Derwent London Plc · LSE:DLN
Derwent London — H1 2021 Earnings Presentation
106 slides from Derwent London's earnings presentation, 2021
Slide 1: Interim Results 2021
Interim Results 2021
Slide 2: Contents
CONTENTS Presenters Contents Paul Williams Introduction and overview 01 Damian Wisniewski Developments 09 Nigel George Leasing and asset management 17 David Silverman Results and financial review 26 Emily Prideaux Valuation and portfolio analysis 38 Investment 43 Summary 53 Appendices 55 Disclaimer
Slide 3: Introduction and Overview
INTRODUCTION AND OVERVIEW PAUL WILLIAMS 1
Slide 4: Introduction
INTRODUCTION London has proved resilient GUIDANCE OUR DEVELOPMENT PIPELINE • Office rents performing better than expected ERV guidance On-site • Raising our ERV guidance developments • Investment yields have firmed Raised to +2% to -2% 410,000 sq ft Positive results and financial strength from 0% to
Slide 5: Central London Office Occupier Market
CENTRAL LONDON OFFICE OCCUPIER MARKET IMPROVING BUSINESS WAR FOR TALENT CONFIDENCE ACCELERATED CHANGE FLIGHT TO QUALITY IN OFFICE USE Derwent London plc - Interim Results 2021 3
Slide 6: Central London Office Investment Market
CENTRAL LONDON OFFICE INVESTMENT MARKET LOOKING BEYOND COVID-19 LOW INTEREST RATES STRONG DEMAND ATTRACTIVE COMPARABLE VALUES Yield (%) EUROPEAN PRIME OFFICE YIELDS 6.0 Cyclical low Current yield CENTRAL LONDON OFFICE INVESTMENT 5.5 Value of investment transactions (£bn) 5.0 9 Quarter total 4 quarte
Slide 7: New Investment Activity
Chalk Farm NEW INVESTMENT ACTIVITY Caledonian Road Camden Road Essex Road Camden Town • Two Knowledge Quarter Primrose Hill The Knowledge acquisitions for £214.6m • Potential Baker Street W1 Quarter Carnegie St Disposal development JV for £64.4m Islington Wharfdale Rd Angel • Accelerated development
Slide 8: Progressing the Pipeline
PROGRESSING THE PIPELINE On-site developments - 410,000 sq ft 1 2 1 2 8% of portfolio Soho Place W1 The Featherstone Building EC1 285,000 sq ft 125,000 sq ft Next phase - 565,000 sq ft 1 3 4 5 3 4 5 6% of portfolio 1 19-35 Baker Street W1 Network Building W1 Bush House WC2 298,000 sq ft 112,000 to 1
Slide 9: A Responsible Business
A RESPONSIBLE BUSINESS Journey to net zero 2030 • Portfolio 99% 2023 EPC compliant • Completed all electric retrofit at 6-8 Greencoat Place • Updated Responsible Development Framework • Set building specific energy reduction targets The Soup Kitchen Counselling Room Supporting local communities • Co
Slide 10: Market Dynamics and an Evolving Business
MARKET DYNAMICS AND AN EVOLVING BUSINESS Market dynamics • Business confidence supports economic growth • Increased letting activity • Limited supply of new space • Two-tier market with flight to quality • Strong investment demand Derwent London, an evolving business • Retain more of our larger mode
Slide 11: Developments
DEVELOPMENTS PAUL WILLIAMS 9
Slide 12: Developments - H1 2022 Completions
DEVELOPMENTS - H1 2022 COMPLETIONS The Featherstone Building EC1 Soho Place W1 • 125,000 sq ft office scheme • 285,000 sq ft office and retail scheme • A speculative development • 100% offices pre-let or pre-sold • Multi-let strategy underway with encouraging • 36,000 sq ft retail available with ERV
Slide 13: 19-35 Baker Street W1 - Our Next Major Development
19-35 BAKER STREET W1 - OUR NEXT MAJOR DEVELOPMENT Derwent London plc - Interim Results 2021 • Appendices 41 to 43 11
Slide 14: 19-35 Baker Street W1
• 298,000 sq ft consented scheme: • 218,000 sq ft offices • 52,000 sq ft residential • 28,000 sq ft retail • +108% uplift in floorspace • On site Oct 2021 • Completion H1 2025 19-35 Baker Street W1 12
Slide 15: Network Building W1 - Planning Success in H2 2021
NETWORK BUILDING W1 - PLANNING SUCCESS IN H2 2021 • Two schemes consented: • Offices and ground floor retail (137,000 sq ft) • Life Sciences and ground floor retail (112,000 sq ft) • Up to 96% uplift in existing floorspace • Potential commencement in H2 2022 with completion in 2025 Derwent London pl
