Derwent London Plc · LSE:DLN
Derwent London — FY2018 Earnings Presentation
98 slides from Derwent London's earnings presentation, 2019
Slide 1: Annual Results 2018
TITLE Annual Results 2018 1 Footnote Derwent London plc Annual Results 2018 • Appendix x 1
Slide 2: Contents
CONTENTS Presenters Contents John Burns Introduction and overview 01 Simon Silver Results and financial review 06 Paul Williams Valuation and portfolio analysis 17 Damian Wisniewski Asset management and investment 24 Nigel George Developing a product 32 David Silverman Underlying market dynamics 45
Slide 3: Introduction and Overview
INTRODUCTION AND OVERVIEW JOHN BURNS Derwent London plc Annual Results 2018 1
Slide 4: Highlights
HIGHLIGHTS OPERATIONAL • £26.8m1 pa of lettings, 4.1% above Dec 2017 ERV • Five pre-lets at Brunel Building W2 totalling £11.3m • EPRA vacancy rate low at 1.8% • Commencing construction at Soho Place W1 and The Featherstone Building EC1 • Since the year end, one further letting at Brunel Building ta
Slide 5: Central London Office Outlook
CENTRAL LONDON OFFICE OUTLOOK London remains appealing as a global city CENTRAL LONDON OFFICE DEMAND CENTRAL LONDON OFFICE INVESTMENT Demand (million sq ft) Value of investment transactions (£bn) 30 Potential demand 22 Active demand 20 25 18 16 20 14 Average 12 15 10 8 10 6 5 4 2 0 2000 2002 2004 20
Slide 6: A Balanced Portfolio
A BALANCED PORTFOLIO Core income Future appraisal Future appraisal 1.04m sq ft 19% Horseferry House SW1 19 Charterhouse Street EC1 Under appraisal • 2008 – Let to Burberry, first break 2023 0.34m sq ft • Currently let at £26.50 psf Core 6% • 2018 – Term certain extended to 2038 income 59% 5.4m sq ft
Slide 7: Adding Growth
ADDING GROWTH IMPACT OF NEW PROJECTS1 £m 350 • 2018: 90% of portfolio ERV locked-in £304.4m 300 £274.4m New projects £30m ERV • Soho Place W1 and The Featherstone £89.6m Building EC1 adds £30m to ERV 250 246.7 • ERV now £304.4m: 200 • £89.6m will contribute to future income 150 90% 100 50 0 2018 Imp
Slide 8: Results and Financial Review
RESULTS AND FINANCIAL REVIEW DAMIAN WISNIEWSKI Derwent London plc Annual Results 2018 6
Slide 9: Headline Numbers
HEADLINE NUMBERS Dec 2018 Dec 2017 % change Net asset value £4,263.4m £4,193.2m 1.7 Special dividend EPRA net asset value per share1,2 3,776p 3,716p 1.6 paid in 2018 of 75p per share EPRA triple NAV per share1,2 3,696p 3,617p 2.2 EPRA total return 5.3% 7.7% n/a Gross property income £196.0m £172.2m
Slide 10: Net Assets, Debt and Gearing
NET ASSETS, DEBT AND GEARING • Equity shareholders’ funds increased by 1.8% to £4,202m • LTV ratio up to 17.2%, due to capex, dividend payments and acquisitions, with no significant disposals in the year • Special dividends of 52p and 75p per share paid in 2017 and 2018, respectively NET ASSETS, DEB
Slide 11: EPRA NAV Movement
EPRA NAV MOVEMENT • EPRA NAV per share up 1.6% to 3,776p from EPRA NAV PER SHARE 3,716p, after payment of 136.5p of dividends Pence 4,000 • Total return (EPRA basis) of 5.3% 3,900 113 (62) • Revaluation surplus: 5 3,800 (75) 4 Investment properties £83.4m 75 3,776 Owner-occupied property £0.7m 3,716
Slide 12: EPRA Earnings
