Derwent London Plc · LSE:DLN
Derwent London — Investor Day (November 2018)
46 slides from Derwent London's investor day presentation, Nov 30, 2018
Slide 1: Investor Presentation Property Tour
INVESTOR PRESENTATION property tour 30 NOVEMBER 2018
Slide 2: Timetable
TIMETABLE 11.30 Arrival at 25 Savile Row 12.00 Introduction John Burns, Chief Executive, Derwent London Paul Williams, Property Director, Derwent London Leasing Market Emily Prideaux, Head of Leasing, Derwent London Asset Management Ben Ridgwell, Head of Asset & Property Mgmt, Derwent London Oli Wil
Slide 3: Introduction
1 INTRODUCTION JOHN BURNS PAUL WILLIAMS
Slide 4: Capturing Reversion
2 CAPTURING REVERSION BUILD UP OF ERV1 £m 300 28.5 299.9 Annualised rent on straightline 15.2 271.4 basis £172.1m2 1.8 14.9 250 9.1 27.1 2.4 200 44.0 156.9 150 £73.5m £41.0m 100 50 0 Reversion Jun 18 Contractual Pre-let Pre-let Vacant Vacant On-site Reviews & JUN 18 Two ERV captured net rent uplifts
Slide 5: Leasing Market
3 leasing market EMILY PRIDEAUX
Slide 6: Leasing Update
4 LEASING UPDATE Total 2018 YTD lettings of £22.4m on 348,800 sq ft: • Almost double the £11.8m announced on 9 August 2018 • 7.8% above Dec 2017 ERV LETTING ACTIVITY (NOV 2018) (TO 8 NOV 2018) (+15.1% Brunel Building, +1.2% others) LETTINGS INCOME Rental income (£m pa) • H2 YTD lettings of £14.6m on
Slide 7: Leasing Update
5 LEASING UPDATE 2018 YTD lettings (by income) broken down into: • Pre-lets (53%) - Brunel Building W2 including Sony Pictures, FA Premier League, Coach and Alpha FX, and 80 Charlotte Street W1 CONFIDENTIAL • Recent refurbishments (9%) - Johnson Building SONY PICTURES EC1 and 25 Savile Row W1 COACH
Slide 8: Market Sentiment
6 MARKET SENTIMENT Good active requirements: 250,000 sq ft 100,000 sq ft Good active demand 2019 2019/20 Strong pre-let market 200,000 sq ft 80,000 sq ft 2019+ 2019 Lease lengths and incentives 100,000 sq ft 180,000 sq ft 2019/2025 2021 Flight to quality product 150,000 sq ft 180,000 sq ft Grade A s
Slide 9: Impact of Flexible Office Space
7 IMPACT OF FLEXIBLE OFFICE SPACE Central London office floorspace (million sq ft) Floorspace (million sq ft) 250 200 erviced office providers playing a S 150 significant role in London’s real estate market 100 Serviced office providers represent c.5% of total central London office market 50 eWork’s
Slide 10: A Product Driven Market
8 A PRODUCT DRIVEN MARKET RESPONDING TO MARKET SENTIMENT & OCCUPIER TRENDS EVOLVING EXPECTATIONS FOR OFFICE SPACE What are occupiers looking Amenity, service for from their real estate? and hospitality : Food & beverage Flexibility - term & space Cutting edge design Event curation Connectivity Mix o
Slide 11: Varied Lease Structures
9 VARIED LEASE STRUCTURES t* t le t le le e- 0% 0% pr 10 10 % 86 5-25 years 5-15 years 10-20 years t le t t e- le le pr % % 98 94 % 64 2-15 years 5-15 years 10-15 years *Based on commercial space
Slide 12: Derwent London's Approach to Flexi Spaces
10 DERWENT LONDON’S APPROACH TO ‘FLEXI’ SPACES Rent Min uplift • IWG let on traditional leases Q2 2017 Box.com £2.14m pa 28,500 sq ft £75.00 psf - • Short-term lettings prior to redevelopment Q1 2017 Adobe £1.01m pa 14,900 sq ft £67.50 psf £74.55 psf (Knotel, Runway East, eOffice) £67.50 psf - Q3 20
Slide 13: Lettings Summary
11 LETTINGS SUMMARY • A positive year with lettings of £22.4m (to 8 Nov 2018) • Lettings of £78.8m (all ahead of ERV) since June 2016 • Market sentiment remains good and over the course of 2018 we have seen large occupiers continue to endorse London as a leading Global City • Supply remains limited
Slide 14: Asset Management
12 ASSET MANAGEMENT BEN RIDGWELL OLI WILLIAMS RICH OLIVER