Slide 16: Network Building W1
Network Building W1 14
Slide 17: Bush House WC2
BUSH HOUSE WC2 • Currently 103,700 sq ft • Refurbishment and extension project could increase the area to c.130,000 sq ft subject to planning • Potential start in 2022 Bush House WC2 Derwent London plc - Interim Results 2021 15
Slide 18: Future Projects
FUTURE PROJECTS Baker Street W1 joint venture • Existing: 122,200 sq ft • Proposed: 240,000 sq ft FUTURE PIPELINE -• BLUE STAR HOUSE Status: SW9 acquisition Expected The White Chapel Building E1 • Existing: 273,000 sq ft 17 • Proposed: c.420,000 sq ft Holden House W1 Blue Star House SW9 Derwent Lond
Slide 19: Leasing and Asset Management
LEASING AND ASSET MANAGEMENT EMILY PRIDEAUX 17
Slide 20: Central London Office Market Showing Signs of Improvement
CENTRAL LONDON OFFICE MARKET SHOWING SIGNS OF IMPROVEMENT • Increased market activity: CENTRAL LONDON OFFICE TAKE-UP AND AVAILABILITY • Positive uptick in viewing and take-up Monthly take-up (million sq ft) 2.5 Availability (million sq ft) 30 Take-up Availability • Occupier sentiment improving with
Slide 21: Good Levels of Demand with Constrained Pipeline
GOOD LEVELS OF DEMAND WITH CONSTRAINED PIPELINE • Committed development pipeline remains constrained with Floor area (million sq ft) POTENTIAL CENTRAL LONDON OFFICE PIPELINE 10 11.2m sq ft under construction: Completed Under construction let/under offer 9 Under construction available • 3.6m sq ft or
Slide 22: The Return to Work
THE RETURN TO WORK • Workplace strategies and ‘back to work’ policies being proactively considered by most businesses • Whilst ‘pandemic’ and delta variant has slowed the increase in overall occupancy, we are hearing more from leadership teams encouraging staff back to the office • Greater flexibili
Slide 23: Key Drivers for Occupiers
apart from others. Shared Amenity: gital Transformation Customer Service Sustain on KEY DRIVERS FOR OCCUPIERS Digital ntelligent BuildingsCustomerTransformation Experience & Amenity Service Shared Village Hubs Amenity: & Village Hubs & Furnished Customer Service Furnished+ Flexible Units Shared Amen
Slide 24: Enhanced Amenity and Customer Engagement
ENHANCED AMENITY AND CUSTOMER ENGAGEMENT DL/78 Customer App Furnished + Flexible Intelligent Buildings • Event opportunities • Available space • Thoughtfully designed • State-of-the-art digital • Meeting rooms Furnished + Flexible infrastructure • Workspace workspace • Club lounge • Offers • Integra
Slide 25: Occupier Survey
OCCUPIER SURVEY What are they missing? What are their intentions on headcount? 1. Collaboration and social interaction Increase No change Unsure Decrease 2. Employee wellbeing % 0 20 40 60 80 100 3. Innovation and creativity 4. Training and education July 2021 51 29 15 5 February 2021 51 18 23 8 Jul
Slide 26: Derwent London Letting Activity
DERWENT LONDON LETTING ACTIVITY • EPRA vacancy rate was 1.8% at the start of the year and Rental income (£m pa) LETTINGS rose to 3.3% in Jun 2021 45 Non pre-lets 40 Pre-lets • £3.9m of lettings in H1 2021: 35 • Majority occurred in Q2 at £3.6m as lockdown eased 30 • H1 transactions -1.6% against Dec
Slide 27: Asset Management Activities
ASSET MANAGEMENT ACTIVITIES Managing 2021 lease expiries • 2021 rental income due to expire/break: Asset Management H1 2021 New rent vs Area Previous rent New rent Uplift Dec 20 ERV ‘000 sq ft £m pa £m pa % % Rent reviews 166.2 7.3 9.1 24.6 (4.3) 24% • 30 June 2020 Lease renewals Lease regears 31.4
Slide 28: Results and Financial Review
RESULTS AND FINANCIAL REVIEW DAMIAN WISNIEWSKI 26
Slide 29: Financial Highlights
FINANCIAL HIGHLIGHTS EPRA NTA per share1, 2 EPRA earnings per share2 Cash and undrawn facilities 3,864p 54.04p £527m Dec 2020: 3,812p H1 2020: 48.90p Jun 2020: £502m +1.4% +10.5% Dec 2020: £476m Gross rental income Net rental income Interest cover ratio (ICR) £98.1m £90.1m 477% H1 2020: £97.8m H1 20
Slide 30: EPRA NTA Movement