EPRA EARNINGS1 • EPRA earnings were up 20.1% to £126.1m on an MOVEMENTS IN EPRA EARNINGS £m EPRA basis, or 5.2% to £110.5m on an 140 underlying basis 23.8 • Gross property income analysed on slide 11 (1.7) (4.1) 3.6 (0.5) 126.1 120 • Adjusting for prior years’ over and under (15.6) accruals for vari
Slide 13: Gross Property Income
GROSS PROPERTY INCOME • Gross property income increased by £23.8m to MOVEMENTS IN GROSS PROPERTY INCOME £196.0m in the year £m 200 17.7 196.0 • Lettings and reviews include: 2.9 (4.2) 5.5 2018 2017 180 7.5 (8.7) 3.1 lettings & lettings & 172.2 reviews reviews £15.9m White Collar Factory EC1 £0.1m £4
Slide 14: Like-for-Like Income
LIKE-FOR-LIKE INCOME • EPRA like-for-like income has been distorted by the unusually high non-rental income and surrender premiums received Properties owned throughout the year Development Acquisitions Total property & disposals EPRA Adjustments1 Underlying £m £m £m £m £m £m 2018 Gross rental income
Slide 15: Cash Flow
CASH FLOW • Increase in net debt of £299.0m to £956.9m • Cash from operations benefitted from £22.2m of surrender premiums and other property income received in the year NET CASH FLOW MOVEMENTS 2018 2017 £m £m FORECAST CAPITAL EXPENDITURE2 On-site projects 2019 starts Other Capitalised interest Cash
Slide 16: Proforma Impact of Major Projects
PROFORMA IMPACT OF MAJOR PROJECTS • Assumes no further lettings other than those already contracted • Shows impact of estimated capital expenditure on both on-site projects and 2019 starts ON-SITE PROJECTS 2019 STARTS Capex and Capex and site contracted Proforma acquisition Proforma Dec 2018 income1
Slide 17: Debt Summary
DEBT SUMMARY • £45.9m of the increase in net debt is due to the Dec 2018 Dec 2017 inclusion of the discounted headlease payments in Total facilities £1,166m £1,166m relation to Soho Place W1 Unutilised facilities and cash £274m £523m • The £150m unsecured convertible bonds, with a current conversion
Slide 18: Debt Facilities
DEBT FACILITIES Dec 2018 Dec 2017 MATURITY PROFILE OF DEBT FACILITIES £m Average spot interest rate 0 50 100 150 200 250 300 350 400 450 500 550 600 3.43% 3.80% (cash basis) 2019 150 Average spot interest rate 2020 3.68% 4.11% (IFRS basis) 2021 Marginal interest rate 1.60% 1.25% 2022 297.5 255.5 202
Slide 19: Valuation and Portfolio Analysis
VALUATION AND PORTFOLIO ANALYSIS NIGEL GEORGE Derwent London plc Annual Results 2018 17
Slide 20: Valuation
VALUATION Investment portfolio valued at £5.2bn Developments drive outperformance • Underlying growth 2.2% 2017: 3.9%: • Valued at £619m, uplift of 18.0% in 2018: • West End 2.3% 2017: 1.9% • 80 Charlotte Street W1 (74% pre-let) 6.3% • City Borders 2.6% 2017: 7.5% • Brunel Building W2 (64% pre-let2)
Slide 21: Property Return
PROPERTY RETURN Total property returns in 2018 CUMULATIVE TOTAL PROPERTY RETURN Index (31 Dec 2007=100) • Derwent London 6.0% 300 Derwent London • MSCI IPD Central London Offices1 5.3% MSCI IPD Central London Offices 165% MSCI IPD UK All Property • MSCI IPD UK All Property 1 6.0% 250 130% 200 83% TO
Slide 22: Movement in Yields
MOVEMENT IN YIELDS EPRA yields TRUE EQUIVALENT YIELD MOVEMENT1 True equivalent yield (%) • True equivalent yield 4.73% (Dec 2017: 4.73%) 7.5 15 97 • Net initial yield 3.4% (Dec 2017: 3.4%): 7.0 • ‘Topped-up’ net initial yield 4.6% (83) 6.5 (Dec 2017: 4.4%) 43 (55) • Up 20 basis points in 2018 – capt