Slide 15: Asset Management - Focus on Income
13 ASSET MANAGEMENT - FOCUS ON INCOME • 87% of our portfolio is income producing • 13% is on-site, of which 62% is pre-let On-site Core income developments on-site 11% refurbishments • 58% is core income, let off an average 2% (pre-let) Consented Pre-let rent of £54 psf, with scope for asset 6% mana
Slide 16: Lease Events - Staying Close to Occupiers
14 LEASE EVENTS - STAYING CLOSE TO OCCUPIERS • Since 2010, 87% average tenant retention or re-let • We view lease events as an opportunity • Good relationships reduce the risk of LEASE EXPIRY ANDLEASE BREAK ANALYSIS1 vacancies EXPIRY AND BREAK ANALYIS1 Income % • Understanding what occupiers 100 7 8
Slide 17: Asset Management - Focus on Occupier Amenity
15 ASSET MANAGEMENT - FOCUS ON OCCUPIER AMENITY Rooftop Yoga at 20 Farringdon Road EC1 Wimbledon Tennis at The White Chapel Building E1 Café at The White Chapel Building E1
Slide 18: Greencoat & Gordon House SW1 - a case study
16 GREENCOAT & GORDON HOUSE sw1- a case study
Slide 19: Greencoat & Gordon House SW1 - 139,000 sq ft
ox 121 Court Services Plac Job 11 to 19 use 17 131 Centre Ho Artillery own e es) Ashd ment Offic House 1 to 17 32 ern (Gov Francis House, Francis Street, SW1 Artillary Place GREENCOAT & GORDON HOUSE sw1 - 139,000 SQ FT 1 Artillery Place 3 (site of) E C HOWICK PLA 21 40 1 23 9 2 PO 15 Fire Station Bl
Slide 20: The Tenant Relationship - VCCP
18 THE TENANT RELATIONSHIP - VCCP April 2011 September 2005 Building repositioned to March 2017 Derwent London welcomes accommodate future growth September 2016 Gordon Studios VCCP to Greencoat House requirements and long term Occupation: completed. Pre-let of in 3,000 sq ft commitment to Greencoat
Slide 21: VCCP Occupation in Greencoat & Gordon House
19 VCCP OCCUPATION IN GREENCOAT & GORDON HOUSE • Long term relationship with VCCP has seen their occupation increase from 3,000 sq ft in 2005 to 65,700 sq ft today • Rental tone increased from £33 psf to £60 psf Average rent (£ psf) Occupied floor area (’000 sq ft) 65 70 60 60 55 50 50 40 45 30 40 2
Slide 22: Taking an Opportunity
20 TAKING AN OPPORTUNITY • Basement occupied • 20,000 sq ft pre-let to by House of Fraser on Gymbox for 20 years at a a peppercorn rent to rent of £0.33m pa in 2054, surrendered June 2016 Jan 2014 • 13,300 sq ft self contained • Capex of £6.65m to ground and lower ground refurbish space office let t
Slide 23: Morelands EC1 - a case study
21 morelands ec1- a case study
Slide 24: Morelands EC1 - 89,500 sq ft
O AD Court LO 116 to 120 71 W 60 22 67 to ST o Factory 1t Sapperton 112 41 114 Court to 33 El 27 Sub Sta to 15 MORELANDS ec1 - 89,500 Melbray SQ FT 63 104 to House 55 to Parmoor 1 to 60 Court 110 El Sub Sta 10 2 10 0 4 2 59 • Long leasehold acquired in 1996 6 1 to to 53 3 49 47 to 5 8 7 9 Factory •
Slide 25: Building a Good Relationship with the Freeholder
23 BUILDING A GOOD RELATIONSHIP WITH THE FREEHOLDER 1996 Derwent Valley purchase 7.5% ground rent 60-year lease £18,750 pa 2011 Headlease regear 125-year lease 2018 10% ground rent £360,000 pa Jun 2135
Slide 26: Managing Occupier Diversity
24 MANAGING OCCUPIER DIVERSITY SMALL USERS <3,000 SQ FT 1-2 YEARS LARGE USERS 20-30,000 SQ FT 10 YEARS MEDIUM USERS 3-10,000 SQ FT 5 YEARS
Slide 27: Providing Flexibility for Businesses to Grow
25 PROVIDING FLEXIBILITY FOR BUSINESSES TO GROW Moved in March 1995 • 1,800 sq ft at £4,500 pa • £2.50 psf November 2018 • 29,400 sq ft at £1.62m pa • £55 psf • Ability to grow organically • Integrating workspaces through bridges and staircases
Slide 28: Thinking Small
