Derwent London plc · LSE:DLN
Derwent London — FY2013 Earnings Presentation
99 slides from Derwent London's earnings presentation, 2014
Slide 1: Derwent London plc Annual Results 2013
Derwent London plc ANNUAL RESULTS 2013
Slide 2: Contents
CONTENTS Presenters: Contents: Page John Burns Introduction 2 Results and financial review 7 Simon Silver Valuation and portfolio analysis 19 Lettings and asset management 26 Damian Wisniewski Projects 33 Acquisitions and disposals 47 Nigel George Outlook for central London property 57 Paul Williams
Slide 3: Introduction: Diversity within London villages
Islington 8% Camden Euston Old Street Bloomsbury Clerkenwell 5% 9% 6 Fitzrovia Shoreditch Marylebone/ 37% Baker Street 5% North of 5% Oxford St The City Paddington Holborn 2% 7% Soho/ Covent Garden Mayfair 2% 4% Southbank INTRODUCTION John Burns Diversity within London villages Victoria 12% Percenta
Slide 4: Highlights 2013 - An excellent year
HIGHLIGHTS 2013 - AN EXCELLENT YEAR 1 PAGE STREET SW1 Strong results ◦◦ NAV growth +20.0% (Portfolio +12.6%1) ◦◦ EPRA PBT +10.1% & EPRA EPS +7.0% ◦◦ Dividend per share +8.3% A successful year ◦◦ Record year for letting (643,200 sq ft - 8.4% above Dec 12 ERV) ◦◦ Completed development 248,000 sq ft -
Slide 5: Firing on all cylinders
FIRING ON ALL CYLINDERS Strong demand for our product Committed to development • £21.8m1 of rental income secured in 2013 • Value of development projects rose 25% in 2013 • £10.5m pre-lets (48%) • Expected profit on cost of on-site developments 34%2 25 450 180 Major completions Pre-lets 400 Capital
Slide 6: Set on strong foundations
SET ON STRONG FOUNDATIONS Rental income up Debt costs down 240 70 7.5 Vacant space and lease reversions Average cost of debt Contractual rental uplifts 7.0 Net initial yield Reversion (% of contractual rental income) Rental income, net of ground rents (£m) 200 Contractual rental income 60 True equiv
Slide 7: Deep pool of opportunities
DEEP POOL OF OPPORTUNITIES 8 We aim to balance development activity with income 7 • 45% portfolio is core income (2.6m sq ft) ? • 55% portfolio is under construction or earmarked for 6 development (3.1m sq ft) DEVELOPMENT / POTENTIAL Floorspace (million sq ft) ◦◦ 27% on-site, consented and appraisal
Slide 8: Results and Financial Review
Islington Camden Euston Thameslink Old Street Bloomsbury Clerkenwell 6 Farringdon Fitzrovia Shoreditch Marylebone/ Liverpool Street Baker Street Paddington North of Tottenham Oxford St Court Road The City Paddington Holborn Bond Street Thameslink Soho/ Covent Garden Mayfair Southbank Belgravia/ Knig
Slide 9: Headline numbers
HEADLINE NUMBERS Dec 2013 Dec 2012 % change Total portfolio at fair value £3,353.1m £2,859.6m 17.3 EPRA net asset value per share1 2,264p 1,886p 20.0 EPRA NNNAV per share1 2,222p 1,764p 26.0 Gross property income £131.6m £124.8m 5.4 EPRA profit before tax 2 £57.8m £52.5m 10.1 EPRA earnings per share
Slide 10: NAV growth
NAV GROWTH • EPRA NAV per share up 20.0% ◦◦ 2,264p from 1,886p Debt, net assets and gearing ◦◦ Split 8.9%/11.1% in H1/H2 2,500 100 Net debt Net assets1 NAV gearing LTV ratio 2,250 2,304 90 • Equity shareholders’ funds 2,000 80 2,057 increased to £2,304m 1,750 1,860 70 1,739 1,663 1,500 60 • Net debt
Slide 11: EPRA NAV movement
EPRA NAV MOVEMENT • At £337.5m, the overall revaluation surplus in 2013 was almost double that in 2012 EPRA NAV per share 2,400 Revaluation surplus: 12 Income statement £335.6m 2,300 52 (10) (13) Comprehensive income1 £1.9m 54 (30) (13) 2,264 Per accounts £337.5m 2,200 326 Trading property2 £2.1m EP
Slide 12: EPRA profit before tax
EPRA PROFIT BEFORE TAX • Gross rental income increased by 5% to £130.9m pa EPRA profit before tax • Surrender premium includes £0.6m (net) at 1-2 Stephen Street W1 140 0.7 2.0 130.9 (9.3) • Admin costs up by 8% due largely to higher 120 staff costs 100 (26.4) • Breakdown of net finance costs: 80 £m