Slide 23: Rental Value Growth
RENTAL VALUE GROWTH • Underlying rental growth of 1.1%: RENTAL VALUE GROWTH Half-yearly rental value growth (%) • City Borders 2.0% 12 • West End 0.6% 9 8.1 6 4.8 5.2 6.6 4.6 4.1 4.2 4.1 3.8 • Good demand for pre-lets and mid-market 3 1.3 2.6 2.8 2.1 2.8 2.6 3.0 1.0 1.1 0.6 0.5 0.6 priced office spa
Slide 24: Reversion Activity 2018
REVERSION ACTIVITY 2018 • £214.8m locked in, up £10.5m (5.1% uplift): REVERSION ACTIVITY £10.5m (5.1%) increase • Contracted uplifts have moved into net - 5.1 4.2 (1.3) 2.5 rent (£8.1m): £m • White Collar Factory EC1 10.3 214.8 • The White Chapel Building E1 204.3 9.6 (0.7) • 1 Oliver’s Yard EC1 200
Slide 25: Build-up of Portfolio ERV
BUILD-UP OF PORTFOLIO ERV • Portfolio reversion of £114.9m1: BUILD-UP OF ERV4 £m 350 • £55.3m contracted and in the income statement £59.6m • £59.6m of potential: 30.0 304.4 300 • £31.9m of pre-lets on developments: 1.7 11.1 274.4 4.1 10.8 250 31.9 Let Vacant ERV £m £m £m 55.3 200 80 Charlotte Stree
Slide 26: Asset Management & Investment
ASSET MANAGEMENT & INVESTMENT DAVID SILVERMAN Derwent London plc Annual Results 2018 24
Slide 27: Letting Activity 2018
LETTING ACTIVITY 2018 • 427,100 sq ft of lettings in 2018 at a rent of £26.8m pa: • 45% from on-site developments and 15% from 2018 LETTINGS IN 2018 refurbishment completions Other • Open market at 9.0% above Dec 2017 ERV 13.4% • Overall 4.1% ahead of ERV 45-51 Whitfield Street W1 2.3% Holden House
Slide 28: Key Lettings in the Year
KEY LETTINGS IN THE YEAR Income: £11.3m pa Income: £1.9m pa Income: £1.9m pa Income: £1.4m pa Income: £1.1m pa Rents1: £65 to £90 psf Rents: £102.50 to Rents: £502 & £75 psf Rent: £62.50 psf Rent: £62.50 psf £108 psf 1 First floor and above 2 Taken in existing condition Derwent London plc Annual Res
Slide 29: Letting Activity 2019 Year to Date
LETTING ACTIVITY 2019 YEAR TO DATE • 2019 lettings: • 46,500 sq ft at £3.1m pa • Open market 4.7% above Dec 2018 ERV • Overall 0.4%1 above ERV HELLMAN & FRIEDMAN • Includes new letting at Brunel Building W2: SONY PICTURES • 33,000 sq ft pre-let to Paymentsense • £2.6m pa (£77.50 psf) • 15-year lease
Slide 30: Asset Management Activities
ASSET MANAGEMENT ACTIVITIES • Lease renewals, rent reviews and lease regears concluded ASSET MANAGEMENT on 833,000 sq ft of the portfolio in 2018 £m 40 New rent • Income increased 20.4%, from £31.8m pa to £38.3m Dec ERV Previous rent 30 • Performance against Dec 2017 ERV: • Rent reviews +2.6% • Leas
Slide 31: Horseferry House SW1 and 60 Whitfield Street
ASSET MANAGEMENT • Locking in reversion and extending lease terms: £m £m 10 8.9 8.9 Burberry 10 1.6 1.6 8 8 • 162,700 sq ft 5.2 5.2 6 6 3.6 3.6 • Term certain extended by 15 years Horseferry Horseferry to 20 years 4 4 6.2 6.2 3.7 3.7 • Stepped rents agreed until 2028 Horseferry House SW1 2 2 0 0 Dec
Slide 32: Investment Activity 2018
INVESTMENT ACTIVITY 2018 n itio sal u is s po Ac q Di 88-94 Tottenham Court Road W1 Porters North N1 • £44.3m acquisition after costs: • £44.7m of net proceeds from disposal: • 45,900 sq ft 36-year leasehold interest • Derwent London share £22.3m • £2.5m net rent at 6.0% yield • 5% premium to Dec 20
Slide 33: Investment Activity 2019 Year to Date
