Derwent London Plc · LSE:DLN
Derwent London — FY2022 Earnings Presentation
117 slides from Derwent London's earnings presentation, Feb 28, 2023
Slide 1: Annual Results 2022
LONDON DERWENT Annual Results 2022 FAA ALAM LALATASIAL AA f JAA ARIA
Slide 2: Contents
CONTENTS Presenters Contents Paul Williams Introduction and overview 01 Damian Wisniewski Results and financial review 07 Nigel George Valuation and investment 18 Emily Prideaux Sustainability 25 Leasing and asset management 29 Delivering the right product 35 Developments 41 Summary 51 Appendices 53
Slide 3: Introduction and Overview
INTRODUCTION AND OVERVIEW PAUL WILLIAMS 1
Slide 4: Introduction and Outlook
INTRODUCTION AND OUTLOOK Derwent London operational activity 2023 LETTINGS (£14.7m) Pre-let Let • 2022: £9.8m lettings, average 13.0% above ERV £29.6m asset mgmt, average 5.3% above ERV • 2023: £14.7m lettings to date, average 7.7% above ERV • 106,100 sq ft • 31,100 sq ft • £11.0m pa • £2.3m pa Flig
Slide 5: Operational Overview
OPERATIONAL OVERVIEW Strategic progress in 2022 • Investment in acquisitions (£133.0m) and capex (£121.8m) • Commitment to development pipeline • On site at two major projects • £206.4m1 non-core disposals (£25.6m above book value) Valuations – quality buildings outperformed • More resilient valuati
Slide 6: Market Themes
MARKET THEMES THEMES DERWENT’S APPROACH Market polarisation Delivering low carbon, design-led product Occupiers more selective on location and Disciplined recycling quality Shortage of prime supply Retain better buildings for longer High vacancy – secondary space sticking Current and future pipeline
Slide 7: Investment Market
INVESTMENT MARKET LONDON MARKET 2022 • £11.2bn liquidity, focused on H1 • Market on pause in Q4 • West End prime yields +25-50bp to 3.75% • City prime yields +75-100bp to 4.5% • Derwent London yield +38bp to 4.88% 2023 • Slow start to year but starting to pick up • Several deals under offer • £33bn
Slide 8: Investing in the Portfolio
INVESTING IN THE PORTFOLIO New build pipeline – Total c.1.8m sq ft • On-site (435,000 sq ft) • Two schemes – 25 Baker Street W1 & Network W1 • Medium-term (c.390,000 sq ft) • Two schemes – 50 Baker Street W1 & Holden House W1 • From late 2024 • Longer-term 25 Baker Street W1 • Old Street Quarter EC1
Slide 9: Results and Financial Review
RESULTS AND FINANCIAL REVIEW DAMIAN WISNIEWSKI 7
Slide 10: Key Financial Figures
KEY FINANCIAL FIGURES EPRA NTA per share1, 2 EPRA earnings per share2 Cash and undrawn facilities4 3,632p 106.6p £577m Dec 2021: 3,959p 2021: 108.5p3 Dec 2021: £608m -8.3% -1.8% Gross rental income Net rental income Interest cover ratio (ICR)5 £207.0m £188.5m 423% 2021: £195.3m3 2021: £177.9m3 Dec 2
Slide 11: Financial Highlights
FINANCIAL HIGHLIGHTS • EPRA NTA per share down 8.3% to 3,632p mainly due to upward yield shift in H2 • Net debt was £1.26bn at Dec 2022 after disposals totalling £209.7m1 • Gearing levels remain low with EPRA LTV of 23.9% (2021: 22.3%) Accounting policy changes2 • Forgiveness of lease payments • Any
Slide 12: EPRA NTA Movement
EPRA NTA MOVEMENT Pence EPRA NTA PER SHARE 4,250 23 107 (78) 4,000 3,959 Investment property disposals £25.6m (23p) Trading property disposals (£0.1m) 0p Total EPRA profit on disposals £25.5m 3,750 (373) -8.3% 2 (8) 3,632 3,500 Investment property (£422.1m) (376p) Trading properties £2.7m 2p Owner-o
Slide 13: EPRA Earnings
EPRA EARNINGS1 £m EPRA EARNINGS 250 Slide Slide 12 13 5.6 207.0 (19.0) 200 Slide (36.4) 13 Slide 150 13 (39.4) 1.0 1.6 (0.7) 119.7 100 106.6p per share 50 0 Gross Premiums Other Admin Net Waivers Tax JVs/other EPRA rental & other property expenses finance & charge earnings income income expenditure
Slide 14: Gross Rental Income
GROSS RENTAL INCOME £m MOVEMENT IN GROSS RENTAL INCOME 250 LIKE-FOR-LIKE2 7.4 (11.1) 1.7 13.7 207.0 200 195.31 Gross rental income 2022: 1.1% 250 Euston Road NW1 3.9m Soho Place W1 £10.8m 230 Blackfriars Road SE1 £1.8m The Featherstone Building EC1 £1.0m Angel Square EC1 (£2.3m) 6-8 Greencoat Place
Slide 15: Property Expenditure and Finance Costs