Slide 13: Gross property income
GROSS PROPERTY INCOME Movements in gross property income 2013 140 • Acquisitions include: 25 & 29 Berners Street £1.4m 9 & 16 Prescot Street £1.0m 1.7 Francis House £0.8m 135 10.1 (2.5) Mark Square House £0.7m 0.6 (4.0) 130 • Disposals include: 1-5 Grosvenor Place £2.0m 4.1 Triangle Centre, Scotland
Slide 14: Property outgoings, EPRA rental income and cost ratios
PROPERTY OUTGOINGS, EPRA RENTAL INCOME AND COST RATIOS Property outgoings 2013 2012 £m £m Property outgoings 8.8 10.4 Recurring property outgoings decreased by £1.7m Ground rents 0.4 0.5 mainly due to void costs at 132-142 Hampstead Road Surrender premiums paid 0.2 0.2 and Riverwalk House in 2012 Di
Slide 15: Cashflow
CASHFLOW Net cashflow movements • Increase in net debt 2013 2012 ◦◦ By £74.4m to £949.2m £m £m Cash from operations 57.5 52.5 • Acquisitions in 2013 cashflow: Acquisitions (130.1) (99.8) Capex (88.8) (108.4) (17.4) (78.6) Disposal proceeds 149.7 161.0 H1 Mark Square House EC2 £29.6m Dividends paid (
Slide 16: Debt summary
DEBT SUMMARY Proforma1 Dec 2013 Dec 2012 • In 2013 we arranged £800m of new facilities Total facilities £1,351m £1,251m £1,204m Net debt £950.3m £949.2m £874.8m • All were unsecured Unutilised facilities £382m £283m £333m ◦◦ Improves operational flexibility ◦◦ Greater access to capital markets Perce
Slide 17: Debt refinancing
DEBT REFINANCING Three steps • £100m unsecured US private placement loan signed in Nov 2013 and drawn down in Jan 2014 3 ◦◦ £75m for 20 years at 4.68% ◦◦ £25m for 15 years at 4.41% • New £550m unsecured revolving bank facility signed and drawn in Sept 2013 2 • Five revolving secured bank facilities
Slide 18: Debt refinancing
DEBT REFINANCING • Impact upon average interest rates and maturities following refinancing: Dec 2012 Dec 2013 Proforma5 Average interest rate1 (spot) 4.63% 3.64% 3.88% Average interest rate2 (spot) 4.88% 4.10% 4.34% Average maturity of borrowings 6.1 years 6.3 years 7.7 years Uncharged properties £6
Slide 19: Debt maturities
DEBT MATURITIES • Weighted average maturity At 31 Dec 2013 Maturity profile of loan facilities - proforma as at Jan 2014 ◦◦ Facilities - 5.9 years £m ◦◦ Drawn amounts - 6.3 years 0 50 100 150 200 250 300 350 400 450 500 550 600 2014 At 31 Jan 2014 2015 2016 175 ◦◦ Facilities - 6.9 years 2017 70 20 ◦
Slide 20: Valuation and Portfolio Analysis
Islington Camden Euston Old Street Bloomsbury Clerkenwell 6 Fitzrovia Shoreditch Marylebone/ Baker Street North of Oxford St The City Paddington Holborn Soho/ Covent Garden Mayfair Southbank VALUATION AND PORTFOLIO ANALYSIS Nigel George Victoria London’s Tech Belt proving a good habitat for London’s
Slide 21: A strong valuation performance in 2013
A STRONG VALUATION PERFORMANCE IN 2013 Delivered through development surpluses, rental growth and yield shift • Underlying 12.6% (2012: 7.3%) • City borders strongest throughout the year 20.3% Projects delivered a 25.1% valuation uplift • Completed £219.3m - uplift 27.2% ◦◦ 1 Page Street, The Buckle
Slide 22: Continued out performance against benchmarks
CONTINUED OUT PERFORMANCE AGAINST BENCHMARKS • Underlying valuation increase 12.6% or 13.9% if 1-5 Grosvenor Place SW1 included at disposal price • Total property return 18.5% (2012: 11.6%) ◦◦ IPD Central London Offices 15.8%1 ◦◦ IPD All UK Property 10.5%1 Drivers of performance Valuation performanc
Slide 23: Yields and income
YIELDS AND INCOME EPRA yields • Net initial 4.2% (Dec 2012: 4.3%) ◦◦ ‘Topped-up’ net initial 4.8% Valuation yields (Dec 2012: 4.8%) 9 Derwent Portfolio - True Equivalent Yield 10 Year Gilt All Coupon • True equivalent yield 5.28% Yield % or Gap between DL TEY and 10-year Gilt Derwent Portfolio - Ini
Slide 24: Solid rental growth
SOLID RENTAL GROWTH • Underlying rental value growth 5.7% - at the top end of our expectations of 4-6% ◦◦ New lettings achieved 8.4% above Dec 2012 ERV ◦◦ Rent review evidence tends to lag the market - starting to come through Rental value growth • City borders outperforming at 8.4% 15 ◦◦ West End 5