EPRA NTA MOVEMENT Pence EPRA NTA PER SHARE 4,000 54 3,900 - (52) (2) +1.4% 52 3,864 3,812 3,800 Investment properties £57.8m 51p Trading properties (£0.2m) 0p Owner-occupied property £1.0m 1p Total £58.6m 3,700 3,600 31 Dec Revaluation Profit EPRA Dividends Other 30 Jun 2020 surplus/ on earnings pai
Slide 31: EPRA Earnings
EPRA EARNINGS1 £m EPRA EARNINGS 120 Slide Slide (£36.1m) 30 32 5.1 100 98.1 (1.4) (6.5) 80 (19.4) +10.8% 60 (14.2) (0.4) (0.7) 60.6 54.04p per share 40 20 0 Gross Waivers Premiums Other Admin Net Tax Other EPRA rental & & other property expenses finance charge earnings income impairments income expe
Slide 32: Gross Rental Income
GROSS RENTAL INCOME £m MOVEMENT IN GROSS RENTAL INCOME LIKE-FOR-LIKE 1 120 9.7 Gross rental income 100 (0.2) (4.9) (4.3) +0.3% 98.1 H1 2020: -4.5% 97.8 H2 2020: -3.4% 80 80 Charlotte Street W1 £9.5m Johnson Building EC1 (£4.0m) Brunel Building W2 £0.2m 40 Chancery Lane WC2 (£0.5m) Total £9.7m Other
Slide 33: Rent Collection
RENT COLLECTION • 93% of Jun 2021 quarter day rents received (i.e. quarter ending Sep 2021) plus 3% due on payment plans • Gradually improving position among office occupiers • £0.5m of rent deposits drawn in H1 2021 with £18.2m remaining Jun 2021 quarter1 Current position Announced 9 Jul Retail/ Re
Slide 34: Impact of Waivers and Impairments
IMPACT OF WAIVERS AND IMPAIRMENTS • Gross rental income in H1 2021 is after £0.8m H1 2021 H1 2020 Variance reduction due to spreading of rent waivers, most of £m £m £m which were agreed in 2020 Gross rental income 98.1 97.8 0.3 Property costs (6.6) (6.9) 0.3 • Waivers and impairments were £1.4m agai
Slide 35: Cash Flow Movement
CASH FLOW MOVEMENT £m MOVEMENT IN NET FACILITIES DRAWN 200 150 Acquisitions (£23.6m) Investment properties £166.5m Capex (£87.4m) Trading properties £3.6m Total (£111.0m) Total £170.1m 100 88.2 (7.7) 170.1 (18.5) 50 (10.7) (2.4) Net facilities drawn 51.3 Opening (£990.3m) Movement £51.3m Cash from C
Slide 36: Committed Capital Expenditure
COMMITTED CAPITAL EXPENDITURE £m 0 50 100 150 200 250 H1 2021 82 5 Actual spend Forecast spend H2 2021 29 13 18 26 7 2022 75 10 40 31 5 2023+ 213 10 16 Soho Place W1 The Featherstone Building EC1 19-35 Baker Street W1 Other Capitalised interest • 19-35 Baker Street W1 due to commence on site Oct 202
Slide 37: Proforma Impact of Major Projects, Acquisitions and Disposals
PROFORMA IMPACT OF MAJOR PROJECTS, ACQUISITIONS AND DISPOSALS • Assumes no further lettings other than those already contracted • Shows impact of estimated remaining capital expenditure on both on-site and committed projects PROFORMA IMPACT OF DISPOSALS, ACQUISITIONS, ON-SITE PROJECTS AND 19-35 BAKE
Slide 38: Green Revolving Credit Facility (RCF)
GREEN REVOLVING CREDIT FACILITY (RCF)1, 2 Eligible green projects (EGP) 1. 80 Charlotte Street W1 (completed June 2020) 2. Soho Place W1 3. The Featherstone Building EC1 4. The 19-35 Baker Street W1 development, which is targeting BREEAM Excellent, will be elected as the next EGP At 30 June 2021: •
Slide 39: Debt Summary
DEBT SUMMARY Jun 2021 Dec 2020 MATURITY PROFILE OF DEBT FACILITIES £m 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 Drawn facilities £999m £1,041m 2021 Unutilised facilities £467m £425m 2022 28 Total facilities £1,466m £1,466m 2023 2024 83 2025 83 175 467 Unutilised facilities and cas
Slide 40: Valuation and Portfolio Analysis
VALUATION AND PORTFOLIO ANALYSIS NIGEL GEORGE 38
Slide 41: Valuation
VALUATION Investment portfolio valued at £5.4bn Two on-site developments performed strongly • Underlying valuation 1.4% H2 2020: -2.1%: • Valued at £0.4bn, uplift of 5.8%: • West End 1.6% H2 2020: -2.4% • Soho Place W1 (87% pre-let) 5.1% • City Borders 0.7% H2 2020: -1.4% • The Featherstone Building
Slide 42: Property Return
PROPERTY RETURN H1 2021 total property returns Total property return (%) TOTAL PROPERTY RETURN PERFORMANCE 12 Derwent London • Derwent London 3.2% MSCI IPD Central London Offices 1 MSCI IPD UK All Property1 10.2 • MSCI IPD Central London Offices1 2.3% 10 • MSCI IPD UK All Property1 5.3% 8 8.0 7.4 7.
