results 2017 51
Slide 54: Appendices
APPENDICES 01. Group balance sheet 53 23. Lease expiry profile and lease length 75 02. Net asset value per share 54 24. Central London office demand 76 03. Group income statement 55 25. Central London office supply 77 04. Reconciliation of IFRS profit and EPRA earnings 56 26. Central London office v
Slide 55: Appendix 1 - Group Balance Sheet
APPENDIX 1 - GROUP BALANCE SHEET Dec 2017 Dec 2016 £m £m Investment property 4,670.7 4,803.8 Owner-occupied property 46.5 34.2 Investments in joint ventures 39.7 36.0 Other non-current assets 110.9 113.0 4,867.8 4,987.0 Other current assets and liabilities (31.0) (73.5) Trading property 25.3 11.7 Ca
Slide 56: Appendix 2 - Net Asset Value per Share
APPENDIX 2 - NET ASSET VALUE PER SHARE Dec 2017 Dec 2016 Diluted Diluted £m p £m p Net assets attributable to equity shareholders 4,128.3 3,694 3,932.3 3,521 Revaluation of trading properties net of tax 1.0 - Fair value of secured bonds (37.7) (36.6) Fair value of unsecured convertible bonds (11.8)
Slide 57: Appendix 3 - Group Income Statement
APPENDIX 3 - GROUP INCOME STATEMENT Year ended Year ended Dec 2017 Dec 2016 £m £m Gross property income 172.2 156.0 Profit on disposal of trading properties - 1.9 Reversal/(write-down) on trading properties 1.0 (1.6) Other income less other costs 2.7 2.4 Property outgoings (11.1) (9.5) Net property
Slide 58: Appendix 4 - Reconciliation of IFRS Profit and EPRA Earnings
APPENDIX 4 - RECONCILIATION OF IFRS PROFIT AND EPRA EARNINGS Year Year ended ended Dec 2017 Dec 2016 £m £m IFRS profit for the year attributable to shareholders 314.0 58.7 Revaluation (surplus)/deficit (147.9) 37.1 Joint venture revaluation surplus (3.9) (1.8) Profit on disposal of properties (50.3)
Slide 59: Appendix 5 - Explanation of EPRA Adjustments
APPENDIX 5 - EXPLANATION OF EPRA ADJUSTMENTS Adjustments 2017 2016 2017 A B C EPRA EPRA IFRS basis basis £m £m £m £m £m £m Net property and other income 164.8 (1.0) 163.8 148.9 Administrative expenses (28.2) (28.2) (30.9) Revaluation surplus 147.9 (147.9) - - Profit on disposal of investment propert
Slide 60: Appendix 6 - EPRA Like-for-Like Rental Income
APPENDIX 6 - EPRA LIKE-FOR-LIKE RENTAL INCOME Properties owned throughout Development the year Acquisitions Disposals property Total £m £m £m £m £m 2017 Gross rental income 143.6 - 4.8 23.7 172.1 Property expenditure (6.0) - (0.6) (4.4) (11.0) Net rental income 137.6 - 4.2 19.3 161.1 (Write-down)/re
Slide 61: Appendix 7 - Debt Facilities
APPENDIX 7 - DEBT FACILITIES Drawn Undrawn Total Maturity £m £m £m 6.5% secured bonds 175.0 - 175.0 March 2026 3.99% secured loan 83.0 - 83.0 October 2024 1.125% unsecured convertible bonds 150.0 - 150.0 July 2019 4.41% unsecured private placement notes 25.0 - 25.0 January 2029 4.68% unsecured priva
Slide 62: Appendix 8 - Net Debt
APPENDIX 8 - NET DEBT Dec 2017 Dec 2016 £m £m Financial liabilities - due after more than 1 year 744.9 922.5 Acquired fair value of secured bonds less amortisation (12.9) (14.0) Equity component of unsecured bonds 12.6 12.6 Unwinding of discount of unsecured bonds (9.1) (7.0) Unamortised issue and a
