Derwent London Plc · LSE:DLN
Derwent London — FY2014 Earnings Presentation
91 slides from Derwent London's earnings presentation, March 2015
Slide 1: Derwent London Plc Annual Results 2014
DERWENT LONDON PLC ANNUAL RESULTS 2014
Slide 2: Contents
CONTENTS Presenters: Contents: John Burns Introduction and overview 1 Simon Silver Results and financial review 5 Damian Wisniewski Valuation and portfolio analysis 16 Nigel George Portfolio management 25 Paul Williams Projects 33 David Silverman Investment activity 42 Outlook for central London pro
Slide 3: Introduction and Overview
INTRODUCTION AND OVERVIEW John Burns 1
Slide 4: Highlights
HIGHLIGHTS Another strong set of results • NAV growth +28.4% (Portfolio +20.4%) • EPRA PBT +7.8% • Dividend per share +8.6% • Total return +30.1% Performance and operations • Underlying rental values +9.0% • £9.2m (188,300 sq ft) of lettings in 2014 with another £5.9m in 2015 to date • 2014 lettings
Slide 5: Raising Middle Market Rents
RAISING MIDDLE MARKET RENTS Good position Good demand • Strong London economy • Derwent product is attracting occupiers • Well placed in the Tech Belt and • Rents are rising close to Crossrail Portfolio value by location + Letting activity Tech Belt 10 18% 12% 33% £9.2m 9 8 £8.0m Rental income (£m p
Slide 6: Maintaining Development Impetus
MAINTAINING DEVELOPMENT IMPETUS New starts in 2015: Development enhances returns1: • The Copyright Building W1 Est. profit on cost from • 80 Charlotte Street W1 Total cost £m Initiation Dec 14 Five developments 2014-16 340 45% 15% Two 2015 new starts 497 28% 18% Developments and capex Raising income
Slide 7: Results and Financial Review
RESULTS AND FINANCIAL REVIEW Damian Wisniewski 5
Slide 8: Financial Headlines
FINANCIAL HEADLINES Dec 2014 Dec 2013 % change Total portfolio at fair value £4,168.1m £3,353.1m 24.3 1 EPRA net asset value per share 2,908p 2,264p 28.4 1 EPRA triple NAV per share 2,800p 2,222p 26.0 Gross property income £138.4m £131.6m 5.2 EPRA profit before tax 2 £62.3m £57.8m 7.8 EPRA earnings
Slide 9: NAV Growth
NAV GROWTH Debt, net assets and gearing 3,500 70 • EPRA NAV per share up 28.4%: Net debt NAV gearing ◦◦ 2,908p from 2,264p Net assets1 LTV ratio 3,000 60 3,012 ◦◦ Split 13.6% / 14.8% in H1 / H2 2,500 2,649 50 • Equity shareholders’ funds 2,304 increased to £3,012m 2,000 40 £m % 1,860 • Net debt incr
Slide 10: EPRA NAV Movement
EPRA NAV MOVEMENT • At £671.9m, the revaluation surplus in 2014 was almost double that in 2013 Revaluation surplus: Income statement £667.1m EPRA NAV per share Other comprehensive income1 £4.8m 3,200 Per accounts £671.9m Trading property2 £3.0m 3,000 33 EPRA surplus £674.9m 654p 57 46 35 10 654 9 2,
Slide 11: EPRA Profit Before Tax
EPRA PROFIT BEFORE TAX • EPRA profit £62.3m, up 8% from £57.8m in 2013 • Excludes £3.9m profit on sale of trading properties • Admin costs up 6% due largely to higher staff costs EPRA profit before tax 160 1.6 2.0 140 0.1 8.2 2014 2013 136.7 £m £m 120 Interest 42.5 40.3 28.1 100 Capitalised interest
Slide 12: Gross Property Income
GROSS PROPERTY INCOME • Acquisitions (all in 2013) include: Movements in gross property income 2014 150 22 Kingsway WC2 £2.9m 19 Charterhouse Street EC1 £1.2m Mark Square House EC2 £0.7m 145 6.5 2.7 • Disposals include: 140 1-5 Grosvenor Place SW1 £1.6m 5.7 5.3 1.0 Jaeger House W1 £0.6m 138.4 5.3 £m
Slide 13: Property Outgoings, EPRA Rental Income & Cost Ratios