Slide 43: Rental Value and Yields
RENTAL VALUE AND YIELDS Rental values Half-yearly rental value growth (%) RENTAL VALUE GROWTH • Rental values declined 0.3% in H1: 12 9 • Offices: 91% of portfolio1 0.1% 6 4.8 5.2 6.6 4.1 3.8 4.2 4.1 3 2.6 3.0 1.0 1.1 0.6 • Retail: 9% of portfolio -5.8% 2.6 2.8 1 2.1 2.8 0.5 0.6 0.4 1.0 0 (0.7) (0.3
Slide 44: Build-up of Portfolio ERV
BUILD-UP OF PORTFOLIO ERV • Portfolio reversion of £106.6m1: £m BUILD-UP OF ERV2 • £60.0m (56%) contracted, including: 300 8.4 5.0 2.1 18.4 294.6 282.4 (6.2) 14.1 • 80 Charlotte Street W1 £19.5m 250 17.0 60.0 • Brunel Building W2 £9.9m £31.1m 200 on-site • Horseferry House SW1 £5.2m 175.8 developmen
Slide 45: Investment
INVESTMENT DAVID SILVERMAN 43
Slide 46: Acquisition Activity
ACQUISITION ACTIVITY Total Net rental Net rental Area after costs Net yield income income Property Date sq ft £m % £m pa £ psf H1 Holford Works WC11 Q2 41,600 23.8 6.8 1.6 40.00 H2 to date Bush House WC22 Q3 103,700 14.5 - - - 250 Euston Road NW1 Q3 165,900 189.9 2.5 4.7 28.30 171-174 Tottenham Cour
Slide 47: Acquisition and Potential JV with Lazari
ACQUISITION AND POTENTIAL JV WITH LAZARI • Off market transaction with Lazari Investments • Acquisition of two properties totalling 182,100 sq ft • Agreement to form 50:50 joint venture and expected to acquire three Baker Street properties totalling 122,200 sq ft1 • The initial consideration include
Slide 48: Acquisition: 250 Euston Road NW1
ACQUISITION: 250 EUSTON ROAD NW1 • Substantial island site of 1.6 acres in the Knowledge Quarter • 165,900 sq ft offices let to UCLH at £4.7m pa or £28 psf until 2039: • Fixed annual increases of 2.5% compounded every 5 years • Tenant only breaks every 5 years with next break in April 2024 Derwent L
Slide 49: Acquisitions in the Knowledge Quarter
ACQUISITIONS IN THE KNOWLEDGE QUARTER Francis Crick Institute UCL Hospital 250 Euston Road The Wellcome Trust UCLH 171-174 Tottenham Court Road Existing ownership Acquisitions Life Science Derwent London plc - Interim Results 2021 47
Slide 50: Acquisition: 171-174 Tottenham Court Road W1
ACQUISITION: 171-174 TOTTENHAM COURT ROAD W1 • Strategic holding • Freehold 16,200 sq ft • Multi-let at £0.6m pa • Longer-term part of a major Knowledge Quarter site • Opposite the Network Building UCLH 90 Whitfield Street Network Building Derwent London plc - Interim Results 2021 48
Slide 51: Joint Venture: Baker Street W1
JOINT VENTURE: 38-52, 54-60 & 66 BAKER STREET W1 • Diagonally opposite our 19-35 Baker Street redevelopment • Potential 240,000 sq ft scheme in 2024 • Detailed memorandum of understanding: • Create a 50:50 joint venture with Lazari Investments • Expected to acquire 122,200 sq ft of multi-let propert
Slide 52: 50
50
Slide 53: Bush House, South West Wing WC2
BUSH HOUSE, SOUTH WEST WING WC2 • Accelerating a development opportunity: • Existing Group freehold • Acquired outstanding 7-year headlease • 103,700 sq ft existing office building • Acquired with vacant possession • Combined interest £51.8m or c.£500 per sq ft • Architects Stiff & Trevillion appoin
Slide 54: Disposals
DISPOSALS • Two major disposals in the year to date: Angel Square EC1 Johnson Building EC1 • Exchanged sale contracts in Q3 2021: • Sale completed in Q1 2021: • £86.5m before costs • £170m before costs • Three connected buildings of 126,200 sq ft • Multi-let building of 192,700 sq ft • Leases expiri
Slide 55: Summary
SUMMARY PAUL WILLIAMS 53
Slide 56: Summary
SUMMARY • Recovering from pandemic – good business confidence OUR • Increasing occupier activity – stronger demand for high quality buildings • 2021 ERV guidance of +2 to -2% MARKET • Good investor confidence in the capital • Yields to remain firm • Attractive, adaptable product DERWENT • Our occupi
Slide 57: Appendices
APPENDICES 55
Slide 58: Appendices
APPENDICES 01. Headline numbers 57 25. Major tenants 81 02. Group balance sheet 58 26. Rent profile and portfolio breakdown 82 03. EPRA net asset value metrics 59 27. Lease expiry profile and lease length 83 04. Group income statement 60 28. Key lettings 84 05. IFRS loss and EPRA earnings 61 29. Key