Slide 63: Appendix 9 - Fixed Rates and Hedging
APPENDIX 9 - FIXED RATES AND HEDGING Dec 2017 Dec 2016 Proportion of drawn facilities at fixed rates or hedged 88% 95% Weighted average duration of swaps1 1.2 years 4.6 years Mark-to-market cost of swaps £7.9m £17.3m Weighted average duration of fixed rate instruments 8.2 years 9.2 years HEDGING PRO
Slide 64: Appendix 10 - Valuation Performance by Village
APPENDIX 10 - VALUATION PERFORMANCE BY VILLAGE Valuation Valuation Weighting movement Dec 2017 Dec 2017 20171 £m % % West End Central Fitzrovia2 1,442.7 29 2.4 Victoria 540.0 11 (3.8) Baker Street/Marylebone 179.2 4 (5.3) Paddington 131.3 3 13.2 Mayfair 92.4 2 (2.1) Soho/Covent Garden 53.0 1 4.1 2,4
Slide 65: Appendix 11 - Rental Value Growth
APPENDIX 11 - RENTAL VALUE GROWTH RENTAL VALUE GROWTH1 2016 H1 2017 H2 2017 2017 % % % % West End 5.5 0.7 0.0 0.7 City Borders 4.4 1.7 1.3 3.0 Central London 5.1 1.1 0.6 1.7 Provincial 4.5 1.2 1.2 2.4 Underlying 5.1 1.1 0.6 1.7 1 On EPRA portfolio Derwent London plc Annual Results 2017 63
Slide 66: 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 3.7 4.4 City Borders 3.0 4.4 6 Central London 3.4 4.4 5 Provincial 6.3 6.5 EPRA portfolio 3.4 4.4 4 Reversionary yield 3 True equivalent yield Initia
Slide 67: Appendix 13 - Context to Yield Movement
APPENDIX 13 - CONTEXT TO YIELD MOVEMENT ■■ 350bp spread between true equivalent yield and VALUATION YIELDS1 10-year Gilt: Yield % or Gap between DL TEY and 10-year Gilt ■■ Gilt yield remained low and flat in 2017 9 Derwent London True Equivalent Yield 10-year Gilt Derwent London Initial Yield Gap be
Slide 68: Appendix 14 - Portfolio Statistics by Village
APPENDIX 14 - 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 reversion4 reversion value £m % sq ft sq ft £m pa £ psf £m pa £m pa £m pa £m pa West End
Slide 69: Appendix 15 - Build-up of Portfolio ERV
APPENDIX 15 - BUILD-UP OF PORTFOLIO ERV Rent uplift pa Rent pa £m £m £m Contracted rental income, net of ground rents 160.1 Contractual rental uplifts White Collar Factory EC1 10.5 Angel Building EC1 8.0 The White Chapel Building E1 (Phase 1) 4.2 40 Chancery Lane WC2 2.81 Other 18.7 44.2 Pre-let ref
Slide 70: Appendix 16 - Evolution of Portfolio ERV
APPENDIX 16 - EVOLUTION OF PORTFOLIO ERV £m 300 Rent reviews and lease renewals Under refurbishment/development Available to occupy 250 Contractual rental uplifts (including pre-lets) Contractual rent 200 150 100 50 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Derwent London plc Annual Result
Slide 71: Appendix 17 - Timing of the Reversion
APPENDIX 17 - TIMING OF THE REVERSION ■■ £68.4m of the reversion locked in: ■■ £14.3m of the reversion from reviews and expiries: ■■ Contractual rental uplifts £44.2m ■■ 63% due over the next two years ■■ Pre-let refurbishments £2.4m ■■ Pre-let developments £21.8m REVIEWS AND EXPIRIES £m 10 Expiries
Slide 72: Appendix 18 - Available Space and Projects