INVESTMENT ACTIVITY 2019 YEAR TO DATE Disposal - 9 Prescot Street E1 Strategy for the year ahead • Exchanged for £53.85m before costs • Further disposals to follow • 50:50 joint venture (DL share £26.9m) • Significant financial firepower for potential acquisitions • 97,000 sq ft office – fully let a
Slide 34: Developing a Product
DEVELOPING A PRODUCT SIMON SILVER Derwent London plc Annual Results 2018 32
Slide 35: Current and Future Projects
CURRENT AND FUTURE PROJECTS • Over one million sq ft of activity – 623,000 sq ft on site and 410,000 sq ft commencing H1 2019 Kentish Town P Highbury & Islington • Two schemes, totalling 443,000 sq ft, with planning consent (resolution to grant) for the near future Chalk Farm Caledonian Road 00 00 0
Slide 36: Project Update
PROJECT UPDATE • Two developments on site: • Brunel Building W2 – 243,000 sq ft offices, 77% pre-let and remainder under offer, due for completion in Q2 2019 • 80 Charlotte Street W1 – 380,000 sq ft mixed-use scheme, 80% of the commercial space pre-let, due for completion in H1 2020 • Two projects c
Slide 37: Brunel Building W2: H1 2019 Delivery
BRUNEL BUILDING W2: H1 2019 DELIVERY • 243,000 sq ft canalside offices • 188,100 sq ft pre-let (77%) at £13.9m pa gross or £13.5m net • Six tenants including Sony Pictures and FA Premier League • Roof terraces and restaurant • Opposite Paddington station • Profit on cost 47% Derwent London plc Annua
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Slide 39: 80 Charlotte Street W1: H1 2020 Delivery
80 CHARLOTTE STREET W1: H1 2020 DELIVERY • 380,000 sq ft mixed-use scheme • Large 40,000 sq ft flexible floorplates on the island site • Extensive rooftop terraces with panoramic views • Commercial space 80% pre-let at £20.9m pa with BCG having options on the remaining office space Derwent London pl
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Slide 41: Soho Place W1: H1 2022 Delivery
SOHO PLACE W1: H1 2022 DELIVERY • 285,000 sq ft: • 209,000 sq ft offices • 36,000 sq ft retail • 40,000 sq ft theatre1 • New public space • ERV £22m • Construction underway • Capex £283m2 1 Pre-let at a nominal ground rent 2 Includes remaining site acquisition cost and profit share to Crossrail Derw
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Slide 43: The Featherstone Building EC1: H1 2022 Delivery
THE FEATHERSTONE BUILDING EC1: H1 2022 DELIVERY • Demolition commenced • 125,000 sq ft scheme including offices, workspaces and retail • 81% floorspace uplift • Adjacent to White Collar Factory • £8m ERV with typical office rent of £70 psf • Capex £76m Derwent London plc Annual Results 2018 • Append
Slide 44: Derwent London plc Annual Results 2018
Derwent London plc Annual Results 2018 42
Slide 45: The Next Generation of Schemes
THE NEXT GENERATION OF SCHEMES 54 - 68 Oxford Street, London 10th February • Two planning consents (resolution to grant) for 443,000 sq ft: 19-35 Baker Street W1 Holden House W1 • 293,000 sq ft of offices, residential and retail • 150,000 sq ft • 105% floorspace uplift • 67% floorspace uplift • Join
Slide 46: Untapped Potential
