Derwent London Plc · LSE:DLN
Derwent London — H1 2015 Earnings Presentation
82 slides from Derwent London's earnings presentation, Aug 13, 2015
Slide 1: Derwent London Plc Interim Results 2015
DERWENT LONDON PLC INTERIM RESULTS 2015
Slide 2: Contents
CONTENTS Presenters: Contents: John Burns Introduction and overview 1 Simon Silver Results and financial review 9 Damian Wisniewski Valuation and portfolio analysis 20 Nigel George Projects 28 Outlook for central London property 41 Outlook for Derwent London 45 Appendices 47 Disclaimer 80
Slide 3: Introduction and Overview
INTRODUCTION AND OVERVIEW John Burns 1
Slide 4: Highlights
HIGHLIGHTS 40 Chancery Lane WC2 Another good set of results • NAV growth +10.9% (Portfolio +9.1%) • Net rental income +5.0% • EPRA EPS +16.5% • Dividend per share +8.2% • Total return +11.9% Performance and operations • ERVs +5.2% • £20.3m of lettings YTD, over twice the 2014 annual total • Complete
Slide 5: 2015 - Set to be a Record Year for Lettings
2015 - SET TO BE A RECORD YEAR FOR LETTINGS Letting Activity • Excellent letting activity year to date: £25 ◦◦ £20.3m pa of income Pre-lets ◦◦ 394,600 sq ft Non pre-lets £20 ◦◦ 53 transactions Rental income (£m pa) £15 Performance Let against Dec 14 ERV Area Income Open Overall £10 sq ft £m pa marke
Slide 6: Lettings Year to Date
LETTINGS YEAR TO DATE • 34,150 sq ft let on the lower floors at £65 psf • 16,150 sq ft let on the top two floors (9 and 10) at £81.75 psf • Seven retail units let at Tottenham Court Walk Other 1-2 Stephen £5.4m Street • Two pre-lets on the lower five £5.4m floors of the tower: Lettings YTD ◦◦ 69,700
Slide 7: Progressing Future Schemes
DEVELOPMENT OPPORTUNITIES • One million sq ft under potential development in H1 2016 ft sq Wedge House SE1 with the commencement of 80 Charlotte Street W1 and 00 ,0 Brunel Building W2: 0 11 ◦◦ ERV £61.3m (7% pre-let) PROGRESSING FUTURE SCHEMES ◦◦ Capex £480m ◦◦ Estimated surplus still to come £197m1
Slide 8: Impact of Potential Developments on Our Income
IMPACT OF POTENTIAL DEVELOPMENTS ON OUR INCOME Outcome of potential development starts on ERV • In H1 ERV grew by £13.2m (+6%): ◦◦ Contracted element1 +£8.3m (+5%) 300 Lease reversions ◦◦ Variable element2 +£4.9m (+9%) Vacant space Contractual rental uplifts 258.4 250 Passing rent 23.2 228.8 • Profo
Slide 9: Acquisition Opportunities
ACQUISITION OPPORTUNITIES • Three major Tech Belt acquisitions: Angel Square EC1 ◦◦ 554,300 sq ft offices • 128,700 sq ft ◦◦ c.£310m after costs • 80% of building let/renewed since ◦◦ £560 psf capital value acquisition • 25,000 sq ft under refurbishment • Exciting short-term refurbishment options: 2
Slide 10: Changing Face of London
CHANGING FACE OF LONDON White Collar Factory EC1 Monmouth House EC1 1 Oliver’s Yard EC1 Tea Building E1 LIVERPOOL STREET CROSSRAIL MAINLINE UNDERGROUND FENCHURCH STREET Aldgate Union E1 MAINLINE ALDGATE UNDERGROUND • Rapidly improving Tech Belt location ALDGATE EAST UNDERGROUND • Excellent transport
Slide 11: Results and Financial Review
RESULTS AND FINANCIAL REVIEW Damian Wisniewski 9
Slide 12: Headline Numbers