APPENDIX 18 - AVAILABLE SPACE AND PROJECTS Vacant Pre-let Total Gross Net Pre-let Total area area area vacant Ground vacant rent net ‘000 ‘000 ‘000 ERV rent ERV ERV ERV sq ft sq ft sq ft £m pa £m pa £m pa £m pa £m pa Comment Available to occupy (EPRA) White Collar Factory EC1 20 - 20 0.6 - 0.6 - 0.6
Slide 73: Appendix 19 - Portfolio Summary
APPENDIX 19 - PORTFOLIO SUMMARY Floor area: 1.12m sq ft Rental income: £31.9m Income: 20% WAULT: 6.5 yrs Rent2: £34.64 Future ERV: £40.25 a ppraisal Potential projects 20% Floor area: 0.22m sq ft Floor area: 1.65m sq ft Rental income: £8.4m Rental income: £53.0m Income: 5% Income: 33% WAULT: 2.6 yrs
Slide 74: Appendix 20 - Rent and Tenant Banding
APPENDIX 20 - RENT AND TENANT BANDING CENTRAL LONDON ‘TOPPED-UP’ PROFILE OF TENANTS’ OFFICE RENT BANDING1 BUSINESS SECTOR2 Other £0-£30 ps f 9% 13% Financial £60+ ps f 4% Media, TV, marketing 28% Government and and advertising public admin 31% 5% £30-£40 ps f 11% Retail & leisure 11% £40-£50 ps f Re
Slide 75: Appendix 21 - Central London Office Rental Values
APPENDIX 21 - CENTRAL LONDON OFFICE RENTAL VALUES 87% of portfolio income from central London offices ■■ Average ‘topped-up’ office rent £49.74 psf CENTRAL LONDON OFFICE RENT PROFILE £ psf 20171 20161 60 Average office rent ‘Topped-up’ rents % % Average ‘topped-up’ office rent 55 <£30 psf 13 6 Avera
Slide 76: Appendix 22 - Lease Expiries, Breaks and Vacancy Rates
APPENDIX 22 - LEASE EXPIRIES, BREAKS AND VACANCY RATES ■■ £8.5m of income subject to breaks/expiries in 2017: ■■ EPRA vacancy rate of 1.3%2 at the year end – down from 2.6% at the start of 2017: ■■ £2.1m taken into projects ■■ Group’s 10-year average of 2.6% ■■ 92% of remainder retained or re-let LE
Slide 77: 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 2018 2019 2020 2021 2022 Total Expiries 3 2 1 6 2 8 11 4 31 Rolling breaks 1 - - 1 - 2 2 - 5 Single breaks 1 1 - 2 5 5 9 4 25 5 3 1 9 7 15 22 8 61 PROFILE OF
Slide 78: Appendix 24 - Central London Office Demand
APPENDIX 24 - CENTRAL LONDON OFFICE DEMAND Market statistics OFFICE TAKE-UP ■■ Central London annual take-up of 13.2m sq ft: Take-up (million sq ft) 20 Central London ■■ 4% above the long-term average and 7% higher than 2016 18 16 ■■ 30% Business Services, 23% Creative Industries, 14 Average 19% Ban
Slide 79: Appendix 25 - Central London Office Supply
APPENDIX 25 - CENTRAL LONDON OFFICE SUPPLY Market statistics OFFICE DEVELOPMENT PIPELINE ■■ Central London vacancy rate ended the year at 4.7%: Floor area (million sq ft) Vacancy rate (%) 12 12 Central London Completed Completed average ■■ Increased from 4.1% a year earlier Under construction Vacanc
Slide 80: Appendix 26 - Central London Office Vacancy
APPENDIX 26 - CENTRAL LONDON OFFICE VACANCY Vacancy rate (%) 16 West End City 14 Central London 12 West End average City average 10 8 6 4 2 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 Source: CBRE Derwent London plc Annual Results 2017 78
Slide 81: Appendix 27 - Central London Office Rental Growth