UNTAPPED POTENTIAL • A wide variety of potential development opportunities across the portfolio: 1.4 MILLION SQ FT OF PORTFOLIO UNDER APPRAISAL OR EARMARKED FOR FUTURE APPRAISAL Francis House & 6-8 Greencoat Place SW1 Network Building W1 80-85 Tottenham Court Road W1 88-94 Tottenham Court Road W1 An
Slide 47: Underlying Market Dynamics
UNDERLYING MARKET DYNAMICS PAUL WILLIAMS Derwent London plc Annual Results 2018 45
Slide 48: Central London Occupier Demand
CENTRAL LONDON OCCUPIER DEMAND Market demand Take-up (million sq ft) CENTRAL LONDON OFFICE TAKE-UP 20 West End • 13.7m sq ft of central London take-up in 2018: 18 Rest of central London Central London average • 7.2% above average 16 • 3.3m sq ft under offer, the highest year-end total for twenty 14
Slide 49: Derwent London's Response to Flexible Offices
DERWENT LONDON’S RESPONSE TO FLEXIBLE OFFICES • Derwent London has provided occupier flexibility for many years • Flexible office providers represent 5.1% of our portfolio, similar to the market • The Office Group are tenants in three of our multi-let buildings: • 1-2 Stephen Street W1 • White Colla
Slide 50: Central London Office Demand and Requirements
CENTRAL LONDON OFFICE DEMAND AND REQUIREMENTS • 13.7m sq ft of take-up in 2018 • Active requirements in the market include: • 8.9m sq ft of active demand at 31 Dec 2018, equal to the long-term average (LTA): • 4.0m sq ft in the West End, 13% above LTA CENTRAL LONDON OFFICE DEMAND Demand (million sq
Slide 51: Central London Office Supply
CENTRAL LONDON OFFICE SUPPLY Supply CENTRAL LONDON DEVELOPMENT PIPELINE Floor area (million sq ft) Vacancy rate (%) • Vacancy rate increased marginally from 4.2% to 4.6% in 2018: 12 Completed Completed average 12 Central London • Below long-term average of 5.1% Under construction Proposed Vacancy ra
Slide 52: A Stable Market Against an Uncertain Background
A STABLE MARKET AGAINST AN UNCERTAIN BACKGROUND • In our market, despite the political and economic CENTRAL LONDON OFFICE RENTAL GROWTH uncertainty: MSCI IPD CLO Rental Growth (Monthly Index, Dec 2000=100) CBRE CLO Vacancy Rate (%) 140 14 • Rents are at an all-time high albeit growth has CBRE CLO Va
Slide 53: Central London Office Investment Market
CENTRAL LONDON OFFICE INVESTMENT MARKET Market statistics CENTRAL LONDON OFFICE INVESTMENT Value of investment transactions (£bn) • £17.6bn of central London transactions in 2018: 22 • 10% above 2017, the highest in four years and 43% 20 above average 18 16 • Overseas investors accounted for 75% (20
Slide 54: What Does It Mean for Derwent London?
WHAT DOES IT MEAN FOR DERWENT LONDON? • Cutting edge design • Occupier focused • Market leading amenities • Well-being ASSETS • Sustainable product PEOPLE • Responsible • Pipeline Business Committee • Recycling the portfolio 52
Slide 55: Summary
TITLE SUMMARY JOHN BURNS Derwent London plc Annual Results 2018 53
Slide 56: Summary
SUMMARY • Uncertain economic and political environment • Good occupier and investment demand OUR MARKET • ERV guidance: +1% to -2% in 2019 • Investment yields expected to remain firm in 2019 • Management succession announced • Derwent London product remains popular and innovative DERWENT • Committed
Slide 57: Appendices
APPENDICES Derwent London plc Annual Results 2018 55
Slide 58: Appendices