PROPERTY OUTGOINGS, EPRA RENTAL INCOME & COST RATIOS Property outgoings 2014 2013 £m £m Property outgoings 7.6 8.8 Decreased due to reduced average voids Ground rents 0.4 0.4 Surrender premiums paid 0.4 0.2 Dilapidation receipts (0.2) (0.1) 8.2 9.3 EPRA cost ratios 2014 2013 % % EPRA - including dir
Slide 14: Cashflow
CASHFLOW • Increase in net debt: ◦◦ By £64.1m to £1,013.3m Forecast capital expenditure1 Net cashflow movements Capital expenditure Capital expenditure Capitalised interest (Major projects) (Other projects) 2014 2013 209 19 £m £m 2017+ 228 23 Cash from operations 65.6 57.5 14.1% Acquisitions (92.4)
Slide 15: Proforma Impact of Major Projects
PROFORMA IMPACT OF MAJOR PROJECTS After £461m Assuming Assuming capex2 50% of 100% of After bond on major projects let projects let conversion projects and at ERV and at ERV and in January contracted 50% of flats 100% of flats Dec 2014 20151 rents3 sold sold Portfolio fair value £4,168m £4,168m £4,6
Slide 16: Debt Summary
DEBT SUMMARY • In January 2014 we completed and drew down £100m of 15/20 year USPP Proforma1 Dec 2014 Dec 2013 unsecured notes Total facilities £1,176m £1,351m £1,251m Net debt £842.8m £1,013.3m £949.2m Unutilised facilities £321m £321m £283m • In December 2014 we extended our £550m bank facility to
Slide 17: Debt Facilities
DEBT FACILITIES Proforma3 Dec 2014 Dec 2013 Average interest rate (spot)1 3.99% 3.78% 3.64% Maturity profile of debt Average interest rate (spot)2 4.27% 4.22% 4.10% £m 0 50 100 150 200 250 300 350 400 450 500 550 600 Proportion of drawn facilities at 2015 93% 94% 83% fixed rate or hedged 2016 175 Av
Slide 18: Valuation and Portfolio Analysis
VALUATION AND PORTFOLIO ANALYSIS Nigel George 16
Slide 19: Valuation
VALUATION Very strong capital growth in 2014: • Underlying 20.4% (2013: 12.6%) • City Borders continue to outperform at 26.3% (2013: 20.3%) Seven projects on site in 2014: • Valued at £547.6m (+24.2% in 2014) • 1-2 Stephen Street W1 (offices) and Queens W2 completed • Turnmill EC1 handed over to Pub
Slide 20: Valuation Drivers and Performance
VALUATION DRIVERS AND PERFORMANCE Our total property return was ahead of benchmarks: • Derwent London 25.1% • IPD Central London Offices 23.5%1 • IPD All Property 17.9%1 Valuation performance Drivers of performance 25 60 2013 2014 20 20.4 50 52 19.0 15 16.5 15.7 Contribution to surplus (%) 40 Capita
Slide 21: Rental Growth
RENTAL GROWTH • Underlying rental value growth of 9.0%: ◦◦ Ahead of our expectations of 6-8% Rental value growth • City Borders highest performer at 11.3%: 15 ◦◦ Tea Building 12.3% 12 13.3 ◦◦ 1 Oliver’s Yard 12.0% 9 Half-yearly rental value growth (%) ◦◦ Morelands 28.3% 6 8.1 4.6 4.2 4.8 3 4.1 3.8 3
Slide 22: Movement in Yields
MOVEMENT IN YIELDS EPRA yields • Net initial yield 3.4% (Dec 2013: 4.2%): ◦◦ ‘Topped-up’ net initial yield 4.0% True equivalent yield movement1 (Dec 2013: 4.8%) 7.5 • True equivalent yield 4.73% 1 7.0 97bp 15bp (Dec 2013: 5.28%): 6.5 83bp True equivalent yield (%) ◦◦ 55 basis points reduction in 201
Slide 23: Context to Yield Movement
CONTEXT TO YIELD MOVEMENT • True equivalent yield gap of 298 bps from 10-year Gilt: Valuation yields1 ◦◦ Strong rental growth outlook 9 ◦◦ Capital flows buoyant Derwent London True Equivalent Yield 10-year Gilt Yield % or Gap between DL TEY and 10-year Gilt Derwent London Initial Yield Gap between D
Slide 24: Portfolio Reversion