Slide 25: Significant income growth potential
SIGNIFICANT INCOME GROWTH POTENTIAL • Annual contracted rent £126.0m with ERV £197.0m • Strong reversion at £71.0m1 Build up of reversion ◦◦ 43% of reversion locked-in (Dec 2012: 38%) 80 ◦◦ Contractual growth • 1 Page Street SW1 £3.0m 70 17.6 • The Buckley Building EC1 £2.0m • 4 & 10 Pentonville Roa
Slide 26: Low average office rents
LOW AVERAGE OFFICE RENTS • Average ‘topped-up’ office rents under £33 psf ◦◦ Core income portfolio1 £39.07 psf ◦◦ Development / potential portfolio2 £25.95 psf Central London office rent profile • Average ERV undemanding as under £40 psf ◦◦ Core income portfolio £41.44 psf 45 ◦◦ Development / potent
Slide 27: Lettings and Asset Management
Islington +12% Camden Euston Old Street Bloomsbury Clerkenwell +15% 6 +30% Fitzrovia Shoreditch Marylebone/ Baker Street +11% +10% North of +11% Oxford St The City Paddington Holborn +15% +23% Soho/ Covent Garden Mayfair +10% +14% Southbank LETTINGS AND ASSET MANAGEMENT Paul Williams Good performanc
Slide 28: Core income portfolio has opportunities
CORE INCOME PORTFOLIO HAS OPPORTUNITIES Letting available space • 2013 was an exceptional year securing £21.8m1 of new income (643,200 sq ft) at an average 8.4% above December 2012 ERV ◦◦ Core income lettings secured £11.3m - 267,500 sq ft ◦◦ On-site pre-lets totalled £10.5m (84% Publicis) - 375,700
Slide 29: Raising the rental tone
RAISING THE RENTAL TONE c t f1 10%2 rb 32%2 rb 11%2 ps 1 1 je u sf ef u f o 50 ef p ps Pr . R R 0 57 00 .0 -£ 5. £7 0 5 £4 £4 The Buckley Building EC1 - 85,000 sq ft • Unilever 4 Hardwick Street EC1 - 12,000 sq ft • Hill+Knowlton (WPP) • Ve Interactive Tower House WC2 - 4,200 sq ft • Tipp24 • Global
Slide 30: Managing demand
MANAGING DEMAND r r n ie on ie on atio p p u s i u s i itig 2 2 7% 9% 9%2 cc n sf cc n sf 1 O xpa 50 p O xpa 50 p 2 m p a e 7. e 2. HS .6 m £4 £4 £1 132-142 Hampstead Road NW1 - 217,000 sq ft Greencoat & Gordon House SW1 • UCL - 10,600 sq ft 1 Oliver’s Yard EC2 - 13,100 sq ft • VCCP • Morningstar 1
Slide 31: Case study 1: Charlotte Building W1
CASE STUDY 1: CHARLOTTE BUILDING W1 1 • 47,200 sq ft development completed 2009, largely % 12 let at rents c.£40-45 psf up e alu • Used potential reviews/breaks to change tenant V mix and extend leases • Took surrender of 12,400 sq ft from LinkedIn and BrandOpus on ground and first floor. BrandOpus
Slide 32: Case study 2: Grafton Hotel W1
CASE STUDY 2: GRAFTON HOTEL W1 % • Grafton Hotel, 130 Tottenham Court 22 Road W1 (330 rooms) up e alu • Occupier’s lease extended from V 77 years to 150 years • Rent raised 56% to £920,000 pa • New rent to increase by 3% pa • Subject to upward only open market rent review in 2033 (tenant break) • Ad
Slide 33: Construction costs
CONSTRUCTION COSTS General market • Inflationary pressures rising Building costs • Natural part of economic cycle • We expect costs to rise 3-5% in 2014 200 175 Derwent London’s response Building Cost Index (1999=100) • Our experience helps: 150 ◦◦ Good relationships with construction groups / teams
Slide 34: Projects
Islington Camden Euston Thameslink Old Street Bloomsbury Clerkenwell 6 1 e Fitzrovia 8 Farringdon Shoreditch Marylebone/ 5 Liverpool Street 9 Baker Street Paddington North of 3 7 Tottenham Oxford St 2 4 Court Road The City Paddington Holborn Bond Street Thameslink Projects on site Soho/ 1. Turnmill
Slide 35: Development pipeline & opportunity
DEVELOPMENT PIPELINE & OPPORTUNITY Existing portfolio - 5.7m sq ft 45% core income 55% development/potential 2.6m sq ft 3.1m sq ft Existing Proposed Portfolio area area weighting m sq ft m sq ft Growth drivers: Future potential 28% 1.6 tbc Rental upside Asset management Appraisals 10% 0.6 0.9 Regear
Slide 36: Delivering our plans