HEADLINE NUMBERS Jun 2015 Dec 2014 Jun 2014 Total portfolio at fair value (excl. JVs) £4,551.8m £4,168.1m £3,742.1m EPRA net asset value per share 1 3,226p 2,908p 2,572p EPRA triple NAV per share 1 3,125p 2,800p 2,513p Gross property income £74.3m £138.4m £69.3m EPRA profit before tax 2 £39.0m £62.3
Slide 13: NAV Growth
NAV GROWTH • EPRA NAV per share up 10.9%: ◦◦ 3,226p from 2,908p Debt, net assets and gearing • Equity shareholders’ funds 4,000 80 Net debt NAV gearing increased to £3,561m Net assets1 LTV ratio 3,500 3,561 70 • Net debt decreased by 13.6%: 3,000 60 3,012 ◦◦ £875.9m from £1,013.3m 2,500 50 ◦◦ £175m
Slide 14: EPRA NAV Movement
EPRA NAV MOVEMENT • At £362.1m, the revaluation surplus in H1 2015 exceeded both H1 2014 and H2 2014 Revaluation surplus: Income statement £361.0m EPRA NAV per share Other comprehensive income1 £1.1m 3,500 Per accounts £362.1m Trading property2 (£1.7m) 3,250 33 1 322 21 5 12 EPRA surplus £360.4m 322
Slide 15: EPRA Profit Before Tax
EPRA PROFIT BEFORE TAX • EPRA profit £39.0m, up 22% from £32.0m in H1 2014 • Excludes £0.6m profit on sale of trading property EPRA profit before tax • Admin costs up 13% due mainly to higher staff costs 100 90 80 2.3 0.9 Finance costs H1 2015 H1 2014 70 4.5 72.0 £m £m 60 14.8 Interest 18.4 20.8 £m
Slide 16: Gross Property Income
GROSS PROPERTY INCOME • Acquisitions include: 20 Farringdon Road EC1 £1.2m Movements in gross property income Angel Square EC1 £1.0m 80 • Disposals include: 0.8 3.1 22 Kingsway WC2 £1.0m 4.8 1.0 1.7 74.3 Mark Square House EC2 £0.5m 70 2.2 3.2 69.3 9 & 16 Prescot Street E1 £0.3m • Lettings and review
Slide 17: Property Outgoings, EPRA Rental Income & Cost Ratios
PROPERTY OUTGOINGS, EPRA RENTAL INCOME & COST RATIOS Property outgoings H1 2015 H1 2014 £m £m Property outgoings 5.0 4.0 Increased due to higher vacancy rate during H1 2015 Ground rents 0.1 0.2 Surrender premiums paid - 0.3 Dilapidation receipts (0.6) - 4.5 4.5 EPRA like-for-like rental Net income1
Slide 18: Cash Flow
CASH FLOW • Decrease in net debt: ◦◦ By £137.4m to £875.9m Forecast capital expenditure1 Net cash flow movements Capital expenditure Capital expenditure Capitalised interest H1 2015 H1 2014 (Major projects) (Other projects) £m £m 273 13 2017+ Cash from operations 34.5 32.9 286 26 Acquisitions (96.3)
Slide 19: Proforma Impact of Major Projects
PROFORMA IMPACT OF MAJOR PROJECTS After £480m Assuming Assuming capex2 50% of 100% of on major projects let projects let projects and at ERV and at ERV and contracted 50% of flats 100% of flats Jun 2015 rents3 sold sold Portfolio fair value £4,552m £5,032m £4,993m £4,955m Drawn debt net of cash £848
Slide 20: Debt Summary
DEBT SUMMARY Jun 2015 Dec 2014 • £175m of 2.75% convertible bonds 2016 Total facilities £1,176m £1,351m redeemed early and converted into new Net debt £876m £1,013m ordinary shares in January 2015 Unutilised facilities £307m £321m • A new £75m unsecured and fully Percentage of unsecured debt 59% 65%
Slide 21: Debt Facilities
DEBT FACILITIES Jun 2015 Dec 2014 Average interest rate (spot)1 3.93% 3.78% Maturity profile of debt facilities Average interest rate (spot)2 4.20% 4.22% £m 0 50 100 150 200 250 300 350 400 450 500 550 600 Proportion of drawn facilities at fixed 91% 94% 2015 rate or hedged 2016 Average maturity of f