Slide 59: Appendix 1 - Headline Numbers
APPENDIX 1 - HEADLINE NUMBERS Jun 2021 % change Dec 2020 Jun 2020 Net asset value (NAV) £4,382.9m 1.6 * £4,315.1m £4,404.7m EPRA net tangible assets per share 1,2 3,864p 1.4 * 3,812p 3,900p EPRA net disposal value per share1,2 3,769p 2.4* 3,682p 3,792p Total return 2.7% n/a (1.8%) (0.1%) Gross renta
Slide 60: Appendix 2 - Group Balance Sheet
APPENDIX 2 - GROUP BALANCE SHEET Jun 2021 Dec 2020 Jun 2020 £m £m £m Investment property 5,068.6 5,029.1 5,219.1 Owner-occupied property 46.6 45.6 45.3 Investment in joint ventures 0.9 0.9 1.3 Other non-current assets 160.3 151.0 144.8 5,276.4 5,226.6 5,410.5 Non-current assets held for sale 163.1 1
Slide 61: Appendix 3 - EPRA Net Asset Value Metrics
APPENDIX 3 - EPRA NET ASSET VALUE METRICS Jun 2021 Dec 2020 EPRA NTA1 EPRA NDV2 EPRA NRV3 EPRA NTA1 EPRA NDV2 EPRA NRV3 £m £m £m £m £m £m Net assets attributable to equity shareholders 4,330.7 4,330.7 4330.7 4,263.2 4,263.2 4,263.2 Revaluation of trading property 0.9 0.9 0.9 1.4 1.4 1.4 Deferred tax
Slide 62: Appendix 4 - Group Income Statement
APPENDIX 4 - GROUP INCOME STATEMENT Half year ended Year ended Half year ended Jun 2021 Dec 2020 Jun 2020 £m £m £m Gross rental income 98.1 202.9 97.8 Net surrender premiums and other property income 3.6 1.8 0.2 Profit on disposal of trading properties 0.5 5.2 0.8 Write-down of trading property (0.7
Slide 63: Appendix 5 - IFRS Profit and EPRA Earnings
APPENDIX 5 - IFRS PROFIT AND EPRA EARNINGS Half year ended Year ended Half year ended Jun 2021 Dec 2020 Jun 2020 £m £m £m IFRS profit/(loss) for the period attributable to shareholders 120.2 (77.6) (9.5) Revaluation (surplus)/deficit (57.8) 196.1 68.3 Profit on disposal of investment property (0.6)
Slide 64: Appendix 6 - Explanation of EPRA Adjustments
APPENDIX 6 - EXPLANATION OF EPRA ADJUSTMENTS Adjustments H1 2021 H1 2020 H1 2021 EPRA EPRA A B C IFRS basis basis £m £m £m £m £m £m Net property and other income 95.1 (0.5) 0.7 - 95.3 86.1 Administrative expenses (19.4) - - - (19.4) (17.1) Revaluation surplus 57.8 - (57.8) - - - Profit on disposal 0
Slide 65: Appendix 7 - Cash Flow
APPENDIX 7 - CASH FLOW Half year ended Year ended Half year ended Jun 2021 Dec 2020 Jun 2020 £m £m £m Property income 88.2 164.6 71.9 Property expenses (7.7) (19.1) (9.6) Other income 2.1 3.5 0.6 Administrative expenses (18.5) (35.5) (20.2) Finance costs (12.9) (28.1) (12.6) Tax in respect of operat
Slide 66: Appendix 8 - Rent Collection
APPENDIX 8 - RENT COLLECTION1 • Year to date, 93% of rent collected with a further 3% on payment plans • Dec 2020 and Mar 2021 quarters represent income recognised in H1 2021 Jun 2021 quarter Mar 2021 quarter Dec 2020 quarter Announced Current Announced Current Announced Current Total quarter’s rent
Slide 67: Appendix 9 - Reconciliation of Like-for-Like Income to IFRS Income
APPENDIX 9 - RECONCILIATION OF LIKE-FOR-LIKE INCOME TO IFRS INCOME Like-for-like Like-for-like Development Acquisitions movement to portfolio property & disposals Total H1 2021 £m £m £m £m H1 2021 Gross rental income 86.1 0.9 11.1 98.1 Other property expenditure (5.7) (0.2) (0.7) (6.6) Write-off/imp
Slide 68: Appendix 10 - Debt Facilities
APPENDIX 10 - DEBT FACILITIES Drawn Undrawn Total Maturity £m £m £m 6.5% secured bonds 175.0 - 175.0 March 2026 3.99% secured loan 83.0 - 83.0 October 2024 1.5% unsecured convertible bonds 175.0 - 175.0 June 2025 2.68% unsecured private placement notes 55.0 - 55.0 January 2026 3.46% unsecured privat
Slide 69: Appendix 11 - Net Debt
APPENDIX 11 - NET DEBT Jun 2021 Dec 2020 £m £m Borrowings 992.3 1,033.2 Acquired fair value of secured bonds less amortisation (8.7) (9.3) Equity component of convertible bonds 7.7 7.7 Unwinding of discount of convertible bonds (2.5) (1.9) Unamortised issue and arrangement costs 10.2 11.3 Facilities
Slide 70: Appendix 12 - Fixed Rates and Hedging
APPENDIX 12 - FIXED RATES AND HEDGING Jun 2021 Dec 2020 Proportion of drawn facilities at fixed rates or hedged 89% 85% Mark-to-market cost of swaps and forward-start swaps £3.4m £5.6m Weighted average duration of fixed rate instruments 6.7 years 7.2 years HEDGING PROFILE 1 MATURITY PROFILE OF FIXED