PORTFOLIO REVERSION • Net income of £131.7m with ERV of £215.6m • Significant reversion of £83.9m1: Build-up of reversion ◦◦ 38% (£32.0m) locked in, including: 90 1 Page Street £3.0m 80 23.5 4 & 10 Pentonville Road £2.0m 70 Angel Building £1.9m 40 Chancery Lane £4.7m (net) 60 Rental uplift (£m) 17.6
Slide 25: Rental Values
RENTAL VALUES • 85% of portfolio income from central London offices: ◦◦ Average ‘topped-up’ office rent £34.55 psf: ◦◦ Core income portfolio £41.75 psf Central London office rent profile ◦◦ Development portfolio £26.31 psf 45 Dec-13 Jun-14 Dec-14 ◦◦ Average ERV £41.77 psf: 40 41.77 39.75 ◦◦ Core inc
Slide 26: Opportunities Across the Portfolio
OPPORTUNITIES ACROSS THE PORTFOLIO • 48% of the portfolio core income with 52% projects - see Appendices 29 and 30 Core income On site Consented Includes: Turnmill EC1 25-33 Berners Street W1 Angel Building EC1 40 Chancery Lane WC2 80 Charlotte Street W1 Strathkelvin Retail Park, Scotland 73 Charlot
Slide 27: Portfolio Management
PORTFOLIO MANAGEMENT Paul Williams 25
Slide 28: Lettings and Asset Management Highlights
LETTINGS AND ASSET MANAGEMENT HIGHLIGHTS Letting activity • 60 transactions totalling 188,300 sq ft at a rent of £9.2m pa: ◦◦ Overall 11.2% above Dec 2013 ERV with open market transactions, 18.1% above ◦◦ TMT/Creative tenants comprised 76% of lettings ◦◦ 26% of deals in the Tech Belt • A strong star
Slide 29: Raising the Rental Tone 2014
RAISING THE RENTAL TONE 2014 rb rb rb 56%1 16%1 41%1 fu fu fu f Re Re f Re f ps ps ps 0 5 4 £5 £6 £5 Morelands EC1 1 Oliver’s Yard EC1 Middlesex House W1 • Q3 – 8,700 sq ft let at £54 psf • Q1 – 6,400 sq ft let at £50 psf • Q3 - 4,300 sq ft let at £65 psf rising rising to a minimum of £58 psf rising
Slide 30: Winning New Space
WINNING NEW SPACE Greencoat and Gordon House SW1 Middlesex House W1 • Negotiated surrender of 40,000 sq ft part ground and basement, which was let on a long lease at £3k pa: • Former car park transformed into 12,200 sq ft of offices: ◦◦ Surrender cost £1.4m ◦◦ Pre-let at £0.5m pa / £37.50 psf with a
Slide 31: Letting Vacant Space: 1-2 Stephen Street W1
LETTING VACANT SPACE: 1-2 STEPHEN STREET W1 • Strong letting activity at the recently refurbished office space: ◦◦ H2 2014: ◦◦ 34,850 sq ft let for £2.2m pa ◦◦ Q1 2015: ◦◦ 34,150 sq ft let for £2.2m pa ◦◦ 16,150 sq ft under offer 29
Slide 32: Phased Refurbishment: 1-2 Stephen Street W1
PHASED REFURBISHMENT: 1-2 STEPHEN STREET W1 • 114,350 sq ft of offices will have been UNDER OFFER 8,075 sq ft refurbished since acquisition in 2010 UNDER OFFER 8,075 sq ft • Accounts for 53% of total office space UNDER REFURBISHMENT 10,900 sq ft £39-£42 psf - EXISTING OCCUPIERS FUTURE REFURBISHMENT
Slide 33: Dealing with Lease Expiries: Angel Square EC1
DEALING WITH LEASE EXPIRIES: ANGEL SQUARE EC1 128,700 sq ft freehold office Short-term expiries • March 2015: 79,900 sq ft at £1.5m pa • Dec 2015: 30,500 sq ft at £0.9m pa • Pre-let 57,600 sq ft to Expedia at £2.1m pa 31
Slide 34: Rising Construction Costs
RISING CONSTRUCTION COSTS • London construction cost inflation1: ◦◦ 5.0% to 7.5% in 2015 ◦◦ 4.0% to 6.0% in 2016 ◦◦ 3.0% to 5.0% in 2017 • Driven by a combination of: ◦◦ Labour costs and skills shortages - slowing delivery ◦◦ Material price inflation ◦◦ Increased London activity ◦◦ Less competition
Slide 35: Projects
PROJECTS Simon Silver 33
Slide 36: Delivering Our Pipeline