DELIVERING OUR PLANS t t le le e- e- Pr Pr On-site projects Turnmill EC1 40 Chancery Lane WC2 ial ial • 586,000 sq ft on-site1 nt nt side side Re Re • 27% pre-let (Publicis) • 30,400 sq ft2 residential to be sold ON-SITE 10% • Started White Collar Factory Queens W2 73 Charlotte Street W1 (50% of the
Slide 37: On-site case study 1: White Collar Factory EC1
ON-SITE CASE STUDY 1: WHITE COLLAR FACTORY EC1 Creating for creatives • Total 293,000 sq ft • White Collar Factory tower 237,000 sq ft • Campus ◦◦ Offices 39,000 sq ft ◦◦ Retail 9,000 sq ft ◦◦ Residential 8,000 sq ft • Public open square • ERV £13.9m • Capex £121m ●● Appendix 25 36
Slide 38: On-site case study 2: 1-2 Stephen Street W1
ON-SITE CASE STUDY 2: 1-2 STEPHEN STREET W1 Rolling refurbishment • Acquired in 2010 (251,000 sq ft) • Executing our business plans 1-2 STEPHEN STREET Business plan in 2010 Delivery New streetscape 2013-15 CHARLOTTE BUILDING Extend retail 2015 Refurbish up to 64,000 sq ft offices1 2013-14 PRIM
Slide 39: On-site case study 2: 1-2 Stephen Street W1
ON-SITE CASE STUDY 2: 1-2 STEPHEN STREET W1 Refurbishing 50% of existing space since acquisition Adding 8% to lettable floorspace 120 metres TOTTENHAM COURT ROAD Phase 1 (2013)1 18,300 sq ft pre-let to BrandOpus at £52.50 psf on ground floor in 2012 Phase 2 (2014) 83,800 sq ft under construction for
Slide 40: On-site case study 2: 1-2 Stephen Street W1
ON-SITE CASE STUDY 2: 1-2 STEPHEN STREET W1 Phase 1 - Studios 2, 3 and 4 let (18,300 sq ft) Phase 2 - 83,800 sq ft offices to let STUDIO 1 TO LET NEW ROOF TERRACES - PHASE 2 39
Slide 41: Tottenham Court Walk W1 - 40,000 sq ft retail
TOTTENHAM COURT WALK W1 - 40,000 sq ft retail m £3 c. 2m V £1 ER ex p Ca Architectural blade New office reception Phase 1 Phase 3 Phase 3 extension Phase 3 extension Increases retail from 24,000 sq ft to 40,000 sq ft TOTTENHAM COURT ROAD 40
Slide 42: Next development projects (consented)
NEXT DEVELOPMENT PROJECTS (CONSENTED) Creating space adding value • Consented schemes to deliver 1.0m sq ft on completion Major consented project pipeline (starts) 400 350 300 CONSENTED 7% Floorspace (’000 sq ft) 250 80 200 Charlotte Street W1 55-65 1 150 North Oxford Wharf Street 100 Road W1 W2 50
Slide 43: Turning plans into reality: Charlotte Street W1
TURNING PLANS INTO REALITY Consented projects: 80 Charlotte Street W1 42
Slide 44: Projects taking shape: Charlotte Street W1
PROJECTS TAKING SHAPE Consented projects: 80 Charlotte Street W1 • Start 2015 • 380,000 sq ft mixed-use ◦◦ 322,000 sq ft offices ◦ ◦ 34,000 sq ft private residential ◦ ◦ 10,000 sq ft affordable residential ◦ ◦ 14,000 sq ft retail • Office rent c.£65 psf • Capex c.£150m • Completion H2 2017 43
Slide 45: Turning plans into reality: 55-65 North Wharf Road W2
TURNING PLANS INTO REALITY Consented projects: 55-65 North Wharf Road W21 • Start c.2016 • 240,000 sq ft offices • Office ERV c.£57.50 psf • Capex £110m • Completion c.2018 1 Option agreement in place to regear headlease 44
Slide 46: Projects taking shape: 55-65 North Wharf Road W2
PROJECTS TAKING SHAPE 55-65 North Wharf Road W2 45
Slide 47: Turning plans into reality: Oxford Street W1
TURNING PLANS INTO REALITY Consented projects: 1 Oxford Street W1 - 275,000 sq ft1 Site 2 Site 1 • Site 1 27,000 sq ft offices • Site 2 177,000 sq ft offices 34,000 sq ft theatre 37,000 sq ft retail • Start c.2018 • Completion c.2020 1 Subject to Derwent London exercising its option to acquire the s
Slide 48: Projects Part II: Acquisitions and Disposals
Islington Camden Euston Thameslink Old Street Bloomsbury Clerkenwell 1 Farringdon Fitzrovia Shoreditch Marylebone/ 2 Liverpool Street 9 Baker Street Paddington North of 3 Tottenham Oxford St Court Road The City Paddington Bond Street Holborn 3 Thameslink Soho/ Covent Garden Mayfair PROJECTS PART II
Slide 49: Additional potential from 38% of the portfolio