Slide 71: Appendix 13 - Valuation Performance by Village
APPENDIX 13 - VALUATION PERFORMANCE BY VILLAGE Valuation Valuation Weighting movement Jun 2021 Jun 2021 H1 20211 £m % % West End Central Fitzrovia2 1,678.5 31 (0.6) Victoria 494.0 9 4.0 Paddington 376.6 7 4.5 Soho/Covent Garden 326.6 6 4.4 Baker Street/Marylebone 157.3 3 0.1 Mayfair 99.9 2 2.9 3,132
Slide 72: Appendix 14 - Rental Value Growth and Average Rents
APPENDIX 14 - RENTAL VALUE GROWTH AND AVERAGE RENTS RENTAL VALUE GROWTH1 H1 2020 H2 2020 2020 H1 2021 % % % % West End (0.5) (2.8) (3.3) (0.4) City Borders (0.8) (1.0) (1.8) (0.1) Central London (0.6) (2.1) (2.7) (0.3) Provincial (3.0) (4.8) (7.8) 0.0 Underlying (0.7) (2.1) (2.8) (0.3) AVERAGE RENTS
Slide 73: Appendix 15 - Valuation Yields
APPENDIX 15 - 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 3.0 4.4 City Borders 4.1 4.7 6 Central London 3.3 4.5 5 Provincial 8.6 9.1 EPRA portfolio 3.4 4.6 4 3 Pre-EP
Slide 74: Appendix 16 - Context to Yield Movement
APPENDIX 16 - CONTEXT TO YIELD MOVEMENT • UK 10-year Gilt yield increased from 0.24% to VALUATION YIELDS1 0.75% in H1 2021: Yield % or Gap between Derwent London True Equivalent Yield (TEY) and 10-year Gilt • 0.12% in Jun 2020 9 Derwent London (TEY) Derwent London Initial Yield 8 10-year Gilt Gap be
Slide 75: Appendix 17 - Evolution of Portfolio ERV
APPENDIX 17 - EVOLUTION OF PORTFOLIO ERV £m £m 350 400 ERV to capture Rent reviews and lease renewals Contractual pre-lets Under refurbishment/development Contractual rental uplifts (excl. pre-lets) Available to occupy 350 300 Contractual rent Contractual rental uplifts (including pre-lets) Contract
Slide 76: Appendix 18 - Portfolio Statistics by Village
APPENDIX 18 - 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 reversion5 reversion value £m % sq ft sq ft £m pa £ psf £m pa £m pa £m pa £m pa West End
Slide 77: Appendix 19 - Build-up of Portfolio ERV
APPENDIX 19 - BUILD-UP OF PORTFOLIO ERV Rent uplift pa Rent pa £m £m £m Contracted rental income, net of ground rents 175.8 Contractual rental uplifts 80 Charlotte Street W1 19.5 Brunel Building W2 9.9 Horseferry House SW1 5.2 Tea Building E1 4.4 60 Whitfield Street W1 2.6 1 Oliver’s Yard EC1 2.4 Ot
Slide 78: Appendix 20 - Available Space and Projects
APPENDIX 20 - AVAILABLE SPACE AND PROJECTS Vacant Pre-let Total Gross Net Pre-let area area area vacant Ground vacant net rent Total net ‘000 ‘000 ‘000 ERV rent ERV ERV ERV sq ft sq ft sq ft £m pa £m pa £m pa £m pa £m pa Comment Available to occupy 6-8 Greencoat Place SW1 32 - 32 2.1 - 2.1 - 2.1 32,
Slide 79: Appendix 21 - Lease Expiry Analysis and Vacancy Rate
APPENDIX 21 - LEASE EXPIRY ANALYSIS AND VACANCY RATE LEASE EXPIRY AND BREAK ANALYSIS1 EPRA VACANCY RATES % £6.4m £14.6m £10.4m £12.5m £9.4m Vacancy rate (%) 100 8 10 CBRE central London offices (by floorspace) 10 10 13 22 90 Derwent London (by floorspace) 7 9 14 Derwent London (by rental value) 80 2
Slide 80: Appendix 22 - Timing of the Reversion
13.1 25 APPENDIX 22 - TIMING OF THE REVERSION 20 15 17.2 13.1 0.1 3.8 • £77.0m of the reversion contracted: • £2.1m 10 of the reversion from 9.7 reviews and 9.5 expiries 8.5 • Contracted uplifts £60.0m 5 2.0 • Pre-let developments £17.0m 0 H2 2021 2022 2023 2024 2025 >2025 REVIEWS AND EXPIRIES £m CO
Slide 81: Appendix 23 - Portfolio Summary
APPENDIX 23 - PORTFOLIO SUMMARY Floor area: 1.14m sq ft Rental income: £41.2m WAULT: 5.5 yrs Future Rent4: £50.81 ERV: £52.44 appraisal 21% Potential projects Floor area: 0.49m sq ft Floor area: 1.93m sq ft Rental income: £8.9m Rental income: £61.6m WAULT: 1.0 yrs WAULT: 4.2 yrs Rent4: £26.72 Rent4:
Slide 82: Appendix 24 - Rent and Tenant Banding
APPENDIX 24 - RENT AND TENANT BANDING CENTRAL LONDON ‘TOPPED-UP’ PROFILE OF TENANTS’ OFFICE RENT BANDING1 BUSINESS SECTOR2 £0-£30 ps f Other Fintech 4% 6% Flexible office 3% £30-£40 ps f providers 6% Media £70+ ps f 5% 23% 25% Financial 6% £40-£50 ps f Government & 17% public admin 6% Technology 7%