DELIVERING OUR PIPELINE • 107,000 sq ft of completions in 2014 1 Q • 519,000 sq ft of projects on site at 31 December 2014 • Two major new starts in 2015: Turnmill EC1 ◦◦ The Copyright Building, 25-33 Berners Street W1 (105,000 sq ft) - Q1 2 ◦◦ 80 Charlotte Street W1 (380,000 sq ft) - H2 Q • An exci
Slide 37: 2016 Completion: White Collar Factory EC1
2016 COMPLETION: WHITE COLLAR FACTORY EC1 • 293,000 sq ft mixed-use scheme: ◦◦ 237,000 sq ft White Collar Factory 16-storey office tower ◦◦ 39,000 sq ft office campus ◦◦ 9,000 sq ft retail ◦◦ 8,000 sq ft residential (nine units) Scheme update: • Demolition completed in August 2014 • Main build contr
Slide 38: Recent Start: The Copyright Building W1
RECENT START: THE COPYRIGHT BUILDING W1 The Copyright Building, 25-33 Berners Street • New headlease agreed: ◦◦ 127-year term ◦◦ 12.5% gearing ◦◦ Profit sharing arrangement above 20% profit on cost • Vacant possession obtained • 105,000 sq ft new-build scheme: ◦◦ 85,000 sq ft of offices ◦◦ 20,000 sq
Slide 39: 2015 Major Project: 80 Charlotte Street W1
2015 MAJOR PROJECT: 80 CHARLOTTE STREET W1 67 Whitfield Street: Flexible floor plates of c.40,000 sq ft • 14,000 sq ft private residential WHITFIELD STREET 53-65 Whitfield Street: • 12,000 sq ft offices • 21,000 sq ft private residential • 10,000 sq ft affordable residential 80 Charlotte Street isla
Slide 40: 2015 Major Project: 80 Charlotte Street W1
2015 MAJOR PROJECT: 80 CHARLOTTE STREET W1 • Commences H2 2015 • Largest project undertaken (380,000 sq ft) • Main development occupies a 1.4 acre island site • Office rent c.£75 psf • Capex c.£175m • Completion in 2018 38
Slide 41: The Next Wave: 55-65 North Wharf Road W2
THE NEXT WAVE: 55-65 NORTH WHARF ROAD W2 • Commences 2016, completion 2018 • 240,000 sq ft offices • Located next to Paddington station – a major new Crossrail hub • Office ERV c.£60 psf 39
Slide 42: Planning Application: Wedge House SE1
PLANNING APPLICATION: WEDGE HOUSE SE1 Wedge House, 40 Blackfriars Road • Working with Hoxton Hotel on a mixed-use development: ◦◦ 41,800 sq ft of offices ◦◦ 68,200 sq ft hotel: ◦◦ 192 rooms ◦◦ Ground floor café / restaurant ◦◦ Mezzanine conference space ◦◦ Rooftop bar and restaurant • Planning appli
Slide 43: Investment Activity
INVESTMENT ACTIVITY David Silverman 42
Slide 44: Principal Acquisitions in 2014
PRINCIPAL ACQUISITIONS IN 2014 Lease Property Date Area Total cost Net yield Rental income length sq ft £m £ psf % £m £ psf years1 19-23 Featherstone Street EC1 Q1 27,500 12.3 450 2.2 0.3 10 0.2 Angel Square EC1 Q4 128,700 78.6 620 3.0 2.4 19 0.3 Total 156,200 90.9 580 2.9 2.7 17 0.3 • Acquisition c
Slide 45: Creating Clusters: Islington
CREATING CLUSTERS: ISLINGTON 9% of the portfolio is in Islington UNDERGROUND sq ft 1 Angel Square 128,700 2 Angel Building 262,000 3 10-4 Pentonville Road 53,400 4 401 St. John Street 12,300 1 456,400 3 2 4 44
Slide 46: Acquisition in 2015: 20 Farringdon Road EC1
ACQUISITION IN 2015: 20 FARRINGDON ROAD EC1 • 170,600 sq ft acquired for £88.0m plus costs • Minimum 175-year long leasehold - 10% gearing • Adjacent to Farringdon Crossrail station • Major future project • Significant near term potential to increase rents • Rent: £3.2m pa (net) • Average office ren
Slide 47: Creating Clusters: Clerkenwell