ADDITIONAL POTENTIAL FROM 38% OF THE PORTFOLIO Appraisals expected to add a further 0.3m sq ft to the portfolio1 FUTURE POTENTIAL 28% ◦◦ Existing space 0.6m sq ft ◦◦ Potential space 0.9m sq ft ◦◦ Currently nine projects APPRAISALS 10% Future development potential in another 28% of the portfolio ◦◦ E
Slide 50: Appraisals
APPRAISALS 1 1 5 6 01 01 c.113,000 sq ft2 c.75,000 sq ft2 2 2 9 Prescot Street E1 Monmouth House EC1 3 1, 1 6 8 c.250,000 sq ft2,4 1 01 c.100,000 sq ft2 2 20 25 & 29 Berners Street W1 19-35 Baker Street W1 1 Earliest landlord possession 2 Potential scheme size 3 Earlier tenant break 4 Group’s share
Slide 51: Future potential
FUTURE POTENTIAL 57,000 sq ft1 63,700 sq ft1 91,400 sq ft1 19 Charterhouse Street EC1 22 Kingsway WC2 Francis House SW1 107,900 sq ft1 79,900 sq ft1 90,800 sq ft1 Henry Wood House W1 Bush House WC2 Holden House W1 1 Existing floor area 50
Slide 52: Another retail opportunity at east end of Oxford Street
ANOTHER RETAIL OPPORTUNITY AT EAST END OF OXFORD STREET Holden House TO T Potential (+51%) sq ft TE 6 NH Retail 73,000 AM Offices 53,000 CO Residential 11,000 UR 137,000 TR 5 OA Oxford Street frontage 46m D POTENTIAL SCHEME Potential retail depth 42m 3 4 7 1 Derwent portfolio1 sq ft D STRE ET OXFOR
Slide 53: Acquisitions in 2013
ACQUISITIONS IN 2013 Rental Lease Property Area Cost1 Cost Net yield income Rent length sq ft £m £ psf % £m £ psf years2 Mark Square House EC2 61,700 29.6 479 5.1 1.5 24.25 4.0 3 19 Charterhouse Street EC1 63,700 41.3 648 4.1 1.7 26.50 6.1 22 Kingsway WC2 91,400 59.3 649 5.1 3.0 32.80 7.3 Total4 216
Slide 54: Adding to Shoreditch & Tech Belt
ADDING TO SHOREDITCH & TECH BELT Adding in the Tech Belt Under appraisal to add 8,000 sq ft Lease expires 2017 TEA BUILDING MARK SQUARE HOUSE 1 OLIVER’S YARD MONMOUTH HOUSE WHITE COLLAR FACTORY SILICON ROUNDABOUT 53
Slide 55: Adding to Crossrail & Tech Belt
ADDING TO CROSSRAIL & TECH BELT 19 CHARTERHOUSE STREET JOHNSON BUILDING FARRINGDON STATION CROSSRAIL THAMESLINK UNDERGROUND Prominent corner building TURNMILL Opposite Farringdon Crossrail interchange Located in the Tech Belt Retail potential on ground floor BUCKLEY BUILDING 54
Slide 56: Maintaining village diversity
MAINTAINING VILLAGE DIVERSITY 40 CHANCERY LANE BUSH HOUSE 22 KINGSWAY Adding to Holborn village Good sized block Rent review 2015 Retail and office opportunity longer term 55
Slide 57: Disposals in 2013
DISPOSALS IN 2013 • Sales of c.£150m (£1,225 psf) at 1.9% initial yield ◦◦ 1-5 Grosvenor Place SW1 secured most of potential development upside 5-6 years ahead of completion ◦◦ Commercial Road E1 properties sold with benefit of planning for student accommodation • Total profit on sales £53.5m repres
Slide 58: Outlook for Central London Property
Islington Camden Euston Old Street Bloomsbury Clerkenwell 6 Fitzrovia Shoreditch Marylebone/ Baker Street North of Oxford St The City Paddington Holborn Soho/ Covent Garden Mayfair Southbank OUTLOOK FOR CENTRAL LONDON PROPERTY John Burns Victoria Improving London economy has led to broad based deman
Slide 59: West End office demand
WEST END OFFICE DEMAND 2013 Outlook 2013 Outlook West End take-up Rental Take-up values 6 5 Derwent London’s view1 • Good demand for our properties from a broad spread Average of sectors 4 Take-up (million sq ft) • Rents steadily rising • Stronger growth in specific buildings/areas • Expect current
Slide 60: West End office supply
WEST END OFFICE SUPPLY 2013 Outlook Vacancy rate West End office development pipeline 2.0 12.5 Derwent London’s view1 Completed Under construction • Vacancy rate set to remain low 1.8 Proposed • Longer term supply picking up 1.6 Vacancy rate 10.0 Completed average • Bank lending to development still
Slide 61: London's Tech Belt
LONDON’S TECH BELT City Fringe availability (ex SE1) • Estimated at c.24m sq ft (11% central London office stock) 4.5 18 Available space Availability 4.0 16 • Increasingly in the spotlight 3.5 14 Available space (million sq ft) 3.0 12 Vacancy rate (%) 2.5 10 • Major lettings in 2013 (Amazon, Google,