PROPERTY EXPENDITURE AND FINANCE COSTS Other property expenditure (£19.0m) • Increased by 32.9% over 2021 comparatives • Irrecoverable service charges of £5.1m £1.7m • Marketing costs of £1.8m £1.1m • Repairs net of dilapidations of £0.3m £1.0m • Utility costs increased substantially in Q4 2022, eg
Slide 16: 2022 Project Expenditure
2022 PROJECT EXPENDITURE Investment Trading Trading Other property property stock Investments receivables Total Soho Place W1 17.6 - - - - 17.6 The Featherstone Building EC1 6.7 - - - - 6.7 Francis House SW1 8.4 - - - - 8.4 Completed major projects 32.7 - - - - 32.7 25 Baker Street W1 38.9 8.3 1.8 -
Slide 17: Estimated Future Expenditure
ESTIMATED FUTURE EXPENDITURE FUTURE SPEND EPC upgrades • Cost to upgrade to EPC ‘B’ by 2030 2023 6 104 35 7 45 7 207 • £97m estimated at Dec 2021 • £107m revised at Dec 2022 2024 82 52 3 31 13 181 • Now £99m after sale of 19 Charterhouse Street EC1 in Jan 2023 2025+ 31 20 24 4 79 • £58.4m specifical
Slide 18: Proforma Impact of Major Projects and Disposal
PROFORMA IMPACT OF MAJOR PROJECTS AND DISPOSAL • Assumes no further lettings, acquisitions or disposals other than those already contracted • Shows impact of estimated remaining capex on major projects, both completed and on-site • Excludes design fees and smaller refurbishment projects PROFORMA IMP
Slide 19: Strong Balance Sheet
STRONG BALANCE SHEET MATURITY PROFILE OF DEBT FACILITIES Unutilised facilities Weighted average £m and cash1 maturity of borrowings 0 100 200 300 400 500 600 700 800 £577m 6.2 years 2023 2024 83 2021: £608m 2021: 7.2 years 2025 175 2026 230 450 2027 100 Average spot 2028 30 EPRA loan-to-value intere
Slide 20: Valuation and Investment
VALUATION AND INVESTMENT NIGEL GEORGE 18
Slide 21: Valuation
VALUATION Valuer appointment Four on-site developments in 2022 • Transitioned from CBRE to Knight Frank • Valued at £0.8bn, uplift of 4.8% • Knight Frank sole valuer in H2 and going forward • Completed Soho Place W1 and The Featherstone Building EC1 Investment portfolio valued at £5.4bn • 25 Baker S
Slide 22: Valuation Themes
VALUATION THEMES • Developments delivering as flight to quality continues VALUATION MOVEMENT BY VALUE Valuation movement in 2022 (%) 6 • Rental values increasing 4 4.8 2 • Investment yields – outward movement in H2 0 (2) (3.5) • Resilience from ‘best in class’ assets (4) (7.4) • Our quality product
Slide 23: Rental Value and Yields
RENTAL VALUE AND YIELDS RENTAL VALUE GROWTH Rental growth (%) Rental values 15 • Rental values increased 1.3% in 2022 10 • Offices: 93% of portfolio1 +1.4% • Retail: 7% of portfolio1 +0.6% 5 • Average office passing rent low at £48.37 psf 2 0 (Dec 2021: £44.18 psf) Derwent London H1 growth • Average
Slide 24: Build-up of Portfolio ERV
BUILD-UP OF PORTFOLIO ERV • Portfolio reversion of £100.4m1 BUILD-UP OF ERV2 £m • £46.4m or 46% contracted, including 350 8.2 • 80 Charlotte Street W1 £12.2m 300 2.7 17.3 (4.5)3 304.6 • Soho Place W1 £4.0m 46.4 30.3 4.53 0.0 • £54.0m of further reversion 250 41.9 • £30.3m from two on-site schemes 20
Slide 25: Acquisition Activity in 2022
ACQUISITION ACTIVITY IN 2022 Acquisitions in 2022 Total Net rental Net rental Area after costs Net yield income income Property Date sq ft £m % £m pa £ psf 230 Blackfriars Road SE1 Q1 60,400 58.3 3.5 2.1 41.00 Soho Place W1 headlease Q1 - 71.9 - - - Other - - 2.8 - - - Total acquisitions 60,400 133.
Slide 26: Disposals
DISPOSALS Disposals1 in 2022 Net Net rental Area proceeds Net yield income Property Date sq ft £m % £m pa New River Yard EC1 Q2 70,700 65.92 4.5 3.3 2 & 4 Soho Place W1 Q3 18,4003 39.8 - - Bush House WC2 Q3 103,700 84.0 - - Intermediate leasehold interest New River Yard EC1 2 & 4 Soho Place W1 Q3 -
Slide 27: Sustainability
SUSTAINABILITY NIGEL GEORGE 25
Slide 28: Self-Generation in Scotland
SELF-GENERATION IN SCOTLAND • 5,500 acres, with the opportunity to contribute to our pathway EAST DUNBARTONSHIRE • Solar park on c.100 acres, cost c.£20-25m Milngavie A822 • Resolution to grant consent received Kirkintilloch • 18.4MW comprising +60k panels A807 • Potential to generate c.40% of B757
Slide 29: Our Journey to Net Zero
OUR JOURNEY TO NET ZERO ENERGY USAGE2 kWh (millions) Energy 70 Electricity – tenant controlled area Electricity – landlord controlled area Gas – total building • Energy consumption down 3% in 2022 60 -26% • Gas consumption down 16% 50 -3% • Landlord electricity down 1% 40 • Tenant electricity up 5%