CREATING CLUSTERS: CLERKENWELL Significant Clerkenwell exposure with 5% 4 in 2010 to 11%1 in 2015 following purchase sq ft Acquired 1 20 Farringdon Road 170,600 2015 2 19 Charterhouse Street 63,700 2013 3 Turnmill 70,500 2004 3 4 The Buckley Building 85,100 2007 5 Johnson Building and 190,900 2000 6
Slide 48: Principal Investment Disposals
PRINCIPAL INVESTMENT DISPOSALS Continued disposal of smaller / mature assets - five London properties sold in 2014 for £98.0m: • Rental income of £3.9m Net yield Net surplus Net surplus 2014 Date Area Net proceeds to purchaser Dec 2013 Jun 2014 sq ft £m £ psf % % % Jaeger House W1 Q2 24,900 30.3 1,2
Slide 49: Outlook for Central London Property
OUTLOOK FOR CENTRAL LONDON PROPERTY John Burns 48
Slide 50: West End Office Demand
WEST END OFFICE DEMAND Market statistics West End take-up • Take-up of 4.4m sq ft in 2014: 6 ◦◦ The highest in four years and 4% above average • Prime West End rents rose 10.7% pa: 5 Take-up (million sq ft) ◦◦ 11.1% in Fitzrovia to £75 psf Average 4 ◦◦ Prime rents of £112.50 psf Mayfair/St James’s,
Slide 51: West End Office Supply
WEST END OFFICE SUPPLY Market statistics • Low vacancy rate of 2.7% (3.4% end-2013) West End office development pipeline • Significantly lower than long-term average of 4.6% 2.5 12.5 • Development completions of 1.17m sq ft in 2015: Completed Under construction ◦◦ 9% above long-term average (1.07m s
Slide 52: The Evolving Tech Belt
Kentish Town Highbury & Islington Chalk Farm THE EVOLVING TECH BELT Camden Road Caledonian Road Essex Road Londo Field Camden Town Primrose Tech Belt Hill Islington • 25 million sq ft1: Carnegie St ◦◦ 11% of central London office stock Wharfdale Rd Angel Haggerston Kings Cross • c.1,750 properties P
Slide 53: Central London Office Investment Market
CENTRAL LONDON OFFICE INVESTMENT MARKET Market statistics • Another good year for the central London office investment market with £18.4bn of transactions • 63% above long-term average of £11.3bn and 8% below the record year of 2013 • Overseas investors dominant (69%) Central London office investmen
Slide 54: Outlook for Derwent London
OUTLOOK FOR DERWENT LONDON John Burns 53
Slide 55: Outlook
OUTLOOK • London economic outlook remains good • Rental growth looks set to continue: Our ◦◦ Estimated to grow 6-8% in 2015 market • Low yields supported by lack of alternatives: ◦◦ Expected to remain firm in 2015 • Property portfolio well positioned for growth: ◦◦ Significant reversions Derwent ◦◦
Slide 56: Appendices
APPENDICES 55
Slide 57: Appendices
APPENDICES 1. Group balance sheet 57 18. Rent and tenant banding 74 2. Net asset value per share 58 19. Central London office vacancy 75 3. Group income statement 59 20. Central London office rental growth 76 4. Reconciliation of IFRS and EPRA profits 60 21. 2014 completions 77 5. Explanation of EPR
Slide 58: Appendix 1 - Group Balance Sheet
APPENDIX 1 - GROUP BALANCE SHEET Dec 2014 Dec 2013 £m £m Investment property 4,041.0 3,242.9 Owner-occupied property 24.8 19.7 Other non-current assets 88.7 80.5 4,154.5 3,343.1 Non-current assets held for sale - 4.8 Other current assets and liabilities (58.6) (31.8) Trading property 24.0 22.6 Cash
Slide 59: Appendix 2 - Net Asset Value per Share
APPENDIX 2 - NET ASSET VALUE PER SHARE Dec 2014 Dec 2013 Diluted Diluted £m p £m p Net assets attributable to equity shareholders 3,012.2 2,304.0 Conversion of 2.75% unsecured convertible bonds 2016 170.5 167.7 Net assets for diluted NAV 3,182.7 2,864 2,471.7 2,230 Revaluation of trading properties