Slide 22: Valuation and Portfolio Analysis
VALUATION AND PORTFOLIO ANALYSIS Nigel George 20
Slide 23: Valuation
VALUATION Capital growth very strong in the first half: • Underlying 9.1% (H2 2014: 9.8%) • City Borders excelled at 11.9% (H2 2014: 12.6%) Six projects valued at £696.9m1 (14.2% uplift in H1): • Under construction: ◦◦ White Collar Factory EC1, The Copyright Building W1 and 73 Charlotte Street W1 •
Slide 24: Valuation Drivers and Performance
VALUATION DRIVERS AND PERFORMANCE Our total property return was ahead of benchmarks: • Derwent London 10.3% • IPD Central London Offices 10.1%1 • IPD All Property 6.5%1 Drivers of performance Valuation performance 60 25 2013 2014 H1 2015 20 20.4 50 52 50 19.0 15 Contribution to surplus (%) 40 Capita
Slide 25: Rental Growth
RENTAL GROWTH • Underlying rental value growth of 5.2% exceeded expectations: ◦◦ Stronger than H1 2014 (4.2%) and H2 2014 (4.8%) • City Borders continues to outperform at 6.3%: Rental value growth ◦◦ Johnson Building EC1 8.4% 15 13.3 ◦◦ Morelands EC1 8.1% 12 9 ◦◦ Tea Building E1 7.6% Half-yearly ren
Slide 26: Movement in Yields
MOVEMENT IN YIELDS EPRA yields • Net initial yield 3.2% (Dec 2014: 3.4%): True equivalent yield movement1 ◦◦ ‘Topped-up’ net initial yield 3.9% 7.5 (Dec 2014: 4.0%) 15bp 7.0 97bp • True equivalent yield 4.56%1 6.5 83bp (Dec 2014: 4.73%): True equivalent yield (%) 6.0 43bp 55bp ◦◦ Tightened by 17bp i
Slide 27: Context to Yield Movement
CONTEXT TO YIELD MOVEMENT • True equivalent yield gap of 253bp from 10-year Gilt: Valuation yields1 ◦◦ Rental growth outlook remains good 9 Derwent London True Equivalent Yield 10-year Gilt ◦◦ Capital flows very strong Derwent London Initial Yield Gap between DL TEY and 10-year Gilt Yield % or Gap b
Slide 28: Reversion and Rental Values
REVERSION AND RENTAL VALUES • Net income of £134.7m with ERV of £228.8m: ◦◦ Significant reversion of 70% or £94.1m • 85% of portfolio income from central London offices: Central London office rent profile ◦◦ Average ‘topped-up’ office rent only £36.83 psf: ◦◦ Core income portfolio £44.01 psf 45 Jun-
Slide 29: Opportunities Across the Portfolio
OPPORTUNITIES ACROSS THE PORTFOLIO • Portfolio evenly split between core income and projects (on site or earmarked) - see Appendices 27 and 28 Core income On site Consented A potential Includes: 40 Chancery Lane WC2 80 Charlotte Street W1 2.29m sq ft Angel Building EC1 73 Charlotte Street W1 Brunel
Slide 30: Projects
PROJECTS Simon Silver 28
Slide 31: Delivering Our Pipeline
DELIVERING OUR PIPELINE1 Turnmill EC1 • 108,500 sq ft completed in H1 2015: ◦◦ Turnmill EC1 ◦◦ Tottenham Court Walk W1 • 515,500 sq ft on site at 30 June and includes: ◦◦ 40 Chancery Lane WC2 (102,000 sq ft) - completed in early July ◦◦ White Collar Factory EC1 ◦◦ The Copyright Building W1 • Next ma
Slide 32: Regenerating Fitzrovia - Tottenham Court Walk W1
REGENERATING FITZROVIA - TOTTENHAM COURT WALK W1 • Nine retail units (38,000 sq ft) • Seven let - 26,600 sq ft at £1.8m pa 30
Slide 33: Regenerating Fitzrovia - Tottenham Court Walk W1
