Derwent London plc · LSE:DLN
Derwent London — H1 2007 Earnings Presentation
58 slides from Derwent London's earnings presentation, August 2007
Slide 1: Derwent London plc Interim results 2007
Derwent London plc Interim results 2007
Slide 2: Contents
Contents Page The London villages 01 Highlights 02 Achievements 03 Financial review 04 Portfolio statistics 12 • Valuation performance 13 • Portfolio summary 15 Portfolio management 17 • Lettings and activity 18 Acquisitions and disposals 20 • Acquisitions 21 • Disposals 25 Projects update 28 • Proj
Slide 3: The London villages
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Slide 4: Highlights
Highlights for the six months to 30th June 2007 • Adjusted net asset value 1,931p per share - 12.5% increase . 1 • Adjusted profit before tax £12.3m. • Total return for the half year 9.7%. Highlights 1 based upon a proforma NAV at the 31st January 2007 of 1,717p. 0 Excellent progress following the m
Slide 5: Achievements
Achievements • Merger of DVH and LMS completed 1st February to create Derwent London. • REIT conversion completed 1st July 2007. • Rapid integration of the businesses with all personnel now located at Savile Row. • Reshaping the combined portfolio - to focus on larger Central London buildings. • Sub
Slide 6: Financial review
Financial review Financial review 0
Slide 7: Financial review: Overview
Interim results 2007 Overview • Results include five months from LMS. • Fair value balance sheet (31.1.07) finalised. • Revised adjusted net asset value per share is 1,717p. • Goodwill upon acquisition “impaired”. • Dividend policy cannot be judged on 2007 results. • Rationalisation of portfolio pos
Slide 8: Group income statement
Interim results 2007 Group income statement • Gross property income rose £24.4 million. • Ex Derwent £1.5 million. • Ex LMS £22.9 million. • Ex Derwent included: • Lettings £3.9 million. • Voids £(1.9) million. • Property outgoings rose £1.9 million. • Void costs £0.7 million. • Transaction costs £0
Slide 9: Group income statement: taxation and dividend
Interim results 2007 Group income statement • Taxation credit of £224 million. • Write back of deferred taxation on revaluation surplus and capital allowances £362 million. • REIT conversion charges £55 million. • Remaining deferred tax on properties outside REIT £30.6 million. • Greenwich Reach acc
Slide 10: Balance sheet
Interim results 2007 Balance sheet • Net asset value per share. • Adjusted 1,931p. • Balance sheet 1,922p. • Difference relates mainly to financial fair value adjustments. • Property, plant and equipment includes Greenwich site. • Trading property is the residential site in Scotland. • Minority inte
Slide 11: Group cash flow
Interim results 2007 Group cash flow • Miscellaneous/exceptional items. • Exceptional administrative costs - explained in note 17. • Exceptional finance costs - explained in note 17. • Includes redemption cost of £20 million debenture to re-finance joint venture with Portman. • Acquisitions and capi
Slide 12: Debt
Interim results 2007 Debt • Net debt per balance sheet £948 million. • Includes: £22.1 million fair value adjustment of secured bond on acquisition. : £9.5 million leasehold liabilities. : £1.7 million secured bond issue costs. • Interest bearing debt at half year was £918 million. • Current (24.8.0
Slide 13: Debt facilities
Interim results 2007 Interim results 2007 Debt Debt facilities Commitment Maturity £m 6.5% secured bond 175.0 March 2026 Floating guaranteed unsecured loan note 32.5 February 2012 Bank facilities Revolving credit 100.0 April 2013 Term/revolving credit 375.0 March 2013 Revolving credit 200.0 December
Slide 14: Portfolio statistics
Portfolio statistics Portfolio statistics 12 12
Slide 15: Valuation performance
Valuation performance Key points • Investment portfolio valuation Portfolio Valuation valuation surplus £m £m1 Investment properties 2,484.4 204.3 Development properties2 313.4 40.6 Acquisition 21.3 0.3 Investment portfolio 2,819.1 245.2 Other properties3 129.3 53.2 2,948.4 298.4 • Performance from:
Slide 16: Valuation performance by location
Valuation performance By location Valuation Valuation Portfolio movement surplus valuation Weighting H1 20071 H1 2007 £m % % £m West End Belgravia/Knightsbridge 184.7 7 29.0 41.5 Victoria 261.9 9 15.1 34.4 Mayfair 66.2 2 12.0 7.1 Soho/Covent Garden 296.3 11 9.2 24.9 Noho 193.1 7 8.6 13.9 Fitzrovia 5
Slide 17: Portfolio summary: Yields
Portfolio summary Yields Yield profile1 Initial Reversionary Yield • A substantial reversionary yield profile. yield yield spread % % % • Equivalent yields levelling. West End 3.8 5.7 1.9 City 4.8 5.9 1.1 • The drivers of future value: • Asset management activity. Central London 4.0 5.7 1.7 • Develo
Slide 18: Portfolio summary: Income profile
Portfolio summary Income profile Income profile Rental Rental uplift per annum Yield1 £m £m % Contracted rental income, net of ground rents 116.7 4.1 Vacant accommodation available and current schemes 18.6 4.7 Anticipated rent review and lease renewal reversions 31.6 5.8 Portfolio reversion 50.2 Pot
Slide 19: Portfolio management
Portfolio management Portfolio management 17 17
Slide 20: Lettings and activity
Lettings and activity Key points • £2.6m of lettings in the first half - 134,000 sq ft. • The Johnson Building; £0.4m pa - 11,100 sq ft. - Syzygy - £42 psf rising to £45 psf at first review. • Fully let. • Initial lettings at £35-£37.50 psf - reversionary. • St Cross Street; £0.5m pa - 18,900 sq ft.