Slide 60: Appendix 3 - Group Income Statement
APPENDIX 3 - GROUP INCOME STATEMENT Year ended Year ended Dec 2014 Dec 2013 £m £m Gross property income 138.4 131.6 Profit on disposal of trading properties 3.9 - Other income 2.0 2.0 Property outgoings (8.2) (9.3) Net property and other income 136.1 124.3 Admin expenses (28.1) (26.4) Total administ
Slide 61: 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 Year ended Year ended Dec 2014 Dec 2013 £m £m IFRS profit before tax 753.7 467.9 Revaluation surplus (667.1) (335.6) Joint venture revaluation surplus (1.9) 0.3 Profit on disposal
Slide 62: Appendix 5 - Explanation of EPRA Adjustments
APPENDIX 5 - EXPLANATION OF EPRA ADJUSTMENTS • 2014 • Adjustments • 2014 • 2013 • IFRS • A • B • C • EPRA • EPRA • £m • £m • £m • £m • £m • £m Net property income and other income 136.1 (3.9) 132.2 124.3 Total administrative expenses (28.4) 0.3 (28.1) (26.4) Revaluation surplus 667.1 (667.1) - - Pro
Slide 63: Appendix 6 - EPRA Like-for-Like Rental Income
APPENDIX 6 - EPRA LIKE-FOR-LIKE RENTAL INCOME Properties owned throughout Development the year Acquisitions Disposals property Total £m £m £m £m £m 2014 Rental income 103.3 6.2 2.0 25.2 136.7 Property expenditure (3.9) - (0.1) (4.0) (8.0) Net rental income 99.4 6.2 1.9 21.2 128.7 Profit on disposal
Slide 64: 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 2.75% unsecured convertible bonds 1751 July 20161 1.125% unsecured convertible bonds 150 July 2019 4.41% unsecured private placement notes 25 January 2029 4.68% unsecured private placemen
Slide 65: Appendix 8 - Net Debt
APPENDIX 8 - NET DEBT Proforma1 Dec 2014 Dec 2013 £m £m £m Financial liabilities - current - 170.5 - Financial liabilities - due after more than 1 year 857.6 857.6 961.7 Acquired fair value of secured bonds less amortisation (16.0) (16.0) (16.9) Equity component of unsecured bonds 12.7 22.3 22.3 Unw
Slide 66: Appendix 9 - Fixed Rates and Hedging
APPENDIX 9 - FIXED RATES AND HEDGING Proforma2 Dec 2014 Dec 2013 Proportion of drawn facilities at fixed rates or hedged 93% 94% 83% 1 Weighted average duration of swaps 4.0 years 4.0 years 4.8 years Mark-to-market cost of swaps £25.2m £25.2m £15.9m Weighted average duration of fixed rate instrument
Slide 67: Appendix 10 - Valuation Performance by Village
APPENDIX 10 - VALUATION PERFORMANCE BY VILLAGE Valuation Valuation Weighting movement Dec 2014 Dec 2014 20141 £m % % West End Central Fitzrovia2 1,511.4 37 19.1 Victoria 498.5 12 18.7 Baker Street/Marylebone 180.6 4 16.4 Soho/Covent Garden 139.4 3 13.8 Mayfair 83.0 2 23.7 Paddington 69.1 2 13.2 2,48
Slide 68: Appendix 11 - Rental Value Growth
APPENDIX 11 - RENTAL VALUE GROWTH Rental value growth1 2013 H1 2014 H2 2014 2014 % % % % West End 5.0 3.7 4.6 8.4 City Borders 8.4 5.5 5.5 11.3 Central London 5.9 4.2 4.9 9.2 Provincial 1.0 2.6 1.2 3.8 Underlying 5.7 4.2 4.8 9.0 1 On EPRA portfolio 67
Slide 69: 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 3.1 3.8 Yield (%) 5 City Borders 3.8 4.2 Central London 3.3 3.9 4 Provincial 5.9 6.0 Reversionary yield 3 EPRA portfolio 3.4 4.0 True equivalent yield Init
Slide 70: Appendix 13 - Portfolio Reversion
APPENDIX 13 - PORTFOLIO REVERSION Rent uplift pa Rent pa £m £m £m Contracted rental income, net of ground rents 131.7 Contractual rental uplifts 1 Page Street SW1 3.0 1-2 Stephen Street W1 2.2 4 & 10 Pentonville Road N1 2.0 Angel Building EC1 1.9 Other 15.1 24.2 Pre-let projects 40 Chancery Lane WC2