APPENDICES 01. Group balance sheet 57 21. Major tenants 77 02. Net asset value per share 58 22. A close relationship with our tenants 78 03. Group income statement 59 23. Derwent London central London office rent profile 79 04. IFRS profit and EPRA/underlying earnings 60 24. Lease expiries, breaks a
Slide 59: Appendix 1 - Group Balance Sheet
APPENDIX 1 - GROUP BALANCE SHEET Dec 2018 Dec 2017 £m £m Investment property 5,028.2 4,670.7 Owner-occupied property 47.0 46.5 Investment in joint ventures 29.1 39.7 Other non-current assets 129.5 110.9 5,233.8 4,867.8 Other current assets and liabilities (44.1) (31.0) Trading property 36.3 25.3 Cas
Slide 60: Appendix 2 - Net Asset Value per Share
APPENDIX 2 - NET ASSET VALUE PER SHARE Dec 2018 Dec 2017 Diluted Diluted £m p £m p Net assets attributable to equity shareholders 4,201.9 3,759 4,128.3 3,694 Revaluation of trading properties net of tax 0.8 1.0 Fair value of secured bonds (35.3) (37.7) Fair value of unsecured convertible bonds (3.6)
Slide 61: Appendix 3 - Group Income Statement
APPENDIX 3 - GROUP INCOME STATEMENT Year ended Year ended Dec 2018 Dec 2017 £m £m Gross property income 196.0 172.2 (Write-down)/reversal of write-down on trading properties (0.2) 1.0 Other income 2.9 2.7 Property outgoings (12.8) (11.1) Net property and other income 185.9 164.8 Administrative expen
Slide 62: Appendix 4 - IFRS Profit and EPRA/Underlying Earnings
APPENDIX 4 - IFRS PROFIT AND EPRA/UNDERLYING EARNINGS Year Year ended ended Dec 2018 Dec 2017 £m £m IFRS profit for the year attributable to shareholders 222.3 314.0 Revaluation surplus (83.4) (147.9) Joint venture revaluation deficit/(surplus) 0.1 (3.9) Profit on disposal of properties (5.2) (50.3)
Slide 63: Appendix 5 - Explanation of EPRA Adjustments
APPENDIX 5 - EXPLANATION OF EPRA ADJUSTMENTS Adjustments 2018 2017 2018 EPRA EPRA A B C IFRS basis basis £m £m £m £m £m £m Net property and other income 185.9 0.2 186.1 163.8 Administrative expenses (32.3) (32.3) (28.2) Revaluation surplus 83.4 (83.4) - - Profit on disposal of investment property 5.
Slide 64: Appendix 6 - Debt Facilities
APPENDIX 6 - 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 1.125% unsecured convertible bonds 150.0 - 150.0 July 2019 4.41% unsecured private placement notes 25.0 - 25.0 January 2029 4.68% unsecured priva
Slide 65: Appendix 7 - Net Debt
APPENDIX 7 - NET DEBT Dec 2018 Dec 2017 £m £m Borrowings – current 148.4 - Borrowings – non-current 766.1 730.8 Acquired fair value of secured bonds less amortisation (11.8) (12.9) Equity component of unsecured bonds 12.6 12.6 Unwinding of discount of unsecured bonds (11.3) (9.1) Unamortised issue a
Slide 66: Appendix 8 - Fixed Rates and Hedging
APPENDIX 8 - FIXED RATES AND HEDGING Dec 2018 Dec 2017 Proportion of drawn facilities at fixed rates or hedged 70% 88% Weighted average duration of swaps1 1.2 years 1.2 years Mark-to-market cost of swaps and forward-start swaps £3.6m £7.9m Weighted average duration of fixed rate instruments 7.2 year
Slide 67: Appendix 9 - Valuation Performance by Village
APPENDIX 9 - VALUATION PERFORMANCE BY VILLAGE Valuation Valuation Weighting movement Dec 2018 Dec 2018 20181 £m % % West End Central Fitzrovia2 1,595.1 30 1.8 Victoria 514.5 10 (4.9) Paddington 259.5 5 39.3 Baker Street/Marylebone 167.2 3 (7.7) Mayfair 95.7 2 4.7 Soho/Covent Garden 81.0 2 4.8 2,713.