Slide 21: Lettings and activity
Lettings and activity Holden House, W1 4 Grosvenor Place, SW1 • Lease surrender on 6,800 sq ft. • Lease surrender on 3,700 sq ft. • Rent passing £35 psf. • Refurbishment undertaken. • Re-let: H&M Hennes at £47.50 psf. • Re-let at £67.50 psf. • Setting new evidence at this • Setting a new benchmark r
Slide 22: Acquisitions and disposals
Acquisitions and disposals Acquisitions and disposals 20 20
Slide 23: Acquisitions
Acquisitions Key points • A competitive buying environment. • Remain acquisitive where: • Rents are reversionary. • Planning/refurbishment potential. • Acquisitions this year - £119m, excluding costs. • Income £5.25m pa. • Net initial yield 4.2%. • First half: • Castle House, 75 Wells Street, W1. Ac
Slide 24: Castle House, Wells Street, W1
Castle House, 75 Wells Street, W1 • £20.0m, excluding costs. • Virtual freehold. • 34,600 sq ft of multi-let offices. • Current income £0.8m pa. • Low rent of £23 psf • A core London village. • Opportunity to upgrade and refocus the building. • Substantial potential for rental improvement. Acquisiti
Slide 25: Woodbridge House, Aylesbury Street, EC1
Woodbridge House, 30 Aylesbury Street, EC1 • £46.3m, excluding costs. • Freehold. • 75,400 sq ft of offices. • Tenant - law firm Pinsent Masons. • Current income £2.45m pa. • Low rent of £32 psf. • Rent review 2010. • Lease expiry 2015. • Potential to win extra floor area - early studies indicate ci
Slide 26: 132-142 Hampstead Road, NW1
132-142 Hampstead Road, NW1 • £52.5m, excluding costs. • Freehold. • Warehouse/office buildings of 231,000 sq ft (GIA) plus a petrol station. • Low capital value - circa £230 psf. • Three tenants; BHS, NHS, BP. • Current income £2.0m pa - £8 psf. • Leases expire 2011 and 2012. Acquisitions and dispo
Slide 27: Disposals
Disposals • Reshaping the portfolio - well advanced with the disposal of: • Vacant residential sites. • Provincial assets. • Non-core smaller properties. • First half disposals £19.6m. • Winchester Road - £18.25m against book value of £10.0m. • Disposals post half year - £314m completed or contracte
Slide 28: Disposals - post half year: London
Disposals - post half year London Property Floor Rental Disposal Capital Uplift on area income price1 value valuation2 Comment sq ft £m pa £m psf % 1. Greenwich Reach, SE10 - - 111.8 - 111 Residential planning consent granted. 2. 160 Brompton Road, SW3 25,000 0.8 45.0 1,800 134 Residential developme
Slide 29: Disposals - post half year: Provincial
Disposals - post half year Provincial Property Floor Income Disposal Uplift on area rental price1 valuation2 Comment sq ft £m pa £m % 1. Lion & Lamb Yard, Farnham 70,000 1.6 32.3 10 Portman Estate JV - retail. 2. Dukes Lane & Middle Street, Brighton 64,000 0.9 20.0 53 Lease regeared prior to sale -
Slide 30: Projects update
Projects update Projects update 28 28
Slide 31: Project pipeline
Project pipeline Key points • Valuation surplus on the development properties - £40.6 million - 14.9% increase. • Qube, W1. • Portobello Dock, W10. • Horseferry House, SW1. • Arup II & III, W1. • Gresse Street/Rathbone Place, W1. • Leonard Street, EC2. • Current projects to deliver: • £100m of futur
Slide 32: Project pipeline summary
Heading Project pipeline Subheading Summary Property Proposed Est capital Est Est Est floor expenditure Total Headline rental Est end surplus Anticipated area to complete cost1 ERV value yield value to come completion 000’s sq ft £m £m £ per sq ft £m pa % £m £m Current projects Telstar, W22 107 - -
Slide 33: Project pipeline: projects subject to planning consent