Slide 71: 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) 1-2 Stephen Street W1 50 - 50 3.4 - 3.4 - 3.4 34,
Slide 72: Lease Expiries and Breaks / Vacancy Rates
APPENDIX 15 - LEASE EXPIRIES AND BREAKS / VACANCY RATES • £17.3m of income subject to breaks / expiries • EPRA vacancy rate of 4.1% at year end – up from 1.0% in 2014: at start of the year ◦◦ 73% of tenants’ income retained or re-let • Vacant space ERV totals £7.1m pa: ◦◦ 49% exchanged or completed
Slide 73: Lease Expiry Profile and Lease Length
APPENDIX 16 - LEASE EXPIRY PROFILE AND LEASE LENGTH Expiries and breaks as a percentage of portfolio income1 West City End Borders Provincial 2015 2016 2017 2018 2019 Total Expiries 4 2 1 7 6 3 12 5 33 Holding over - - - - - - - - - Rolling breaks 5 1 - 6 1 - 1 - 8 Single breaks - - - - 2 4 3 4 13 9
Slide 74: Appendix 17 - Portfolio Statistics by Village
APPENDIX 17 - 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 75: Appendix 18 - Rent and Tenant Banding
APPENDIX 18 - RENT AND TENANT BANDING Central London ‘topped-up’ office rent banding1 Profile of tenants’ business sector2 £0 - £20 psf Other £60+ psf 4% 8% 11% Financial £20 - £30 psf 4% 14% Media, TV, marketing Charities and advertising 4% 29% Government and £50 - £60 psf public admin 18% 6% Retai
Slide 76: 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 00 Q1 02 Q1 04 Q1 06 Q1 08 Q1 10 Q1 12 Q1 14 Source: CBRE 75
Slide 77: Central London Office Rental Growth
APPENDIX 20 - CENTRAL LONDON OFFICE RENTAL GROWTH 40 30 20 Rental growth (% pa) 10 0 Q1 00 Q1 02 Q1 04 Q1 06 Q1 08 Q1 10 Q1 12 Q1 14 -10 -20 West End -30 City Central London -40 Source: CBRE 76
Slide 78: Appendix 21 - 2014 Completions
APPENDIX 21 - 2014 COMPLETIONS Queens W2 1-2 Stephen Street W1 • 21,400 sq ft residential and retail scheme: • 85,150 sq ft of offices delivered in September 2014: ◦◦ 18,700 sq ft residential (16 units) ◦◦ 28,350 sq ft pre-let to Freud Communications ◦◦ 2,700 sq ft retail – let in Q1 2015 ◦◦ 6,500 s
Slide 79: Appendix 22 - 2015 Completions
APPENDIX 22 - 2015 COMPLETIONS Turnmill, 63 Clerkenwell Road EC1 40 Chancery Lane WC2 • 70,500 sq ft scheme completed Q1 2015: • 101,800 sq ft due to complete Q2 2015: ◦◦ 58,200 sq ft offices pre-let to Publicis Groupe at ◦◦ 97,400 sq ft offices pre-let to Publicis Groupe at £3.1m pa (net) £5.7m pa
Slide 80: Appendix 23 - Other 2015 Completions
APPENDIX 23 - OTHER 2015 COMPLETIONS Tottenham Court Walk W1 • 38,000 sq ft retail extension and refurbishment - completes Q2 2015 • Eight units - one pre-let 73 Charlotte Street W1 • Increases previous area by 58% • 15,500 sq ft: • Provides modern units directly onto Tottenham Court ◦◦ 13,600 sq ft
Slide 81: Appendix 24 - 1 Oxford Street W1 - Option Site
APPENDIX 24 - 1 OXFORD STREET W1 - OPTION SITE 1 Oxford Street W1 • Start c.2018 • 275,000 sq ft mixed-use scheme ◦◦ 204,000 sq ft offices ◦◦ 37,000 sq ft retail ◦◦ 34,000 sq ft 350-seat theatre • Located above Tottenham Court Road station – also a new Crossrail interchange 80
Slide 82: Profit on Cost of Developments
APPENDIX 25 - PROFIT ON COST OF DEVELOPMENTS White Collar Factory 73 Charlotte Street 40 Chancery Lane Turnmill Queens Completion Completed Q1 2015 Q2 2015 Q3 2015 Q3 2016 Commercial area (sq ft) 461,900 2,700 70,500 101,800 1,900 285,000 Residential area (sq ft) 40,300 18,700 - - 13,600 8,000 Est.