REGENERATING FITZROVIA - TOTTENHAM COURT WALK W1 STEPHEN STREET BLE BLE LA LA AI AI AV AV 10 0 M E T R E S 10 0 M E T R E S Tottenham Court Road • Retail floorspace increased by 58% • Previous income £0.7m pa • ERV £2.4m pa 31
Slide 34: Making Good Progress at White Collar Factory EC1
MAKING GOOD PROGRESS AT WHITE COLLAR FACTORY EC1 • Q3 2016 completion • 293,000 sq ft scheme (24% pre-let): ◦◦ 237,000 sq ft 16-storey office tower ◦◦ Additional office campus, restaurants, residential and a new public square • Capex to complete £82m 32
Slide 35: On Site: The Copyright Building W1
ON SITE: THE COPYRIGHT BUILDING, 30 BERNERS STREET W1 • 105,000 sq ft development: ◦◦ 85,000 sq ft of offices ◦◦ 20,000 sq ft of retail • ERV £6.8m (net) - Offices c.£77.50 psf • Capex to complete £51m • Completion H2 2017 33
Slide 36: Major 2015 Commencement: 80 Charlotte Street W1
MAJOR 2015 COMMENCEMENT: 80 CHARLOTTE STREET W1 • 380,000 sq ft development: ◦◦ 321,000 sq ft offices ◦◦ 45,000 sq ft residential ◦◦ 14,000 sq ft retail • Commences H2 2015 34
Slide 37: Major 2015 Commencement: 80 Charlotte Street W1
MAJOR 2015 COMMENCEMENT: 80 CHARLOTTE STREET W1 • ERV £23.9m - Offices c.£75 psf • Capex to complete £207m • Completion H2 2018 35
Slide 38: Major 2016 Commencement: Brunel Building W2
MAJOR 2016 COMMENCEMENT: BRUNEL BUILDING W2 55-65 North Wharf Road • 240,000 sq ft office development • Commences early 2016 • ERV £14.8m (net) - Offices c.£62.50 psf • Capex £131m • Completion H1 2019 36
Slide 39: Planning Success - Wedge House SE1
PLANNING SUCCESS – WEDGE HOUSE SE1 40 Blackfriars Road • Resolution to grant planning consent in June 2015 • 68,200 sq ft hotel: ◦◦ 192 rooms ◦◦ Ground floor restaurant ◦◦ Mezzanine conference space ◦◦ Skybar and restaurant • 41,800 sq ft offices 37
Slide 40: Advancing Our Projects - 1 Oxford Street W1
ADVANCING OUR PROJECTS - 1 OXFORD STREET W1 • One of the best redevelopment sites along the Crossrail route • 275,000 sq ft office, retail and theatre scheme with new public realm • Agreement signed with Crossrail for a new 150-year lease - Crossrail receive £55m at scheme completion, a 5% ground re
Slide 41: Future Development - 19-35 Baker Street W1
FUTURE DEVELOPMENT - 19-35 BAKER STREET W1 • Memorandum of Understanding signed with our joint venture partner, The Portman Estate, in early 2015 • Derwent London owns a 55% interest • Estimated scheme of c.250,000 sq ft: ◦◦ 70% increase on existing area • Architectural studies underway FULL PAGE IM
Slide 42: Construction Costs
CONSTRUCTION COSTS • Construction costs have risen in the last two years: ◦◦ Capacity constraints ◦◦ Contractors looking to improve margins • On-site projects, except The Copyright Building, are on fixed price contracts • We have raised capex estimates on the three new developments1: ◦◦ Detailed dis
Slide 43: Outlook for Central London Property
OUTLOOK FOR CENTRAL LONDON PROPERTY John Burns 41
Slide 44: Central London Office Demand
CENTRAL LONDON OFFICE DEMAND Market statistics Office take-up 20 • Central London take-up of 7.1m sq ft in H1 2015: 18 Central London ◦◦ +13% above long-term half-year average 16 14 Take-up (million sq ft) Annual average • West End take-up of 2.0m sq ft in H1: 12 ◦◦ Broadly in line with the average