Slide 30: Energy Intensity and Embodied Carbon
ENERGY INTENSITY AND EMBODIED CARBON Energy intensity Embodied carbon • 4% annual reduction to 123 kWh/sqm • 2022 completions delivered in line with 2025 target • 12% ahead of target and in line with 2025 pathway • On-site schemes designed as low carbon buildings target • Focus areas • Focus areas •
Slide 31: Leasing and Asset Management
LEASING AND ASSET MANAGEMENT EMILY PRIDEAUX 29
Slide 32: Occupational Market Overview
OCCUPATIONAL MARKET OVERVIEW Take-up CENTRAL LONDON OFFICE TAKE-UP Take-up (million sq ft) • Central London office take-up of 12.3m sq ft 20 West End City Midtown, Southbank & Docklands 18 • In-line with LTA and 29% above 2021 16 • West End: 4.9m sq ft (20% above LTA) 14 • City: 5.1m sq ft (3% above
Slide 33: Office Development Pipeline
OFFICE DEVELOPMENT PIPELINE Central London COMMITTED DEVELOPMENT PIPELINE • 12.7m sq ft due 2023 to 2025 (36% pre-let or under offer) Floor area (million sq ft) 12 Under construction available Central London • Demand strong for ‘best in class’ space Under construction let/under offer Completed 10 •
Slide 34: Derwent London Leasing Activity
DERWENT LONDON LEASING ACTIVITY Derwent London letting activity in 2022 Rental income (£m pa) LETTING ACTIVITY • 163,000 sq ft let at £9.8m pa 45 Pre-let Non pre-let 40 • 13.0% above Dec 2021 ERV 35 • 46 transactions, 72% weighted to H1 30 • 5.7 year WAULT (to break) 25 Annual average 20 Strong leas
Slide 35: Derwent London Asset Management Activity
DERWENT LONDON ASSET MANAGEMENT ACTIVITY ASSET MANAGEMENT ACTIVITY 2022 VACANCY EVOLUTION Previous New New rent vs EPRA vacancy rate (%) Vacant ERV (£m) 10 20 Area rent rent Uplift Dec 2021 ERV EPRA vacancy rate Vacant ERV ‘000 sq ft £m pa £m pa % % 9 18 Rent reviews 215.7 12.6 13.8 10.1 6.2 8 16 Le
Slide 36: Occupier Survey
OCCUPIER SURVEY SURVEY RESULTS • Hybrid working models largely established Expected change in real estate footprint over the next 5 years (%) 100 • The office retains its centrality • Quality includes amenity, connectivity and sustainability 80 80 69 • Sustained upward trend in occupiers expecting 6
Slide 37: Delivering the Right Product
DELIVERING THE RIGHT PRODUCT EMILY PRIDEAUX 35
Slide 38: Derwent's Differentiators
DERWENT’S DIFFERENTIATORS • Architecturally-led design INNOVATIVE • High quality materials ARCHITECTURAL • Volume & light • Strong environmental DESIGN performance • Intelligent systems CUSTOMER-FOCUSED • Experience • Service SOLUTIONS • Amenity • Vibrant CONNECTIVITY Bond Street Liverpool Street Wh
Slide 39: Innovative Architectural Design
INNOVATIVE ARCHITECTURAL DESIGN BUILDING THE RIGHT PRODUCT Forward thinking, high-quality designs • Delivering unique workspaces • Innovative architecture • Superior materials • Volume & light • Generous amenity Derwent London plc - Annual Results 2022 37
Slide 40: Customer-Focused Solutions
CUSTOMER-FOCUSED SOLUTIONS DL/MEMBERS DL/EXPERIENCE DL/LOUNGES DL/APP Dedicated member teams Shared portfolio amenity Member benefits Brunel Building launch – rooftop DL/78.Fitzrovia DL/78.Fitzrovia – event DL/28.Old Street Derwent London plc - Annual Results 2022 38
Slide 41: Furnished + Flexible
‘FURNISHED + FLEXIBLE’ • 27 units totalling 63,600 sq ft • Pipeline 34,100 sq ft • Sub-10,000 sq ft units appraised on this basis • Significant rental premiums achieved Derwent London plc - Annual Results 2022 39
Slide 42: Delivering Product to Meet Varied Demand
DELIVERING PRODUCT TO MEET VARIED DEMAND Delivery: Delivery: fully fully fitted fitted Lease term: 10 years (break at 5) Lease term: 5 years (break at 3) Rental uplift: £85 psf (from £54) Rental uplift: £81 psf (from £56) EPC upgrade: B (from C) EPC upgrade: B (from D & E) Delivery: Delivery: shell
Slide 43: Developments
DEVELOPMENTS PAUL WILLIAMS 41
Slide 44: 2022 Completions
2022 COMPLETIONS Profit Profit MAJOR PROJECTS on cost1 25% on cost1 30% SOHO PLACE W1 THE FEATHERSTONE BUILDING EC1 285,000 sq ft 127,300 sq ft OFFICES 100% PRE-LET 59% LET (INC 2023 ACTIVITY) Profit RETROFITS on cost1 31% £85+ psf rent FRANCIS HOUSE SW12 43 WHITFIELD STREET W1 38,200 sq ft 11,000 s