APPENDIX 27 - CENTRAL LONDON OFFICE RENTAL GROWTH Rental growth (% pa) 40 West End City 30 Central London 20 10 0 (10) (20) (30) (40) 2001 2003 2005 2007 2009 2011 2013 2015 2017 Source: CBRE Derwent London plc Annual Results 2017 79
Slide 82: Appendix 28 - Central London Office Investment Market
APPENDIX 28 - CENTRAL LONDON OFFICE INVESTMENT MARKET Market statistics CENTRAL LONDON OFFICE INVESTMENT ■■ £16.4bn of central London transactions in 2017: Value of investment transactions (£bn) 20 ■■ 38% above average and 25% above 2016 18 16 ■■ Overseas investors accounted for 81% 14 12 Average ■■
Slide 83: Appendix 29 - Letting Activity 2017
APPENDIX 29 - LETTING ACTIVITY 2017 ■■ A record year for lettings: Rental income (£m pa) LETTING ACTIVITY ■■ £41.5m pa (gross) or £41.3m (net) of income 45 2015 2016 2017 ■■ 685,700 sq ft 40 ■■ 77 transactions 35 The Boston Consulting Group 30 ■■ Pre-lets accounted for 68% of activity: ■■ Arup at 80
Slide 84: Appendix 30 - 80 Charlotte Street W1
APPENDIX 30 - 80 CHARLOTTE STREET W1 ARUP THE BOSTON CONSULTING GROUP ■■ 153,400 sq ft pre-let in 2017 ■■ 123,500 sq ft pre-let in Q3 2017 (133,600 sq ft in Q1, 19,800 sq ft in Q3) ■■ £10.6m pa ■■ £11.2m pa with annual increases of 2.25% ■■ Average rent of £85.50 psf for the first 15 years ■■ 15-yea
Slide 85: Appendix 31 - Asset Management: Expedia - Angel Building EC1
APPENDIX 31 - ASSET MANAGEMENT: EXPEDIA - ANGEL BUILDING EC1 Regear and assignment: ■■ Expedia’s occupation increases from 93,400 sq ft to 231,400 sq ft in 2019 and potentially 248,500 sq ft from 2021 ■■ Lease expiry moved from 2021 to 2030, no breaks ■■ Incentives equivalent to 21 months rent ■■ To
Slide 86: Appendix 32 - Asset Management: Mother - Tea Building E1
APPENDIX 32 - ASSET MANAGEMENT: MOTHER - TEA BUILDING E1 ■■ Renewed lease on 49,650 sq ft of office space ■■ Lease was due to expire in 2018 ■■ Lease extended to 2028 ■■ Incentives equivalent to 8 months rent-free ■■ Current average rent of £1.66m pa or £33.40 psf, rising to £1.93m pa/£38.80 psf in
Slide 87: Appendix 33 - White Collar Factory EC1: 2017 Completion
APPENDIX 33 - WHITE COLLAR FACTORY EC1: 2017 COMPLETION ■■ 293,000 sq ft scheme completed in H1 2017 ■■ 94% let with remainder exchanged or under offer ■■ Rental income of let space £17.1m pa Derwent London plc Annual Results 2017 85
Slide 88: Appendix 34 - The Copyright Building W1: 2017 Completion
APPENDIX 34 - THE COPYRIGHT BUILDING W1: 2017 COMPLETION ■■ 108,000 sq ft scheme completed in H2 2017 ■■ Fully let at £7.4m pa (net) ■■ 88,000 sq ft of offices pre-let to Capita in Q1 2016 ■■ 20,000 sq ft of retail (three units) let in 2017 to a restaurant, hairdresser and fitness operator ■■ Sold f
Slide 89: Appendix 35 - Planning Consents: Monmouth House EC1
APPENDIX 35 - PLANNING CONSENTS: MONMOUTH HOUSE EC1 ■■ 125,000 sq ft office-led development ■■ Adjacent White Collar Factory EC1 ■■ Replaces two tired properties totalling 69,000 sq ft: ■■ Both fully-let on a short-term basis ■■ Scheme could commence in 2019 Derwent London plc Annual Results 2017 87
Slide 90: Appendix 36 - Planning Consents: 19-35 Baker Street W1