Slide 83: Profit on Cost of 2015 Starts
APPENDIX 26 - PROFIT ON COST OF 2015 STARTS 25-33 Berners Street 80 Charlotte Street Completion 2017 2018 Commercial area (sq ft) 440,000 105,000 335,000 Residential area (sq ft) 45,000 - 45,0002 Est. future capex (£m) 226 51 175 Total cost (£m)1 497 117 380 ERV (£ psf) c.77.50 c.75.00 ERV (£m pa) 2
Slide 84: Impact of 2015 Starts
APPENDIX 27 - IMPACT OF 2015 STARTS • Proposed 2015 project starts: 25-33 Berners Street W1 and 80 Charlotte Street W1 Impact on ERV of the two developments Proforma ERV £m Portfolio ERV 215.61 20 Less: ERV on existing buildings 11.2 Current rental income 29.8 Potential ERV on the two projects 29.8
Slide 85: Potential Project Delivery 2015-2020
APPENDIX 28 - POTENTIAL PROJECT DELIVERY 2015-20201 700 Under construction1 620 Potential starts 592 600 Premier Estimated completions ('000 sq ft) 55-65 House North SW1 500 Wharf Network Road Building 415 W2 W1 400 25-33 Berners 19-35 Street Baker W1 Street 300 293 W1 Wedge 226 House 80 SE1 Charlot
Slide 86: Appendix 29 - Project Summary 2015-2016
APPENDIX 29 - PROJECT SUMMARY 2015-2016 Current Pre 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 projects2 Turnmill EC1 - 41 70 2 - - 2 Q1 2015 £55 40 Chan
Slide 87: Appendix 30 - Project Summary 2016+
APPENDIX 30 - PROJECT SUMMARY 2016+ Current Pre net scheme Proposed Earliest Property income area area possession Comment £m pa ‘000 sq ft ‘000 sq ft year Consented 1 Oxford Street W1 - - 275 c.2018 Option site. Offices, retail and theatre 25 Savile Row W1 1.2 42 58 TBC Residential consent granted i
Slide 88: Appendix 31 - Project Pipeline 2015-2020
APPENDIX 31 - PROJECT PIPELINE 2015-2020 On-site 2015-16 Other consented Potential pipeline projects1 + starts + projects + Appraisals = (by 2020) 0.52m sq ft 0.73m sq ft 0.33m sq ft 0.89m sq ft 2.47m sq ft Turnmill EC1 40 Chancery Lane WC2 1 Oxford Street W1 25 Savile Row W1 d ed ed te -si te nt nt
Slide 89: Appendix 32 - Portfolio Map
Kentish Town Highbury & Islington APPENDIX 32 - PORTFOLIO MAP Chalk Farm Caledonian Road Camden Road Essex Road Camden Town Primrose Hill Islington Carnegie St Wharfdale Rd Angel Haggerston Kings Cross TEC Park H Alban Regent’s Park BEL y St S t Pancras Hoxton Euston International Th am es T lin k E
Slide 90: Appendix 33 - Management Structure - Executive Team
APPENDIX 33 - 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 91: 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