Slide 45: 25 Baker Street W1
25 BAKER STREET W1 • Completion H1 2025 • 298,000 sq ft mixed-use scheme • Scheme ERV £18.4m (net) • Office ERV £90 psf • Capex to complete £217m • 97% office capex fixed (80% of total) • 56% of commercial element pre-let/sold Derwent London plc - Annual Results 2022 • Appendices 50 to 51 43
Slide 46: 44
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Slide 47: Network W1
NETWORK W1 • Completion H2 2025 • 137,000 sq ft • Scheme ERV £11.9m • Office ERV £87.50 psf • Capex to complete £107m • Demolition completed Derwent London plc - Annual Results 2022 • Appendices 50 to 51 45
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Slide 49: Pipeline Update
PIPELINE UPDATE MEDIUM-TERM (c.390,000 sq ft) LONGER-TERM (c.950,000 sq ft) 50 BAKER STREET W1 HOLDEN HOUSE W1 OLD STREET QUARTER EC1 230 BLACKFRIARS ROAD SE1 START DATE 2024+ START DATE 2025+ START DATE 2027+ START DATE 2030+ c.240,000 sq ft c.150,000 sq ft 750,000+ sq ft 200,000+ sq ft Existing: 1
Slide 50: 50 Baker Street W1 JV (50%)
50 BAKER STREET W1 JV (50%) 7 — Roof Garden • Start date: 2024+ • Scheme: c.240,000 sq ft FINAL 9 2.12.22 22-124 50 Baker Street CGI Derwent London plc - Annual Results 2022 • Appendix 52 48
Slide 51: Old Street Quarter EC1
OLD STREET QUARTER EC1 We stla Plac nd e • Start date: 2027+ Brita • Potential scheme: 750,000+ sq ft nnia Walk City Roa d reet Lever St Cayton Street East Road treet ess S Peerl t tree ay S Bath Galw et Stre Stree win Bald t treet ess S Peerl et Stre nor Rad Derwent London plc - Annual Results 2022
Slide 52: Further Portfolio Opportunities: Refurbishments
FURTHER PORTFOLIO OPPORTUNITIES: REFURBISHMENTS 20 FARRINGDON ROAD EC1 166,300 sq ft Avg passing rent: £53.55 psf 1 Potential ERV: £80.00+ psf 1 OLIVER’S YARD EC1 186,000 sq ft Avg passing rent: £56.35 psf 1 Potential ERV: £60.00+ psf 1-2 STEPHEN STREET W1 266,200 sq ft Avg passing rent: £63.85 psf
Slide 53: Summary
SUMMARY PAUL WILLIAMS 51
Slide 54: Summary
SUMMARY The market • London is a resilient global city • Importance of core locations • Deep and broad occupier base • Strong pre-let activity Derwent London • Delivering best in class buildings • Retain better buildings for longer • Well positioned in flight to quality • Very strong balance sheet D
Slide 55: Appendices
APPENDICES 53
Slide 56: Appendices
APPENDICES Financials 55 Valuation 69 Portfolio income profile 76 Sustainability 89 London office market 94 Developments & refurbishments 106 54
Slide 57: Financials
FINANCIALS Appendices 01. Headline numbers 56 02. Group balance sheet 57 03. EPRA net asset value metrics 58 04. Group income statement 59 05. IFRS (loss)/profit and EPRA earnings 60 06. Explanation of EPRA adjustments 61 07. Group cash flow 62 08. Like-for-like income reconciliation 63 09. Accounti
Slide 58: Appendix 1 - Headline Numbers
APPENDIX 1 - HEADLINE NUMBERS Dec 2022 Dec 2021 % change Net asset value (NAV) £4,075.5m £4,441.8m (8.2) EPRA net tangible assets per share1,2 3,632p 3,959p (8.3) EPRA net disposal value per share 1,2 3,768p 3,884p (3.0) EPRA total return -6.3% 5.8% n/a Gross rental income £207.0m £195.3m4 6.0 Net r
Slide 59: Appendix 2 - Group Balance Sheet
APPENDIX 2 - GROUP BALANCE SHEET Dec 2022 Dec 2021 £m £m Investment property 5,002.0 5,361.21 Owner-occupied property 50.0 49.3 Investment in joint ventures 43.9 51.1 Other non-current assets 198.6 166.1 5,294.5 5,627.7 Non-current assets held for sale 54.2 102.8 Other current assets and liabilities
Slide 60: Appendix 3 - EPRA Net Asset Value Metrics
APPENDIX 3 - EPRA NET ASSET VALUE METRICS Dec 2022 Dec 2021 EPRA NTA1 EPRA NDV2 EPRA NRV3 EPRA NTA1 EPRA NDV2 EPRA NRV3 £m £m £m £m £m £m Net assets attributable to equity shareholders 4,075.5 4,075.5 4,075.5 4,441.8 4,441.8 4,441.8 Revaluation of trading property 4.8 4.8 4.8 1.9 1.9 1.9 Deferred ta
Slide 61: Appendix 4 - Group Income Statement
APPENDIX 4 - GROUP INCOME STATEMENT Year ended Year ended Dec 2022 Dec 2021 £m £m Gross property income 208.4 200.91 Profit on disposal of trading properties 0.2 0.7 Write-down of trading property (0.2) (1.4) Other income 4.2 3.5 Waivers and impairment 1.0 (2.2)1 Other property outgoings (19.0) (14.