26 THINKING SMALL • In 2017 we had nine small units totalling 7,000 sq ft • We opted to upgrade and reconfigure the space creating five units • We trialled “ready-to-go” space on three units: • Ready furnished • Fibre wired • All-inclusive including rents, rates and service charges • We offered simp
Slide 29: Summary
27 SUMMARY • Individual building business plan, but aligned with overall Group goals • Producing long-term sustainable performance • Teamwork with other client facing parts of the Group • Current trends: • Occupiers remain fully engaged • Derwent London has been successful letting smaller units this
Slide 30: Development
28 DEVELOPMENT BENJAMIN LESSER
Slide 31: Soho Place W1
29 SOHO PLACE W1 simon allford, ahmm
Slide 32: The Featherstone Building EC1
30 THE featherstone building ec1 PETER PULFORD, DERWENT LONDON
Slide 33: Conclusions & Q&A
31 CONCLUSIONs & Q&A JOHN BURNS
Slide 34: Property Tour
32 property tour
Slide 35: Brunel Building W2
33 BRUNEL BUILDING W2
Slide 36: Brunel Building, Canalside Walk W2
34 BRUNEL BUILDING, 2 CANALSIDE WALK W2 243,000 SQ FT - ON SITE 2001 Acquired 77,600 sq ft leasehold building for £22.2m before costs – tired, dated offices let at £20 psf 2008 Planning consent gained for a 316,000 sq ft office and residential scheme in two buildings 2012 Headlease extended from 83
Slide 37: Soho Place W1
35 SOHO PLACE W1
Slide 38: Soho Place W1 - 285,000 sq ft Consented
36 SOHO PLACE W1 285,000 SQ FT - CONSENTED 1986 Acquired a 25% leasehold interest in 135-155 Charing Cross Road (62,000 sq ft) 1998 Acquired remaining 75% leasehold interest and freehold in 135- 155 Charing Cross Road 006 2 Acquired 17 Oxford Street (3,300 sq ft) and Astoria (42,300 sq ft) 2009 Buil
Slide 39: 88-94 Tottenham Court Road W1
37 88-94 TOTTENHAM COURT ROAD W11
Slide 40: 88-94 Tottenham Court Road W1
38 88-94 tottenham court road W1 45,900 SQ FT - appraisal studies 1 2007 45,900 sq ft office and retail freehold building, a former LMS property, located on a prominent corner 47-year leasehold interest held by a third party 2018 Acquired 36-year leasehold interest for £42m before costs, £2.5m pa ne
Slide 41: NETWORK BUILDING W 1 1
MEE UIA Ie Pa EA RE, S/O i t Ba eats ay Va RO ei, Se, ——-
Slide 42: Network Building, 95-100 Tottenham Court Road W1
40 NETWORK BUILDING, 95-100 TOTTENHAM COURT ROAD W1 64,200 SQ FT - appraisal studies Network 90 Whitfield Building Street 2007 A freehold mixed-use building of 64,200 sq ft, a former LMS property, fronting Tottenham Court Road 2011 Acquired headlease for £31m before costs (expired 2054) - giving us
Slide 43: 80 Charlotte Street W1
41 80 CHARLOTTE STREET W11
Slide 44: 80 Charlotte Street W1 - 380,000 sq ft
42 80 CHARLOTTE STREET W1 380,000 SQ FT - on site 1 2007 Outdated 234,000 sq ft of offices, a former LMS property, let to Saatchi & Saatchi (Publicis Groupe) 1.4 acre island site in a core West End location 2011 Planning permission granted for a 380,000 sq ft mixed-use Make designed project: - 322,0
Slide 45: Derwent London Attendees
43 DERWENT LONDON ATTENDEES JOHN BURN S * Chief Executive SIMO N SILV ER * Property Director DAMI A N W I S N I EW S K I * Finance Director PAUL WIL L I A MS* Property Director NI GE L GEORGE* Property Director DAV ID SILV ER M A N* Property Director B EN RI DGW ELL* Head of Asset & Property Managem
Slide 46: Disclaimer
44 DISCLAIMER This presentation has been prepared by Derwent London plc (the “Company”). This presentation is for information purposes only and does not constitute an No representation or warranty (express or implied) of any nature is given nor offering document or an offer of transferable securitie