Slide 62: Central London office investment market
CENTRAL LONDON OFFICE INVESTMENT MARKET • 2013 proved to be a bumper year 2013 Outlook ◦◦ £19.4bn transactions (£7.2bn in H1 / £8.0bn Q4) Yields ◦◦ Overseas investors continue to dominate (68%) ◦◦ West End yields -25 bps to 3.75% ◦◦ City yields -50 bps to 4.50% Central London office investment Derwe
Slide 63: Outlook for Derwent London
Islington Camden Euston Old Street Bloomsbury Clerkenwell 6 Fitzrovia Shoreditch Marylebone/ Baker Street North of Oxford St The City Paddington Holborn Soho/ Covent Garden Mayfair Southbank OUTLOOK FOR DERWENT LONDON John Burns Victoria Well positioned for growth 62
Slide 64: Outlook for 2014
OUTLOOK FOR 2014 • Rental growth at early stage of cycle Estimated to grow around 5-7% in 2014 • Yields at more advanced stage in cycle Our Expected to remain firm in 2014 market • Key to medium-term is the London economy and impact on demand Estimated to be at early / mid stage of cycle • Too early
Slide 65: Appendices
DERWENT LONDON APPENDICES 64
Slide 66: Appendices
APPENDICES Page Page 1. Group balance sheet 66 17. Lease expiry profile and lease length 82 2. Net asset value per share 67 18. Rent and tenant banding 83 3. Group income statement 68 19. Central London office vacancy 84 4. Reconciliation of IFRS and EPRA profits 69 20. Central London office rental
Slide 67: Appendix 1 - Group balance sheet
APPENDIX 1 - GROUP BALANCE SHEET Dec 2013 Dec 2012 £m £m Investment property 3,242.9 2,772.6 Owner-occupied property 19.7 17.9 Other non-current assets 80.5 74.2 3,343.1 2,864.7 Non-current assets held for sale 4.8 16.5 Other current assets and liabilities (31.8) (31.4) Trading property 22.6 - Cash
Slide 68: Appendix 2 - Net asset value per share
APPENDIX 2 - NET ASSET VALUE PER SHARE Dec 2013 Dec 2012 Diluted Diluted £m p £m p Net assets attributable to equity shareholders 2,304.0 1,860.4 Conversion of 2.75% unsecured convertible bonds 2016 167.7 - Net assets for diluted NAV 2,471.7 2,230 1,860.4 1,814 Revaluation of trading properties 2.1
Slide 69: Appendix 3 - Group income statement
APPENDIX 3 - GROUP INCOME STATEMENT Year ended Year ended Dec 2013 Dec 2012 £m £m Gross property income 131.6 124.8 Other income 2.0 2.5 Property outgoings (9.3) (10.6) Property outgoings Rates credits - (9.3) (10.3) 0.3 Net property income 124.3 117.0 Admin expenses (26.4) (24.5) Total administrati
Slide 70: Appendix 4 - Reconciliation of IFRS and EPRA profits
APPENDIX 4 - RECONCILIATION OF IFRS AND EPRA PROFITS Reconciliation of IFRS profit before tax to EPRA and underlying profit before tax Year ended Dec 2013 Year ended Dec 2012 EPS p £m EPS p £m IFRS profit before tax 446.40 467.9 222.76 228.1 Revaluation surplus (335.6) (174.4) Joint venture revaluat
Slide 71: Appendix 5 - EPRA like-for-like rental income
APPENDIX 5 - EPRA LIKE-FOR-LIKE RENTAL INCOME Properties owned throughout Development the period Acquisitions Disposals property Total £m £m £m £m £m 2013 Rental income 105.1 5.2 1.6 19.0 130.9 Property expenditure (4.8) (0.1) (0.4) (3.9) (9.2) Net rental income 100.3 5.1 1.2 15.1 121.7 Other1 1.9 -
Slide 72: Appendix 6 - Debt facilities
APPENDIX 6 - DEBT FACILITIES £m £m Maturity 6.5% secured bonds 175 March 2026 3.99% secured loan 83 October 2024 2.75% unsecured convertible bonds 175 July 2016 1.125% unsecured convertible bonds 150 July 2019 Committed bank facilities Term - secured 28 June 2018 Term/revolving credit - secured 90 D
Slide 73: Appendix 7 - Net debt
APPENDIX 7 - NET DEBT Dec 2013 Dec 2012 £m £m Financial liabilities - due after more than 1 year 961.7 879.2 Acquired fair value of secured bonds less amortisation (15.6) (16.4) Unamortised loan arrangement costs 7.8 6.7 Leasehold liabilities (8.2) (8.9) Unamortised issue costs on unsecured bonds 5.