Slide 62: Appendix 5 - IFRS (Loss)/Profit and EPRA Earnings
APPENDIX 5 - IFRS (LOSS)/PROFIT AND EPRA EARNINGS Year ended Year ended Dec 2022 Dec 2021 £m £m IFRS (loss)/profit for the year attributable to shareholders (280.5) 252.3 Revaluation deficit/(surplus) 422.1 (131.1)1 Joint venture revaluation deficit 9.3 14.2 Profit on disposal (25.6) (10.4) Profit o
Slide 63: Appendix 6 - Explanation of EPRA Adjustments
APPENDIX 6 - EXPLANATION OF EPRA ADJUSTMENTS Adjustments 2022 2021 2022 EPRA EPRA A B C IFRS basis basis £m £m £m £m £m £m Net property and other income 194.6 (0.2) 0.2 - 194.6 187.91 Administrative expenses (36.4) - - - (36.4) (37.1) Revaluation deficit (422.1) - 422.1 - - - Profit on disposal 25.6
Slide 64: Appendix 7 - Group Cash Flow
APPENDIX 7 - GROUP CASH FLOW Year ended Year ended Dec 2022 Dec 2021 £m £m Property income 194.4 192.7 Property expenses (22.5) (14.3) Tenant deposit movement 9.7 (1.2)1 Service charge balance movement 3.0 0.41 Other income 4.2 4.1 Administrative expenses (33.1) (34.7) Finance costs (36.8) (25.0) Tr
Slide 65: Appendix 8 - Like-for-Like Income Reconciliation
APPENDIX 8 - LIKE-FOR-LIKE INCOME RECONCILIATION Like-for-like Development Acquisitions portfolio property & disposals Total £m £m £m £m 2022 Gross rental income 181.9 15.0 10.1 207.0 Other property expenditure (13.8) (5.2) (0.5) (19.5) Write-off/impairment of receivables 0.2 0.7 0.1 1.0 Net rental
Slide 66: Appendix 9 - Accounting Policy Changes
APPENDIX 9 - ACCOUNTING POLICY CHANGES • Impact of 2021 restatements as a result of the change in accounting policy 31 Dec 31 Dec Restatement1 Restatement2 Restated £m £m £m £m Group balance sheet (extract) Investment property 5,359.7 1.3 - 5,361.2 Trade and other receivables 61.7 (1.3) (19.4) 41.0
Slide 67: Appendix 10 - Green Debt Facilities and Expenditure
APPENDIX 10 - GREEN DEBT FACILITIES AND EXPENDITURE • £650m of green debt facilities GREEN BORROWINGS AND QUALIFYING EXPENDITURE • £300m green tranche within £450m revolving £m credit facility 800 Green RCF Available green headroom Green expenditure Green bond • £350m green bond Drawn green faciliti
Slide 68: Appendix 11 - Debt Summary
APPENDIX 11 - DEBT SUMMARY MATURITY PROFILE OF FIXED RATES Dec 2022 Dec 2021 £m 0 50 100 150 200 250 300 350 400 450 500 Bank facilities drawn - £10m 2023 Fixed rates borrowings £1,238m £1,238m 2024 83 Drawn facilities £1,238m £1,248m 2025 175 2026 230 Unutilised facilities and cash1 £577m £608m 202
Slide 69: Appendix 12 - Debt Facilities
APPENDIX 12 - DEBT FACILITIES Drawn Undrawn Total Maturity £m £m £m 1.5% unsecured convertible bonds 175.0 - 175.0 June 2025 6.5% secured bonds 175.0 - 175.0 March 2026 1.875% unsecured green bonds 350.0 - 350.0 November 2031 2.68% unsecured private placement notes 55.0 - 55.0 January 2026 3.46% uns
Slide 70: Appendix 13 - Net Debt
APPENDIX 13 - NET DEBT Dec 2022 Dec 2021 £m £m Borrowings – current 19.7 12.3 Borrowings – non-current 1,229.4 1,237.1 Acquired fair value of secured bonds less amortisation (6.5) (8.0) Unamortised discount on unsecured green bonds 1.7 1.8 Equity component of convertible bonds 7.7 7.7 Unwinding of d
Slide 71: Valuation
VALUATION Appendices 14. Property return 70 15. Valuation performance by village 71 16. Rental value growth and average rents 72 17. Valuation yields 73 18. Context to yield movement 74 19. Portfolio statistics by village 75 69
Slide 72: Appendix 14 - Property Return
APPENDIX 14 - PROPERTY RETURN • Outperformance due to: TOTAL PROPERTY RETURN Total return (%) • Resilience of high quality buildings 18 16.5 15 • Surplus from development completions 12 • Soho Place W1 and The Featherstone Building EC1 9 • Asset locations – 70% of portfolio in the West End 6 6.0 6.0
Slide 73: Appendix 15 - Valuation Performance by Village
APPENDIX 15 - VALUATION PERFORMANCE BY VILLAGE Valuation Valuation Weighting movement Dec 2022 Dec 2022 20221 £m % % West End Central Fitzrovia2 1,772.9 33 (8.2) Victoria 492.0 9 (7.2) Soho/Covent Garden 396.0 8 10.7 Paddington 372.5 7 (5.5) Marylebone 225.3 4 3.4 Mayfair 105.0 2 (1.2) 3,363.7 63 (4
Slide 74: Appendix 16 - Rental Value Growth and Average Rents
APPENDIX 16 - RENTAL VALUE GROWTH AND AVERAGE RENTS RENTAL VALUE GROWTH1 2021 H1 2022 H2 2022 2022 % % % % West End (0.5) 0.5 0.7 1.2 City Borders 0.3 1.6 0.0 1.6 Central London (0.2) 0.9 0.5 1.4 Provincial 0.1 (0.3) 0.4 0.1 Underlying (0.2) 0.8 0.5 1.3 AVERAGE RENTS - CENTRAL LONDON OFFICES ‘Topped
Slide 75: Appendix 17 - Valuation Yields