Slide 83: Appendix 25 - Major Tenants
APPENDIX 25 - MAJOR TENANTS ‘Topped-up’ income % Existing Pre-let 01 Expedia 7.4 - 02 Burberry 5.8 - 03 Boston Consulting Group 5.4 - 04 G-Research 0.4 3.8 05 Government 4.2 - 06 Arup 3.9 - 07 Apollo - 3.1 08 The Office Group 2.8 - 09 Sony Pictures 1.9 - 10 FremantleMedia Group 1.8 - 11 Publicis Gro
Slide 84: Appendix 26 - Rent Profile and Portfolio Breakdown
APPENDIX 26 - RENT PROFILE AND PORTFOLIO BREAKDOWN DERWENT LONDON CENTRAL LONDON OFFICE RENT PROFILE PORTFOLIO BREAKDOWN NO of Weighting £ psf Valuation properties % 65 > £200m 7 46 Average office rent £100m - £200m 10 25 Average topped-up office rent 60 £50m - £100m 12 16 Average office ERV1 < £50m
Slide 85: Appendix 27 - Lease Expiry Profile and Lease Length
APPENDIX 27 - LEASE EXPIRY PROFILE AND LEASE LENGTH West City EXPIRIES AND BREAKS AS A PERCENTAGE OF PORTFOLIO INCOME1 End Borders Provincial H2 2021 2022 2023 2024 2025 Total Expiries 3 2 - 5 4 3 3 10 25 Rolling breaks 2 - - 2 2 1 0 0 5 Single breaks - 2 - 2 7 6 7 2 24 5 4 - 9 13 10 10 12 54 PROFIL
Slide 86: Appendix 28 - Key Lettings
APPENDIX 28 - KEY LETTINGS Q2 Q3 Q3 6-8 Greencoat Place SW1 20 Farringdon Road EC1 Charlotte Building W1 • Fora • Depop • The & Partnership • Entire building of 32,400 sq ft • 33,500 sq ft • 14,900 sq ft • £2.2m pa at average rent of £69 psf • £1.8m pa at £52.50 psf • £1.0m pa at £67.50 psf • 15-yea
Slide 87: Appendix 29 - Key Asset Management Transactions
APPENDIX 29 - KEY ASSET MANAGEMENT TRANSACTIONS w ie ar ev ge ntr Re Re Angel Building EC1 Tea Building E1 • Expedia • Soho House • 125,500 sq ft • 32,900 sq ft • Rent review increased income from £5.85m to • Lease extended from 2031 to 2036 (no breaks) £7.49m • Rent increased from £0.94m to £1.18m
Slide 88: Appendix 30 - Central London Office Demand
APPENDIX 30 - CENTRAL LONDON OFFICE DEMAND Market statistics Take-up (million sq ft) OFFICE TAKE-UP • Central London office take-up totalled 3.0m sq ft in H1 2021: 20 Central London 18 • 19% lower than H1 2020 16 • 52% below the six-month Long Term Average (LTA) 14 Annual average • 23% banking & fin
Slide 89: Appendix 31 - Central London Office Supply
APPENDIX 31 - CENTRAL LONDON OFFICE SUPPLY Existing supply OFFICE DEVELOPMENT PIPELINE • Central London vacancy rate of 9.3% at the half year: Floor area (million sq ft) 12 Vacancy rate (%) 12 Central London Proposed • Highest level since Q4 2004 Under construction Completed 10 Completed average 10
Slide 90: Appendix 32 - Central London Office Vacancy Rates
APPENDIX 32 - CENTRAL LONDON OFFICE VACANCY RATES Vacancy rate (%) 16 West End West End average City City average 14 Central London 12 10 8 6 4 2 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 H1 21 Source: CBRE Derwent London plc - Interim Results 2021 88
Slide 91: Appendix 33 - Secondhand Space
APPENDIX 33 - SECONDHAND SPACE Available space (million sq ft) 30 Secondhand New completed New under construction 25 20 10-year average 15 10 5 0 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Q4 2015 Q2 2016 Q4 2016 Q2 2017 Q4 2017 Q2 2018 Q4 2018 Q2 2019 Q4 2019 Q2 2020 Q4
Slide 92: Appendix 34 - Central London Office Construction Starts
APPENDIX 34 - CENTRAL LONDON OFFICE CONSTRUCTION STARTS Construction starts (million sq ft) 3.0 2.5 2.0 4-quarter rolling average 1.5 1.0 0.5 0.0 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Q4 2015 Q2 2016 Q4 2016 Q2 2017 Q4 2017 Q2 2018 Q4 2018 Q2 2019 Q4 2019 Q4 2020 Q2 2021 Q2
Slide 93: Appendix 35 - Central London Office Rental Growth
APPENDIX 35 - CENTRAL LONDON OFFICE RENTAL GROWTH • At the half year CBRE reported prime office rental growth of -1.1% pa: Prime rental growth (% pa) CENTRAL LONDON OFFICE PRIME RENTAL GROWTH 40 West End • West End: +1.3% (-9.7% pa six months earlier) City 30 Central London • City: -2.2% (-4.4% pa s
Slide 94: Appendix 36 - Central London Office Investment Market
APPENDIX 36 - CENTRAL LONDON OFFICE INVESTMENT MARKET H1 2021 activity Investment transactions (£bn) CENTRAL LONDON OFFICE INVESTMENT 22 • CBRE reported £3.9bn of central London transactions: 20 18 • Compares to £2.4bn in H1 2020 and £5.2bn in H2 2020 16 • 35% below the LTA 14 Annual average 12 • 70