Slide 45: Central London Office Supply
CENTRAL LONDON OFFICE SUPPLY Market statistics Office development pipeline 12 12 • Vacancy rate 2.8% in central London and 2.3% in the Central London Proposed West End: 10 Under construction Completed 10 Completed average ◦◦ Long-term average of 5.4% and 4.5% respectively Floor area (million sq ft)
Slide 46: Central London Office Investment Market
CENTRAL LONDON OFFICE INVESTMENT MARKET Market statistics Central London office investment • A good H1 with £8.2bn of transactions: 20 ◦◦ £5.6bn half-year average 18 ◦◦ £7.1bn in H1 2014 Value of investment transactions (£bn) 16 • Prime office yields down 25bp since year-end: 14 ◦◦ 3.5% in West End
Slide 47: Outlook for Derwent London
OUTLOOK FOR DERWENT LONDON John Burns 45
Slide 48: Outlook
OUTLOOK • London economic outlook remains good • Raising ERV growth estimates: Our ◦◦ 8-10% in 2015 for our portfolio market • Low yields supported by lack of alternatives: ◦◦ Expected to remain firm in H2 2015 • Capturing additional opportunities: ◦◦ Building out our development pipeline Derwent ◦◦
Slide 49: Appendices
SS ee ——_ : —— ERVIN a = — — — -—— = a ee APPENDICES 47
Slide 50: Appendices
APPENDICES 1. Group balance sheet 49 17. Lease expiries and breaks / vacancy rates 65 2. Net asset value per share 50 18. Lease expiry profile and lease length 66 3. Group income statement 51 19. Central London office vacancy 67 4. Reconciliation of IFRS and EPRA profits 52 20. Central London office
Slide 51: Appendix 1 - Group Balance Sheet
APPENDIX 1 - GROUP BALANCE SHEET Jun 2015 Dec 2014 Jun 2014 £m £m £m Investment property 4,420 .3 4,041 .0 3,581 .4 Owner-occupied property 35 .8 24 .8 23 .1 Investment in joint ventures 26 .2 7 .4 5 .5 Other non-current assets 86 .8 81 .3 79 .3 4,569 .1 4,154 .5 3,689 .3 Non-current assets held for
Slide 52: Appendix 2 - Net Asset Value per Share
APPENDIX 2 - NET ASSET VALUE PER SHARE Jun 2015 Dec 2014 Diluted Diluted £m p £m p Net assets attributable to equity shareholders 3,561 .3 3,012 .2 Conversion of 2.75% unsecured convertible bonds 2016 - 170 .5 Net assets for diluted NAV 3,561 .3 3,188 3,182 .7 2,864 Revaluation of trading properties
Slide 53: Appendix 3 - Group Income Statement
APPENDIX 3 - GROUP INCOME STATEMENT Half year ended Year ended Half year ended Jun 2015 Dec 2014 Jun 2014 £m £m £m Gross property income 74.3 138.4 69 .3 Profit on disposal of trading properties 0.6 3.9 - Other income less other costs 0.9 2.0 1 .1 Property outgoings (4.5) (8.2) (4 .5) Net property a
Slide 54: Appendix 4 - Reconciliation of IFRS and EPRA Profits
APPENDIX 4 - RECONCILIATION OF IFRS AND EPRA PROFITS Reconciliation of IFRS profit before tax to EPRA profit before tax Half year Year Half year ended ended ended Jun 2015 Dec 2014 Jun 2014 £m £m £m IFRS profit before tax 405 .0 753 .7 371 .4 Revaluation surplus (361 .0) (667 .1) (330 .8) Joint vent
Slide 55: Appendix 5 - Explanation of EPRA Adjustments