Project pipeline Summary Property Current rental income Existing Proposed Anticipated per annum floor area floor area completion Comments £m 000’s sq ft 000’s sq ft Projects subject to planning consent The Angel Centre, EC1 (F) 4.2 162 250 2009 Planning submission imminent. The Turnmill, EC1 (F) 0.6
Slide 34: Pre-let developments
Pre-let developments Arup Phase II & III, W1 Horseferry House, SW1 Telstar, W2 • 2007 H1 valuation uplift 11.4%. • 2007 H1 valuation uplift 24.0%. • 107,000 sq ft development. • 142,000 sq ft new development. • 163,000 sq ft refurbishment. • Completion Autumn 2007. • External envelope progressing. •
Slide 35: Qube, Whitfield Street, W1
Qube, 90 Whitfield Street, W1 Current projects • 2007 H1 valuation uplift 15.2%. • Completion October 2007. • 100,000 sq ft offices/8,000 sq ft retail. • Delivering a quality building to a tight West End market. • Marketing at £62.50 psf. Projects update 33 Investing in Fitzrovia - transforming the
Slide 36: 16-19 Gresse Street, W1
16-19 Gresse Street, W1 Current projects • 2007 H1 valuation uplift 3.9%. • 47,000 sq ft new office development. • 11 residential units in Rathbone Place - planning gain. • Completion early 2009. • Office rental value +£60 psf. Projects update 34 Investing in Noho - creating a location.
Slide 37: 55-65 North Wharf Road, W2
55-65 North Wharf Road, W2 Planning update • Planning application submitted June 2007. • A striking innovative design offering: - 240,000 sq ft offices. - 100 apartments. • Incorporating the latest environmentally friendly technology. • Opens up public access to the adjacent Canal. • Lease break cla
Slide 38: 55-65 North Wharf Road, W2
55-65 North Wharf Road, W2 Planning update Projects update 36 Investing in Paddington - with striking design.
Slide 39: The Angel Centre, St John Street, EC1
The Angel Centre, St John Street, EC1 Planning update • 162,000 sq ft existing. • Vacant possession obtained. • BT continued rental obligation - £4.2m pa until expiry in Q1 2010. • Architects AHMM appointed. • Horseferry House. • The Johnson Building. • Feasibility studies in final stages. Projects
Slide 40: The Angel Centre, St John Street, EC1
The Angel Centre, St John Street, EC1 Planning update Top floor extension. Making an entrance. Potential infill with a featured atri- Potential infill with a feature atrium. Extend elevations. Remodelling the facade. Ground floor extensions. Projects update 38 Investing in Islington - creating innov
Slide 41: The Angel Centre, St John Street, EC1
The Angel Centre, St John Street, EC1 Proposal Existing floor plan. • Base scheme now 250,000 sq ft. • Floor area increase over 50%. • Planning application imminent. • Delivery 2009. Proposed floor plan. Projects update 39
Slide 42: The Angel Centre: Financials
The Angel Centre, St John Street, EC1 Financials Rental Estimated Profit on cost sensitivity matrix (£m/%) value value £m pa £m Rental value psf Offices @ £42 psf 9.8 £37.00 £42.00 £47.00 4.75 27.1 48.7 70.3 Retail/restaurant 0.4 10.2 16.3% 29.2% 42.1% Yield % Yield @ 5.0% 20.0 5.00 18.0 38.5 59.0 1
Slide 43: Projects subject to planning
Projects subject to planning Planning update City Road Estate, EC1 1-5 Grosvenor Place, SW1 • Existing buildings 100,000 sq ft. • A landmark West End location. • Multi-let £1.3m pa (£13 psf) - rolling • Existing buildings - 162,000 sq ft. lease breaks. • In partnership with Grosvenor. • Planning rec
Slide 44: Project pipeline: Conclusion
Project pipeline Conclusion • Current developments progressing well and delivering attractive valuation returns. • Feasibility stage on 2.5m sq ft of projects. • Total project pipeline 3.3m sq ft. • End development value circa £2.8bn. • Additions to the pipeline through the acquisitions of: • Woodbr