APPENDIX 36 - PLANNING CONSENTS: 19-35 BAKER STREET W1 ■■ Resolution to grant consent in Nov 2017 for a 293,000 sq ft scheme: ■■ 206,000 sq ft offices with roof terraces ■■ 52,000 sq ft residential ■■ 35,000 sq ft retail ■■ Open courtyard with through-route to Gloucester Place ■■ Joint Venture with
Slide 91: Appendix 37 - Planning Consents: Holden House W1
APPENDIX 37 - PLANNING CONSENTS: HOLDEN HOUSE W1 54 - 68 Oxford Street, London 10th February 2017 ■■ Resolution to grant consent in Nov 2017 for a 150,000 sq ft scheme: ■■ Potential for a single Oxford Street flagship store ■■ Or a retail-led scheme with offices ■■ Part retained façade Derwent Londo
Slide 92: Appendix 38 - Current Projects: Profit on Cost
APPENDIX 38 - CURRENT PROJECTS: PROFIT ON COST Brunel Building W2 80 Charlotte Street W1 e e sit sit On On Summary £m End value 939 Less: Total cost1 744 Project surplus 195 Less: Booked to Dec 17 54 Surplus to come 141 Profit on total cost 26% Profit to come on total cost 19% Yield on cost5 6.0% Co
Slide 93: Appendix 39 - Project Summary: Current
APPENDIX 39 - PROJECT SUMMARY: CURRENT Current Pre Total net scheme Proposed 2018 2019 2020+ capex to Current income area area capex capex capex complete Delivery office Property £m pa ‘000 sq ft ‘000 sq ft £m £m £m £m date c.ERV psf On-site developments Brunel Building W2 (0.1) 78 243 56 13 1 70 H1
Slide 94: Appendix 40 - Project Summary: Future
APPENDIX 40 - PROJECT SUMMARY: FUTURE Current Pre- net scheme Proposed Earliest income area area possession Property £m pa ‘000 sq ft ‘000 sq ft year Comment Consented Monmouth House EC11 0.3 69 125 2019 Adjacent White Collar Factory 19-35 Baker Street W12 5.8 146 293 2020 Joint venture - The Portma
Slide 95: Appendix 41 - Project Pipeline
APPENDIX 41 - PROJECT PIPELINE On-site On-site Consented Under Potential developments + refurbishments + appraisal = 0.62m sq ft 0.09m sq ft + projects 0.72m sq ft 0.31m sq ft pipeline 1.74m sq ft Soho Place W1 Monmouth House EC13 te d ed en nt ns nse 0.71m sq ft 1.03m sq ft Co Co 1 2 +81% +127% Bru
Slide 96: Appendix 42 - Portfolio Map
APPENDIX 42 - PORTFOLIO MAP Highbury & Islington Chalk Farm Caledonian Road Camden Road Essex Road Camden Town Primrose Hill Islington Carnegie St TEC H Wharfdale Rd Angel Kings Cross BEL T Albany Regent’s Park S t Pancras Hoxton St International Th Maida Vale am es lin k Euston Old Street Up pe rW
Slide 97: Appendix 43 - Executive Committee and Senior Management
APPENDIX 43 - EXECUTIVE COMMITTEE AND SENIOR MANAGEMENT John Burns* Chief Executive Damian Wisniewski* Finance Director Simon Silver* Property Director Nigel George* Property Director Paul Williams* Property Director David Silverman* Property Director David Lawler* Company Secretary Richard Baldwin*
Slide 98: Disclaimer
DISCLAIMER This presentation has been prepared by Derwent London plc (the may become apparent. Past performance is not indicative of future “Company”). No representation or warranty (express or implied) of results and forward-looking statements are not guarantees of future any nature is given nor is