APPENDIX 5 - EXPLANATION OF EPRA ADJUSTMENTS • H1 • H1 • 2015 • Adjustments 2015 2014 • IFRS • A • B • C • EPRA • EPRA • £m • £m • £m • £m • £m • £m Net property income and other income 71 .3 (0 .6) 70 .7 65 .9 Total administrative expenses (14 .8) (14 .8) (13 .1) Revaluation surplus 361 .0 (361 .0)
Slide 56: Appendix 6 - EPRA Like-for-Like Rental Income
APPENDIX 6 - EPRA LIKE-FOR-LIKE RENTAL INCOME Properties Like-for-like increase on owned throughout Development H1 2014 H2 2014 the period Acquisitions Disposals property Total % % £m £m £m £m £m H1 2015 Rental income 3.9 2.8 59.2 2.7 1.1 9.0 72.0 Property expenditure (2.7) (0.1) (0.2) (2.1) (5.1) N
Slide 57: Appendix 7 - Debt Facilities
APPENDIX 7 - DEBT FACILITIES £m £m Maturity 6.5% secured bonds 175 March 2026 3.99% secured loan 83 October 2024 1.125% unsecured convertible bonds 150 July 2019 4.41% unsecured private placement notes 25 January 2029 4.68% unsecured private placement notes 75 January 2034 Committed bank facilities
Slide 58: Appendix 8 - Net Debt
APPENDIX 8 - NET DEBT Jun 2015 Dec 2014 £m £m Financial liabilities - current - 170 .5 Financial liabilities - due after more than 1 year 887 .6 857 .6 Acquired fair value of secured bonds less amortisation (15 .5) (16 .0) Equity component of unsecured bonds 12 .6 22 .3 Unwinding of discount of unse
Slide 59: Appendix 9 - Fixed Rates and Hedging
APPENDIX 9 - FIXED RATES AND HEDGING Jun 2015 Dec 2014 Proportion of drawn facilities at fixed rates or hedged 91% 94% Weighted average duration of swaps 1 4.2 years 4.0 years Mark-to-market cost of swaps £20.5m £25.2m Weighted average duration of fixed rate instruments 9.8 years 7.7 years Hedging p
Slide 60: Appendix 10 - Valuation Performance by Village
APPENDIX 10 - VALUATION PERFORMANCE BY VILLAGE Valuation Valuation Weighting movement Jun 2015 Jun 2015 H1 20151 £m % % West End Central Fitzrovia2 1,660.0 36 8.4 Victoria 548.5 12 9.7 Baker Street/Marylebone 193.7 4 7.0 Soho/Covent Garden 157.7 3 13.1 Mayfair 85.4 2 2.6 Paddington 68.3 2 0.9 2,713.
Slide 61: Appendix 11 - Rental Value Growth
APPENDIX 11 - RENTAL VALUE GROWTH Rental value growth1 H1 2014 H2 2014 2014 H1 2015 % % % % West End 3.7 4.6 8.4 5.0 City Borders 5.5 5.5 11.3 6.3 Central London 4.2 4.9 9.2 5.3 Provincial 2.6 1.2 3.8 2.9 Underlying 4.2 4.8 9.0 5.2 1 On EPRA portfolio 59
Slide 62: Appendix 12 - Valuation Yields
APPENDIX 12 - VALUATION YIELDS Yields’ profile1 EPRA initial yields 8 Pre-EPRA EPRA Net initial ‘Topped-up’ 7 yield initial yield % % 6 West End 3.0 3.7 Yield (%) 5 City Borders 3.3 4.0 Central London 3.1 3.8 4 Provincial 5.7 6.1 Reversionary yield 3 True equivalent yield EPRA portfolio 3.2 3.9 Init
Slide 63: Appendix 13 - Portfolio Statistics by Village
APPENDIX 13 - PORTFOLIO STATISTICS BY VILLAGE Rent Vacant Net Vacant review / Floor floor contracted Average space lease Estimated area area rental rental rental renewal Total rental Valuation Weighting ‘000 ‘000 income income value reversion reversion value £m % sq ft sq ft £m pa £ psf £m pa £m pa
Slide 64: Appendix 14 - Portfolio Reversion