APPENDIX 17 - 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 3.5 4.5 6 City Borders 4.1 4.6 Central London 3.7 4.6 5 Provincial 8.0 8.5 EPRA portfolio 3.7 4.6 4 3 Pre-EP
Slide 76: Appendix 18 - Context to Yield Movement
APPENDIX 18 - CONTEXT TO YIELD MOVEMENT • As at 31 December 2022 VALUATION YIELDS1 • Derwent London true equivalent yield of 4.88% % 12 (+38bp in 2022) Derwent London true equivalent yield 10-year Gilt BBB yield • BBB yield 6.17% (+379bp in 2022) 10 • UK 10-year Gilt yield of 3.67% (+270bp in 2022)
Slide 77: Appendix 19 - Portfolio Statistics by Village
APPENDIX 19 - PORTFOLIO STATISTICS BY VILLAGE Net Vacant Floor Vacant contracted Average space Estimated area1 floor area rental rental rental Lease Total rental Valuation Weighting ‘000 ‘000 income income value reversion2 reversion value £m % sq ft sq ft £m pa £ psf £m pa £m pa £m pa £m pa West End
Slide 78: Portfolio Income Profile
PORTFOLIO INCOME PROFILE Appendices 20. Evolution of portfolio ERV 77 21. Build-up of portfolio ERV 78 22. Available space and projects 79 23. Vacancy rate and lease expiry analysis 80 24. Lease expiry profile and lease length 81 25. Timing of the reversion 82 26. Portfolio summary 83 27. Major tena
Slide 79: Appendix 20 - Evolution of Portfolio ERV
APPENDIX 20 - 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 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 202
Slide 80: Appendix 21 - Build-up of Portfolio ERV
APPENDIX 21 - BUILD-UP OF PORTFOLIO ERV Rent uplift pa Rent pa £m £m £m Contracted rental income, net of ground rents 204.2 Contractual rental uplifts 80 Charlotte Street W1 12.2 Horseferry House SW1 5.2 Soho Place W1 4.0 Brunel Building W2 3.1 Francis House SW1 2.9 88 Rosebery Avenue EC1 2.4 Other
Slide 81: Appendix 22 - Available Space and Projects
APPENDIX 22 - AVAILABLE SPACE AND PROJECTS Vacant Pre-let/ Total Gross Net Pre-let area sold area area vacant Ground vacant net rent Total net ‘000 ‘000 ‘000 ERV rent ERV £m ERV ERV sq ft sq ft sq ft £m pa £m pa pa £m pa £m pa Comment Available to occupy The Featherstone Building EC1 86 - 86 5.9 - 5
Slide 82: Appendix 23 - Vacancy Rate and Lease Expiry Analysis
APPENDIX 23 - VACANCY RATE AND LEASE EXPIRY ANALYSIS Vacancy rate (%) VACANCY RATES • Derwent London EPRA vacancy rate1 of 6.4% at Dec 2022 10 Derwent London EPRA (by rental value) CBRE central London offices (by floorspace) • 6.5% in Jun 2022 and 1.6% in Dec 2021 9 CBRE West End offices (floorspace
Slide 83: 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 2023 2024 2025 2026 2027 Total Expiries 2 2 - 4 4 11 3 5 27 Rolling breaks 1 - - 1 1 - - - 2 Single breaks 1 4 - 5 10 5 1 2 23 Total 4 6 - 10 15 16 4 7 52 PRO
Slide 84: Appendix 25 - Timing of the Reversion
APPENDIX 25 - TIMING OF THE REVERSION CONTRACTED UPLIFTS AND PRE-LETS: £46.4M REVIEWS AND EXPIRIES: £8.2M £m £m 5 Expiries 18 0.5 Future contracted growth above current ERV Reviews Contracted uplifts Future contracted growth above current ERV 4 16 3 2.9 14 0.3 2 12 1.3 1 1.4 10 0.5 1.3 0.6 0.2 0.3 1
Slide 85: Appendix 26 - Portfolio Summary
APPENDIX 26 - PORTFOLIO SUMMARY Proforma Pipeline Core for Old Street 47% income Quarter EC1 53% acquisition5 Future appraisal Floor area: 1.46m sq ft 27% Rental income: £51.6m WAULT: 4.5 yrs Rent : 4 £47.57 ERV: £48.88 Core 57% 5.46m sq ft1 43% Floor area: 0.36m sq ft Potential projects Floor area:
Slide 86: Appendix 27 - Major Tenants
APPENDIX 27 - MAJOR TENANTS ‘Topped-up’ income % 01 Expedia 6.2 02 Public sector1 5.9 03 Burberry 5.8 04 Boston Consulting Group 5.5 05 G-Research 4.3 06 Arup 3.8 07 Apollo 3.1 08 The Office Group/Fora 3.1 09 Sony Pictures 1.9 10 FremantleMedia Group 1.8 11 VCCP 1.7 12 Adobe 1.6 13 Publicis Groupe 1
Slide 87: Appendix 28 - Rent and Tenant Banding
APPENDIX 28 - RENT AND TENANT BANDING CENTRAL LONDON ‘TOPPED-UP’ PROFILE OF TENANTS’ OFFICE RENT BANDING1 BUSINESS SECTOR2 £0-£30 psf Flexible office Other £80+ psf 4% £30-£40 psf providers 4% 13% 9% 4% Media Public sector 20% 6% Retail & hospitality 7% £70-£80 psf £40-£50 psf 16% 15% Technology 5.4
Slide 88: Appendix 29 - Office Rent Profile
APPENDIX 29 - OFFICE RENT PROFILE £ psf 65 Average office ERV1 Average topped-up office rent 60 55 50 45 40 35 30 25 20 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 1 Includes ERV of on-site schemes Derwent London plc - Annual Results 2022 86
Slide 89: Appendix 30 - Key Lettings: New Occupiers