Slide 95: Appendix 37 - Central London Office Yields
APPENDIX 37 - CENTRAL LONDON OFFICE YIELDS Prime office yield (%) 7.0 West End City West End average City average 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Source: CBRE Derwent London plc - Interim Results 2021 93
Slide 96: Appendix 38 - Acquisition and Potential JV with Lazari
APPENDIX 38 - ACQUISITION AND POTENTIAL JV WITH LAZARI1 Initial impact on Earnings and NAV • We are disclosing the following additional information as this is a Class 2 transaction. • Based on the initial rental income, we expect the combined transactions to have a c.£4m p.a. positive impact on the
Slide 97: Appendix 39 - Long Leasehold Acquisition: Holford Works WC1
APPENDIX 39 - LONG LEASEHOLD ACQUISITION: HOLFORD WORKS WC1 • Acquisition of 65-year leasehold interest for £23.8m after costs where we already own the freehold • 41,600 sq ft of former industrial space used as offices • Principal occupiers: Barbour and Vidya Health • Combined interest: net initial
Slide 98: Appendix 40 - Major On-Site Refurbishment: Francis House SW1
Proposed Reception view - Optio APPENDIX 40 - MAJOR ON-SITE REFURBISHMENT: FRANCIS HOUSE SW1 • 38,000 sq ft office refurbishment • ERV of £2.5m or £65 psf • On site H1 2021 • Completion H1 2022 • Capex to complete of £13m Derwent London plc - Interim Results 2021 96
Slide 99: Appendix 41 - New Major Scheme: 19-35 Baker Street W1
Derwent London Internal Presentation 3rd February 2021 APPENDIX 41 - NEW MAJOR SCHEME: 19-35 BAKER STREET W1 1 2 4 4 nt OH KEY 3 sidential 1. Office sidential Plant 2. Market residential 3. Intermediate residential ate Residential 4. Retail nt Derwent London plc - Interim Results 2021 97
Slide 100: Appendix 42 - On-Site and 2021 Developments: Profit on Cost
APPENDIX 42 - ON-SITE AND 2021 DEVELOPMENTS: PROFIT ON COST 19-35 Baker Street W1 le e- d t/ Summary £m pr sol % e- 87 pr End value 1,189 Less: Total cost1 1,013 Project surplus 176 Less: Booked to Jun 21 44 Surplus to come 132 Profit on total cost 17% Profit to come on total cost 13% Yield on cost
Slide 101: Appendix 43 - Project Summary: Current Projects
APPENDIX 43 - PROJECT SUMMARY: CURRENT PROJECTS Current Pre H2 Total Current net scheme Proposed 2021 2022 2023+ capex to office income area area capex capex capex complete Delivery c.ERV Property £m pa ‘000 sq ft ‘000 sq ft £m £m £m £m date psf On-site projects Soho Place W11 - 107 285 29 75 - 104
Slide 102: Appendix 44 - Project Summary: Future Projects
APPENDIX 44 - 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 3.9 90 150 2025 Network Building W1 4.2 70 137 2022 Redevelopment - dual consent 8.1 160 287 Under appraisa
Slide 103: Appendix 45 - Portfolio EPC Coverage
APPENDIX 45 - PORTFOLIO EPC COVERAGE1 % of ERV 40 36.8 35 30 25 21.6 20 14.8 14.4 15 10 5.8 5.0 5 0.3 0.6 0.7 0 A B C D E Project Under Outstanding Exempt review EPC Bandings 1 As at July 2021 Derwent London plc - Interim Results 2021 101
Slide 104: Appendix 46 - Portfolio Map
Camden Road APPENDIX 46 - PORTFOLIO MAP Essex Road Lond Field Camden Town Primrose Hill Carnegie St Islington TEC Wharfdale Rd Angel H BEL Kings Cross T Alban Regent’s Park y St St Pancras Hoxton International Th am es lin k Euston Old Street Up pe rW ob Old Street Clerkenwell urn Pl Shoreditch Grea
Slide 105: Appendix 47 - Executive Committee and Senior Management
APPENDIX 47 - EXECUTIVE COMMITTEE AND SENIOR MANAGEMENT Executive Committee Senior Management Paul Williams Chief Executive Vasiliki Arvaniti Head of Asset Management Damian Wisniewski Chief Financial Officer Lesley Bufton Head of Property Marketing Nigel George Executive Director Matt Cook Head of
Slide 106: Disclaimer
DISCLAIMER This presentation has been prepared by Derwent London plc (the apparent. Past performance is not indicative of future results “Company”). No representation or warranty (express or implied) of and forward-looking statements are not guarantees of future any nature is given nor is any respon