APPENDIX 14 - PORTFOLIO REVERSION Rent uplift pa Rent pa £m £m £m Contracted rental income, net of ground rents 134.7 Contractual rental uplifts 1-2 Stephen Street W1 5.7 1 Page Street SW1 3.0 4 & 10 Pentonville Road N1 2.0 Turnmill EC1 2.0 Other 17.5 30.2 Pre-let projects 40 Chancery Lane WC2 4.71
Slide 65: Appendix 15 - Vacant Space - Available and Projects
APPENDIX 15 - VACANT SPACE - AVAILABLE AND PROJECTS Vacant Pre-let Total Total Total area area area Vacant Pre-let gross Ground net ‘000 ‘000 ‘000 ERV ERV ERV rent ERV sq ft sq ft sq ft £m pa £m pa £m pa £m pa £m pa Comment Available to occupy 1-2 Stephen Street W1 16 - 16 0.9 - 0.9 - 0.9 5,300 sq f
Slide 66: Appendix 16 - Rent and Tenant Banding
APPENDIX 16 - RENT AND TENANT BANDING Central London ‘topped-up’ office rent banding1 Profile of tenants’ business sector2 £0 - £20 psf 4% Other £60+ psf 9% £20 - £30 psf 15% Financial 10% Government and 2% public admin Media, TV, marketing 3% and advertising Charities 29% 4% £30 - £40 psf Retail sa
Slide 67: Appendix 17 - Lease Expiries and Breaks / Vacancy Rates
APPENDIX 17 - LEASE EXPIRIES AND BREAKS / VACANCY RATES • £12.7m of income subject to breaks / expiries • EPRA vacancy rate low at 1.6%: during H1 2015: ◦◦ 4.1% at Dec 2014 ◦◦ 87% of tenants’ income retained or re-let • Portfolio average lease length 6.6 years Lease expiry and break analysis1 EPRA v
Slide 68: Appendix 18 - Lease Expiry Profile and Lease Length
APPENDIX 18 - LEASE EXPIRY PROFILE AND LEASE LENGTH Expiries and breaks as a percentage of portfolio income1 West City H2 End Borders Provincial 2015 2016 2017 2018 2019 Total Expiries 3 2 - 5 6 2 11 5 29 Holding over - - - - - - - - - Rolling breaks 2 1 - 3 1 - 1 - 5 Single breaks - - - - 2 5 5 5 1
Slide 69: Appendix 19 - Central London Office Vacancy
APPENDIX 19 - CENTRAL LONDON OFFICE VACANCY 16 West End 14 City Central London 12 West End average City average Vacancy rate (%) 10 8 6 4 2 0 Q1 01 Q1 03 Q1 05 Q1 07 Q1 09 Q1 11 Q1 13 Q1 15 Source: CBRE 67
Slide 70: Appendix 20 - Central London Office Rental Growth
APPENDIX 20 - CENTRAL LONDON OFFICE RENTAL GROWTH 40 30 20 Rental growth (% pa) 10 0 Q1 01 Q1 03 Q1 05 Q1 07 Q1 09 Q1 11 Q1 13 Q1 15 -10 -20 West End -30 City Central London -40 Source: CBRE 68
Slide 71: Appendix 21 - 2015 Completions
APPENDIX 21 - 2015 COMPLETIONS Turnmill, 63 Clerkenwell Road EC1 40 Chancery Lane WC2 • 70,500 sq ft scheme completed January 2015: • 102,000 sq ft scheme completed July 2015: ◦◦ 58,200 sq ft offices pre-let to Publicis Groupe at ◦◦ 97,600 sq ft offices pre-let to Publicis Groupe at £3.1m pa £5.7m p
Slide 72: Appendix 22 - Other 2015 Completions
APPENDIX 22 - OTHER 2015 COMPLETIONS 73 Charlotte Street W1 • 15,500 sq ft residential and office scheme • The Corner House apartments 13,600 sq ft: ◦◦ 11,700 sq ft private (9 units) ◦◦ 1,900 sq ft affordable (2 units) • Offices 1,900 sq ft • Completes Q3 2015 70
Slide 73: Appendix 23 - 2015 Developments - Profit on Cost
APPENDIX 23 - 2015 DEVELOPMENTS - PROFIT ON COST White Collar Factory Copyright Building 73 Charlotte Street 40 Chancery Lane Turnmill Completion Q1 2015 Q3 2015 Q3 2015 Q3 2016 H2 2017 Commercial area (sq ft) 564,400 70,500 102,000 1,900 285,000 105,000 Residential area (sq ft) 21,600 - - 13,600 8,