Slide 74: Appendix 8 - Fixed rates and hedging
APPENDIX 8 - FIXED RATES AND HEDGING Proforma Dec 2013 Dec 2012 Proportion of drawn facilities at fixed rates or hedged 93% 83% 92% 1 Weighted average duration of swaps 4.8 years 4.8 years 5.8 years Mark-to-market cost of swaps £15.9m £15.9m £54.3m Weighted average duration of fixed rate instruments
Slide 75: Appendix 9 - Convertible bonds 2019
APPENDIX 9 - CONVERTIBLE BONDS 2019 • £150m 1.125% unsecured convertible bonds repayable July 2019 ◦◦ Launched and issued July 2013 • Initial conversion price £33.35; 35% premium to reference share price of £24.70 • IFRS interest rate: 2.67% Income statement presentation 2013 2014 £m £m Interest 0.7
Slide 76: Appendix 10 - Valuation performance by village
APPENDIX 10 - VALUATION PERFORMANCE BY VILLAGE Valuation Valuation Weighting movement Dec 2013 Dec 2013 20131 £m % % West End: Central Fitzrovia2 1,236.6 37 11.3 Victoria 416.5 12 7.7 Baker Street/Marylebone 155.0 5 10.9 Soho/Covent Garden 141.8 4 13.7 Mayfair 66.0 2 9.6 Paddington 60.6 2 14.8 2,076
Slide 77: Appendix 11 - Valuation drivers & rental value growth
APPENDIX 11 - VALUATION DRIVERS & RENTAL VALUE GROWTH True equivalent yield movement1 7.5 15bp • True equivalent yield 5.28%1 7.0 True equivalent yield (%) 83bp 97bp 6.5 55bp 6.0 43bp 12bp 12bp 4bp 3bp 3bp 3bp 24bp 5.5 37bp 7bp 5.0 H2 07 H2 08 H2 09 H2 10 H2 11 H2 12 H2 13 Rental value growth1 2012
Slide 78: Appendix 12 - Valuation yields
APPENDIX 12 - VALUATION YIELDS Yields’ profile1 EPRA initial yields 8 Pre-EPRA EPRA Net initial ‘Topped-up’ yield initial yield 7 % % West End 3.9 4.6 6 Yield (%) City Borders 4.5 5.3 5 Central London 4.1 4.8 Provincial 6.2 6.4 4 Initial yield EPRA portfolio 4.2 4.8 True equivalent yield Reversionar
Slide 79: Appendix 13 - Portfolio reversion
APPENDIX 13 - PORTFOLIO REVERSION Rent uplift pa Rent pa £m £m £m Contracted rental income, net of ground rents 126.0 Contractual rental uplifts 1 Page Street SW1 3.0 The Buckley Building EC1 2.0 4 & 10 Pentonville Road N1 2.1 132-142 Hampstead Road NW1 1.0 Other 14.3 22.4 Pre-let projects 40 Chance
Slide 80: Appendix 14 - Vacant space - available and projects
APPENDIX 14 - 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 (EPRA) Tower House WC2 6 - 6 0.4 - 0.4 - 0.4 Tea Buildin
Slide 81: Appendix - Vacancy rates
APPENDIX 15 - VACANCY RATES • Maintained strong tenant retention during 2013 • EPRA vacancy rate fell from 1.6% to 1.0% in 2013 ◦◦ Available space to occupy 38,000 sq ft • Portfolio average lease length 7.1 years ◦◦ Minor refurbishments 51,000 sq ft ◦◦ On-site major projects 586,000 sq ft Lease expi
Slide 82: Appendix 16 - Portfolio statistics by village
APPENDIX 16 - 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 83: Appendix - Lease expiry profile and lease length
APPENDIX 17 - LEASE EXPIRY PROFILE AND LEASE LENGTH Expiries and breaks as percentage of portfolio income1 West City End Borders 2014 2015 2016 2017 2018 Total Expiries 5 - 5 6 5 4 10 30 Holding over 1 - 1 - - - - 1 Rolling breaks 4 1 5 1 - - 1 7 Single breaks 2 1 3 2 4 2 2 13 12 2 14 9 9 6 13 51 Pr
Slide 84: Appendix 18 - Rent and tenant banding
APPENDIX 18 - RENT AND TENANT BANDING Central London ‘topped-up’ office rent banding1 Profile of tenants’ business sector2 £60+ psf £0 - £20 psf Other 4% 6% 7% Financial 4% £20 - £30 psf Media, TV, marketing Charities £50 - £60 psf 12% 4% and advertising 20% 28% Government and public admin 7% Retail
Slide 85: Appendix - 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 Source: CBRE 84
Slide 86: Appendix - Central London office rental growth
APPENDIX 20 - CENTRAL LONDON OFFICE RENTAL GROWTH 40 30 20 Rental growth (% pa) 10 0 Q1 00 Q1 01 Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 -10 -20 West End -30 City Central London -40 Source: CBRE 85
Slide 87: Appendix 21 - Major projects - 2013 completions