APPENDIX 30 - KEY LETTINGS: NEW OCCUPIERS Q1 Q2 Q2 90 Whitfield Street W1 The Featherstone Building EC1 The Featherstone Building EC1 • Michael Kors • Marshmallow • Dept Agency • 18,850 sq ft on 2nd floor • 16,220 sq ft on 1st floor • 11,450 sq ft on 9th and 10th floors • £1.4m pa at £72.50 psf • £1
Slide 90: Appendix 31 - Key Asset Management Transactions
APPENDIX 31 - KEY ASSET MANAGEMENT TRANSACTIONS 1 Oliver’s Yard EC1 • Morningstar • Renewal Q2 2022 on 49,640 sq ft • Lease extended by four years to Jun 2027 (from Jun 2023) • Income increased 18.8% to £3.0m pa • 14.2% above the net effective ERV 1 Page Street SW1 • Burberry • Regear Q4 2022 on 127
Slide 91: Sustainability
SUSTAINABILITY Appendices 32. Portfolio EPC profile 90 33. EPC rating progression 91 34. DL’s Net Zero Carbon 2030 pathway 92 35. Embodied carbon 93 89
Slide 92: Appendix 32 - Portfolio EPC Profile
APPENDIX 32 - PORTFOLIO EPC PROFILE 1 Exempt Project A B C D E Under review/outstanding 0.3 0.3 ERV 11.5 8.7 44.8 20.4 9.5 4.5 2030 compliant: 65.3% 2030 non-compliant: 34.7% 1.4 0.4 Floorspace 8.7 7.5 42.3 22.9 9.8 7.0 2030 compliant: 59.9% 2030 non-compliant: 40.1% 0 10 20 30 40 50 60 70 80 90 100
Slide 93: Appendix 33 - EPC Rating Progression
APPENDIX 33 - EPC RATING PROGRESSION 1 London commercial portfolio by ERV (%) 100 99.9 100.0 Dec 2021 Dec 2022 90 85.7 80 78.9 70 65.3 60 61.0 50 40 30 20 10 0 2023 compliant 2027 compliant 2030 compliant 1 London commercial portfolio excluding 19 Charterhouse Street EC1 that was sold in Q1 2023 Der
Slide 94: Appendix 34 - DL's Net Zero Carbon 2030 Pathway
APPENDIX 34 - DL’S NET ZERO CARBON 2030 PATHWAY Guiding principles Action Delivery Transparency Communication and collaboration Operational carbon Integrity Governance Reducing Offsetting Reducing the Influence operational energy and carbon emissions Procuring and investing in renewable energy embod
Slide 95: Appendix 35 - Embodied Carbon
APPENDIX 35 - EMBODIED CARBON Embodied Embodied carbon carbon footprint intensity Year Scheme tCO2e kgCO2e/sqm 2020 80 Charlotte Street W1 19,790 506 2021 19-23 Fitzroy Street W1 18 36 3-5 Rathbone Place W1 162 185 6-8 Greencoat Place SW1 763 191 DL/78 W1 93 122 2022 1 Soho Place W1 16,401 550 The F
Slide 96: London Office Market
LONDON OFFICE MARKET Appendices 36. Demand 95 37. Take-up by type 96 38. Space under offer 97 39. Supply 98 40. Development letting timescale 99 41. Available office space 100 42. Availability 101 43. Take-up and availability 102 44. Prime office rents 103 45. Investment market 104 46. Investment de
Slide 97: Appendix 36 - Demand
APPENDIX 36 - DEMAND Market statistics OFFICE TAKE-UP Take-up (million sq ft) 20 • Central London Central London 18 • 12.3m sq ft of take-up in 2022 16 • 29% above 2021 14 Average 12 • In line with the LTA 10 • Activity by sector: 28% banking & finance, 17% creative 8 industries, 17% professional, 1
Slide 98: Appendix 37 - Take-up by Type
APPENDIX 37 - TAKE-UP BY TYPE Central London office take-up (million sq ft) 18 Secondhand Grade B/C Secondhand Grade A 16 New/Pre-let 14 10-year annual average 12 10 8 6 4 2 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: CBRE Derwent London plc - Annual Results 2022 96
Slide 99: Appendix 38 - Space Under Offer
APPENDIX 38 - SPACE UNDER OFFER Floorspace (million sq ft) 5.0 West End City Midtown Docklands Southbank 4.5 4.0 Average 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: CBRE Derwent London plc - Annual Results 2022 97
Slide 100: Appendix 39 - Supply
APPENDIX 39 - SUPPLY Existing supply OFFICE DEVELOPMENT PIPELINE Floor area (million sq ft) Vacancy rate (%) • Central London vacancy rate of 8.2% at year end 12 Under construction available 12 Central London Under construction let/under offer • 8.6% at Q4 2021 and 8.0% at Q2 2022 Completed 10 10 Co
Slide 101: Appendix 40 - Development Letting Timescale
APPENDIX 40 - DEVELOPMENT LETTING TIMESCALE Months from practical completion to achieve 75% let or pre-let 40 30 20 10 0 (10) (20) (30) 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Source: CBRE Derwent London plc - Annual Results 2022 99
Slide 102: Appendix 41 - Available Office Space
APPENDIX 41 - AVAILABLE OFFICE SPACE Floorspace (million sq ft) 30 New – under construction New – completed Secondhand – landlord controlled 25 Secondhand – tenant controlled 20 15 10 5 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: CBRE Derwent London plc - Annual Results 2022 100
Slide 103: Appendix 42 - Availability