Slide 74: Appendix 24 - Future Schemes - Profit on Cost
APPENDIX 24 - FUTURE SCHEMES - PROFIT ON COST 80 Charlotte Street Brunel Building Completion H2 2018 H1 2019 Commercial area (sq ft) 575,000 335,000 240,000 Residential area (sq ft) 45,000 45,0002 - Est. future capex (£m) 338 207 131 Total cost (£m)1 674 434 240 ERV (£ psf) c.75.00 c.62.50 ERV (£m p
Slide 75: Appendix 25 - Impact of H2 2015 and 2016 Starts
APPENDIX 25 - IMPACT OF H2 2015 AND 2016 STARTS • Proposed starts: 80 Charlotte Street W1 and Brunel Building W2 Impact on ERV of the two developments Proforma ERV £m Portfolio ERV 228.81 30 Current rental income Less: ERV on existing buildings 9.1 38.7 25 Current reversion Potential ERV on the two
Slide 76: Appendix 26 - Potential Project Delivery 2015-2020
APPENDIX 26 - POTENTIAL PROJECT DELIVERY 2015-2020 600 Completed Under construction 490 492 Estimated completions ('000 sq ft) 500 Potential starts Premier Wedge House House SW1 400 SE1 365 19-35 Baker 305 Monmouth Street 300 293 House1 W1 The EC1 Copyright 226 Building 80 Charlotte 200 W1 TCW W1 St
Slide 77: Appendix 27 - Project Summary 2015-2016
APPENDIX 27 - PROJECT SUMMARY 2015-2016 Current Pre H2 Total Current net scheme Proposed 2015 2016 2017+1 capex to office Property income area area capex capex capex complete Delivery ERV £m pa ‘000 sq ft ‘000 sq ft £m £m £m £m date psf On-site projects 40 Chancery Lane WC2 - 61 102 5 1 - 6 Q3 2015
Slide 78: Appendix 28 - Project Summary 2016+
APPENDIX 28 - PROJECT SUMMARY 2016+ Current Pre net scheme Proposed Earliest Property income area area possession £m pa ‘000 sq ft ‘000 sq ft year Comment Consented Wedge House SE1 - 39 110 Vacant Hotel and office consent granted in 2015 1 Oxford Street W1 - - 275 2018 Offices, retail and theatre -
Slide 79: Appendix 29 - Project Pipeline
APPENDIX 29 - PROJECT PIPELINE On-site 2015-16 Other consented projects 0.52m sq ft + starts 0.62m sq ft + projects 0.39m sq ft + Appraisals 1.17m sq ft = Potential pipeline 2.70m sq ft 40 Chancery Lane WC2 73 Charlotte Street W1 Wedge House SE1 1 Oxford Street W1 d d d te e te te ple sit en en 1.14
Slide 80: Appendix 30 - Portfolio Map
Highbury & Islington Chalk Farm Caledonian Road APPENDIX 30 - PORTFOLIO MAP Camden Road Essex Road Lond Fie Camden Town Primrose Hill Islington Carnegie St Wharfdale Rd Angel TEC Haggerston Kings Cross Park H Albany Regent’s BEL Park S t Pancras Hoxton St T International Th am Maida Vale Euston es l
Slide 81: Appendix 31 - Management Structure - Executive Team
APPENDIX 31 - MANAGEMENT STRUCTURE - EXECUTIVE TEAM John Burns* Chief Executive Officer Damian Wisniewski* Finance Director Simon Silver* Property Director Nigel George* Property Director Paul Williams* Property Director David Silverman* Property Director Tim Kite* Company Secretary Richard Baldwin*
Slide 82: Disclaimer
DISCLAIMER This presentation has been prepared by Derwent London plc (the apparent. Past performance is not indicative of future results and “Company”). No representation or warranty (express or implied) of forward-looking statements are not guarantees of future performance. any nature is given nor