APPENDIX 21 - MAJOR PROJECTS - 2013 COMPLETIONS • Completed 248,000 sq ft - 100% let - securing rents of £10.9m pa • Profit on cost 39% 1 Page Street SW1 The Buckley Building EC1 Morelands Buildings EC1 • 127,000 sq ft - £5.3m pa • 85,000 sq ft - £4.2m pa • 17,800 sq ft - £0.6m pa • Pre-let Burberry
Slide 88: Appendix - Profit on cost of developments
APPENDIX 22 - PROFIT ON COST OF DEVELOPMENTS White Collar Factory 73 Charlotte Street 40 Chancery Lane Turnmill Queens Completion Q3 2014 Q4 2014 Q4 2014 Q3 2015 Q3 2016 Commercial area (sq ft) 461,900 70,500 101,800 2,700 1,900 285,000 Residential area (sq ft) 40,300 - - 18,700 13,600 8,000 Est. fu
Slide 89: Appendix 23 - Turnmill EC1 and 40 Chancery Lane WC2
APPENDIX 23 - TURNMILL EC1 AND 40 CHANCERY LANE WC2 • 155,600 sq ft office element pre-let to Publicis Groupe for £7.8m1 • Completion H2 2014 t t le le e- e- pr pr % % 83 96 Turnmill EC1 (70,500 sq ft) 40 Chancery Lane WC2 (101,800 sq ft) • 58,200 sq ft offices pre-let £3.1m pa • 97,400 sq ft office
Slide 90: Appendix 24 - On-site residential projects
APPENDIX 24 - ON-SITE RESIDENTIAL PROJECTS Queens, Bishop’s Bridge Road W2 73 Charlotte Street W1 • 16 private flats (18,700 sq ft) for sale • Nine private flats (11,700 sq ft) • 2,700 sq ft retail (ERV c.£0.1m pa) • Two affordable flats (1,900 sq ft) • Completion Q4 2014 • 1,900 sq ft offices (ERV
Slide 91: Appendix 25 - White Collar Factory EC1 - 293,000 sq ft
APPENDIX 25 - WHITE COLLAR FACTORY EC1 - 293,000 sq ft WHITE COLLAR FACTORY CAMPUS 1.1 ACRES MONMOUTH HOUSE 90
Slide 92: Appendix - Next steps: current and future potential
APPENDIX 26 - NEXT STEPS: CURRENT AND FUTURE POTENTIAL • Three existing buildings of Tottenham Court Walk, Impact of three developments on ERV 80 Charlotte Street, 55-65 North Wharf Road comprise 30 the majority of the next potential development phases Current rental income 25 Current reversion 37 P
Slide 93: Appendix 27 - Potential project delivery 2014-2020
APPENDIX 27- POTENTIAL PROJECT DELIVERY 2014-2020 800 Under construction 700 Starts in next 12 months Potential starts Estimated completions (’000 sq ft) 600 500 Balmoral Grove N7 400 Baker Street 300 W1 Turnmill 80 200 EC1 White Charlotte Collar Street 55-65 Stephen Factory W1 North 1 Oxford Street
Slide 94: Appendix 28 - Project pipeline 2014-2020
APPENDIX 28 - PROJECT PIPELINE 2014-2020 On-site 2014-6 Other consented Potential pipeline projects1 + starts + projects + Appraisals = (by 2020) 0.6m 0.6m 0.4m 0.9m 2.5m sq ft Turnmill EC1 Chancery Lane WC2 Wedge House SE1 1 Oxford Street W1 ed ed te te nt nt 1.2m sq ft -si -si 1.3m sq ft se se On
Slide 95: Appendix 29 - Project summary 2014-16
APPENDIX 29 - PROJECT SUMMARY 2014-16 Current Pre Current net scheme Proposed 2014 2015 2016+1 Total office Property income area area capex capex capex capex Delivery ERV £m pa ‘000 sq ft ‘000 sq ft £m £m £m £m date £psf On-site projects3 Turnmill EC1 - 41 70 12 - - 12 Q3 2014 55.00 40 Chancery Lane
Slide 96: Appendix 30 - Project summary 2015+
APPENDIX 30 - PROJECT SUMMARY 2015+ Current Pre net scheme Proposed Earliest Property income area area possession Comment £m pa ‘000 sq ft ‘000 sq ft year Consented Wedge House SE1 0.2 39 80 2014 Rolling break from 2014. Offices 1 Oxford Street W1 - - 275 c.2017 Option site. Offices, retail & theatr
Slide 97: Appendix 31 - Current project programme map
Islington APPENDIX 31 - CURRENT PROJECT PROGRAMME MAP Camden Euston Thameslink Old Street Bloomsbury Clerkenwell 6 1 Fitzrovia 8 Farringdon Shoreditch Marylebone/ 5 Liverpool Street 9 Baker Street Paddington North of 3 7 Tottenham Oxford St 2 4 Court Road The City Paddington Holborn Bond Street Tham
Slide 98: Appendix 32 - Management structure - executive team
APPENDIX 32 - 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 99: 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) forward-looking statements are not guarantees of future performance. of any nature is given nor