APPENDIX 42 - AVAILABILITY Available space (million sq ft) % 30 Docklands, Midtown & Southbank Secondhand % 100 City Tenant controlled % 27 90 West End 24 80 21 70 18 60 15 50 12 40 9 30 6 20 3 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 0 Source: CBRE Derwent London p
Slide 104: Appendix 43 - Take-up and Availability
APPENDIX 43 - TAKE-UP AND AVAILABILITY Take-up (million sq ft) Availability (million sq ft) 2.5 30 Take-up Availability 2.0 24 1.5 18 1.0 12 0.5 6 0.0 2016 2017 2018 2019 2020 2021 2022 0 Source: CBRE Derwent London plc - Annual Results 2022 102
Slide 105: Appendix 44 - Prime Office Rents
APPENDIX 44 - PRIME OFFICE RENTS Prime offfice rent (£ psf) 140 Q2 2016 (EU referendum) 137.50 Q4 2019 (pre-pandemic) Q4 2022 120 120 110 100 95 95 92.50 90 90 90 90 87.50 85 85 82.50 82.50 82.50 80 80 80 77.50 77.50 73 71 70 67.50 60 40 20 0 Mayfair Soho North of North of Midtown Victoria Paddingto
Slide 106: Appendix 45 - Investment Market
APPENDIX 45 - INVESTMENT MARKET CENTRAL LONDON OFFICE INVESTMENT • £11.2bn of investment transactions in 2022 Value of investment transactions (£bn) 9 • 12% above 2021 Quarter total 4-quarter average 8 • 6% below the LTA 7 • 71% of transactions in H1 with only 6% (£0.7bn) in Q4 6 5 4 3 2 1 0 2000 20
Slide 107: Appendix 46 - Investment Demand
APPENDIX 46 - INVESTMENT DEMAND SOURCES OF INVESTMENT EUROPEAN PRIME OFFICE YIELDS Prime office yield (%) 7.0 London - West End London - City Middle 6.5 Paris East Frankfurt 8% 6.0 5.5 SE Asia 5.0 17% UK & Europe 4.5 36% 4.0 £33.3bn 3.5 3.0 2.5 North America 19% 2.0 2000 2002 2004 2006 2008 2010 201
Slide 108: Developments & Refurbishments
DEVELOPMENTS & REFURBISHMENTS Appendices 47. Soho Place W1 107 48. The Featherstone Building EC1 108 49. Francis House SW1 109 50. Developments on site: profit on cost 110 51. Project summary: current projects 111 52. Project summary: future projects 112 53. Portfolio map 113 106 106
Slide 109: Appendix 47 - Soho Place W1
APPENDIX 47 - SOHO PLACE W1 H1 2022 completion • 285,000 sq ft mixed-use scheme • 88% let or sold (100% for offices) • 33,000 sq ft retail available (£3.2m ERV) • Embodied carbon 550 kgCO2e/sqm (offset) Derwent London plc - Annual Results 2022 107
Slide 110: Appendix 48 - The Featherstone Building EC1
APPENDIX 48 - THE FEATHERSTONE BUILDING EC1 H1 2022 completion • 127,300 sq ft office scheme – 59% let • 31,100 sq ft let to Buro Happold at £2.3m pa • 16,220 sq ft let to Marshmallow at £1.2m pa • 11,450 sq ft let to Dept Agency at £1.0m pa • Embodied carbon 539 kgCO2e/sqm Derwent London plc - Annu
Slide 111: Appendix 49 - Francis House SW1
APPENDIX 49 - FRANCIS HOUSE SW1 H2 2022 completion • 38,200 sq ft refurbishment • EPC upgraded from C to B • Pre-let entirety to Edelman in Q4 2021 • £2.9m pa or £76 psf • 14.7% above Dec 2020 ERV • 15-year lease, break at 10 Derwent London plc - Annual Results 2022 109
Slide 112: Appendix 50 - Developments on Site: Profit on Cost
APPENDIX 50 - DEVELOPMENTS ON SITE: PROFIT ON COST Summary £m End value 786 Less: Total cost1 708 Project surplus 78 Less: Booked to Dec 22 4 Surplus to come 74 Profit on total cost 11% Yield on cost2 5.4% Completion H1 2025 H2 2025 Commercial area (sq ft) 383,000 246,0003 137,000 Residential area (
Slide 113: Appendix 51 - Project Summary: Current Projects
APPENDIX 51 - PROJECT SUMMARY: CURRENT PROJECTS Current Pre Total net scheme Proposed 2023 2024 2025+ capex to Current income area area capex capex capex complete Delivery office Property £m pa ‘000 sq ft ‘000 sq ft £m £m £m £m date c.ERV psf On-site major projects 25 Baker Street W1 - 143 298 104 8
Slide 114: Appendix 52 - Project Summary: Future Projects
APPENDIX 52 - 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 4.2 91 150 2025 4.2 91 150 Under appraisal1 Strathkelvin Retail Park2 0.9 108 126 2023 50 Baker Street W1 J
Slide 115: Appendix 53 - Portfolio Map
Caledonian Road Camden Road APPENDIX 53 - PORTFOLIO MAP Essex Road Camden Town Primrose Hill Carnegie St Islington The Knowledge Kings Cross Wharfdale Rd Angel TECH BEL T Quarter Albany Regent’s Park St Pancras Hoxton St International Th Maida Vale am es lin k Euston Up pe rW ob Old Street Clerkenwe
Slide 116: Executive Committee and Senior Management
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 Richard Dean Director of
Slide 117: Disclaimer
DISCLAIMER This presentation has been prepared by Derwent London plc (the This presentation is for information purposes only and does not constitute “Company”). No representation or warranty (express or implied) of any an offering document or an offer of transferable securities to the public nature