Slide 45: Market summary
Market summary Market summary 43 43
Slide 46: Occupational market outlook
Occupational market outlook Central London vacancy rates West End 18 Central London 16 • Vacancy rate 2.5% (Dec 2006 3.5%). 14 City • First half takeup encouraging at 2.4m sq ft. 12 West End 10 • Full year 2006 takeup 4.2m sq ft. % 8 • Rental growth positive in all sub-markets. 6 4 • Driven by scarc
Slide 47: Investment summary
Investment summary • First half turnover at £9.5bn (full year 2006 total £15.7bn). • Overseas investors account for over two thirds of total acquisitions. • Central London investments - the favoured asset class as rental growth comes through. • Yields levelling - but low vacancy rates and tight supp
Slide 48: Conclusion
Conclusion Conclusion 46 46
Slide 49: Conclusion
Conclusion • A fully integrated business - achieved in six months. • Disposal strategy on target and prices are exceeding expectations. • Extensive development pipeline. • A portfolio with low average rents - £25 psf in the West End, plenty of growth to come. • Ongoing acquisition policy - preferenc
Slide 50: Appendices
Heading Subheading Appendices Appendices 48 48
Slide 51: Appendices
Appendices 1. Capital expenditure. 2. Portfolio summary. 3. Portfolio statistics by villages. 4. Principal lettings 2007. 5. Project pipeline map. 6. Management structure - executive team. Appendices 49
Slide 52: Capital expenditure
Appendix 1 Capital expenditure Summary by property 2006 2007 2008 2009 acutal budget budget & beyond1 budget £m £m £m £m Horseferry House 3.9 18.3 4.4 - Arup II & III2 6.1 22.3 6.1 11.2 Qube2 14.6 16.1 0.8 - Portobello Dock/Kensal House 1.3 9.1 0.9 - Gresse Street & Rathbone Place 0.9 4.4 13.5 4.1 L
Slide 53: Portfolio summary
Heading Appendix 2 Subheading Portfolio summary Net Vacant Rent review contracted accommodation and lease Estimated rental income Average rental value reversions rental value Valuation per annum rental income per annum per annum per annum £m £m £ per sq ft £m £m £m West End Central 1,808.8 67.2 26.4
Slide 54: Portfolio statistics by villages
Appendix 3 Portfolio statistics by villages Vacant Net Average Vacant Rent review/ Estimated Floor floor contracted rental accommodation lease renewal rental Weighting area area rental income income rental value reversion value % sq ft 000’s 000’s £m pa £psf £m pa £m pa £m pa West End: Central Fitzr
Slide 55: Principal lettings 2007
Appendix 4 Principal lettings 2007 The Johnson Building, EC1 4 Grosvenor Place, SW1 • Lettings of last floor - Syzygy Ltd. • New rental level achieved. • 11,100 sq ft. • 3,700 sq ft. • £0.4m pa. • £0.3m pa. • £42.50 psf rising to £45 psf. • £67.50 psf. 6-7 St Cross Street, EC1 Tea Building, E1 • 3 r
Slide 56: Project pipeline map
Appendix 5 Project pipeline map1 Current projects 1. Telstar, W2 - 107,000 sq ft 2. Horseferry House, SW1 - 163,000 sq ft Camden/ 3. Arup II & III, W1 - 142,000 sq ft Islington 4. Qube, W1 - 108,000 sq ft 10, 19 5. Portobello Dock, W10 - 69,000 sq ft 6. Gresse Street, W1 - 47,000 sq ft Clerkenwell P
Slide 57: Management structure - executive team
Appendix 6 Management structure - executive team • John Burns Chief Executive • Simon Silver Head of Development • Chris Odom Finance Director • Nigel George Director • Paul Williams Director • David Silverman Associate Director • Tim Kite Company Secretary • Nick Groves Senior Investment Manager •
Slide 58: Disclaimer
Disclaimer This presentation includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Derwent London plc to be materially different from any f