Slide 68: Appendix 10 - Rental Value Growth
APPENDIX 10 - RENTAL VALUE GROWTH RENTAL VALUE GROWTH1 2017 H1 2018 H2 2018 2018 % % % % West End 0.7 0.4 0.2 0.6 City Borders 3.0 0.6 1.4 2.0 Central London 1.7 0.5 0.7 1.2 Provincial 2.4 0.1 (4.4) (4.3) Underlying 1.7 0.5 0.6 1.1 1 On EPRA portfolio Derwent London plc Annual Results 2018 66
Slide 69: Appendix 11 - Valuation Yields
APPENDIX 11 - VALUATION YIELDS YIELD PROFILE1 EPRA INITIAL YIELDS Yield (%) Net initial ‘Topped-up’ 8 Pre-EPRA EPRA yield initial yield % % 7 West End 3.4 4.5 City Borders 3.2 4.5 6 Central London 3.3 4.5 5 Provincial 7.2 6.9 EPRA portfolio 3.4 4.6 4 Reversionary yield 3 True equivalent yield Initia
Slide 70: Appendix 12 - Context to Yield Movement
APPENDIX 12 - CONTEXT TO YIELD MOVEMENT • 346bp spread between true equivalent yield VALUATION YIELDS1 and 10-year Gilt: Yield % or Gap between Derwent London True Equivalent Yield (TEY) and 10-year Gilt • Gilt yield low and stable at 1.27% on 9 Derwent London TEY 10-year Gilt Derwent London Initial
Slide 71: Appendix 13 - Evolution of Portfolio ERV
APPENDIX 13 - EVOLUTION OF PORTFOLIO ERV £m 300 Rent reviews and lease renewals Under refurbishment/development Available to occupy 250 Contractual rental uplifts (including pre-lets) Contractual rent 200 150 100 50 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Derwent London plc Annual Result
Slide 72: Appendix 14 - Portfolio Statistics by Village
APPENDIX 14 - PORTFOLIO STATISTICS BY VILLAGE Net Vacant Floor Vacant contracted Average space Estimated area floor area 1 rental rental rental Lease Total rental Valuation Weighting ‘000 ‘000 income income value reversion4 reversion value £m % sq ft sq ft £m pa £ psf £m pa £m pa £m pa £m pa West En
Slide 73: Appendix 15 - Build-up of Portfolio ERV
APPENDIX 15 - BUILD-UP OF PORTFOLIO ERV Rent uplift pa Rent pa £m £m £m Contracted rental income, net of ground rents 159.5 Contractual rental uplifts White Collar Factory EC1 8.4 Angel Building EC1 8.0 Horseferry House SW1 5.2 Tea Building E1 5.0 The White Chapel Building E1 4.3 Other 24.4 55.3 Vac
Slide 74: Appendix 16 - Available Space and Projects
APPENDIX 16 - AVAILABLE SPACE AND PROJECTS Vacant Pre-let Total Gross Net Pre-let Total area area area vacant Ground vacant net rent 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 (EPRA) Johnson Building EC1 36 - 36 1.8 - 1.8 - 1.8
Slide 75: Appendix 17 - Timing of the Reversion
25 20 APPENDIX 17 - TIMING OF THE REVERSION 15 5.9 26.3 12.0 10 2.3 • £87.2m of the reversion contracted: • £11.1m of the reversion from reviews and expiries 0.1 10.2 5.7 • Fixed rental uplifts £55.3m 5 7.4 4.6 4.6 2.2 • Pre-let developments £31.9m 0 2019 2020 2021 2022 2023 >2023 REVIEWS AND EXPIRI
Slide 76: Appendix 18 - Outcome of Expected 2018 Reversion
APPENDIX 18 - OUTCOME OF EXPECTED 2018 REVERSION £m 10 CONTRACTUAL UPLIFTS REVIEWS EXPIRIES 9 8 7 6 Still to come 5 8.9 Contracted 1.5 8.1 4 Regears 3 contracted 4.9 3.1 Still to come 2 3.2 1.7 Reviews 1 contracted Contracted 1.2 1.3 0 Dec-17 Dec-18 Dec-17 Dec-18 Dec-17 Dec-18 (reversion in 2018) (r
Slide 77: Appendix 19 - Portfolio Summary
APPENDIX 19 - PORTFOLIO SUMMARY Floor area: 1.04m sq ft Rental income: £29.8m Income: 19% WAULT: 6.5 yrs Rent4: £35.10 Future ERV: £41.77 appraisal Potential projects 19% Floor area: 0.34m sq ft Floor area: 1.61m sq ft Rental income: £12.6m Rental income: £51.4m Income: 8% Income: 32% WAULT: 2.2 yrs
Slide 78: Appendix 20 - Rent and Tenant Banding
APPENDIX 20 - RENT AND TENANT BANDING CENTRAL LONDON ‘TOPPED-UP’ PROFILE OF TENANTS’ OFFICE RENT BANDING1 BUSINESS SECTOR2 £0-£30 ps f Other 9% 10% Financial Media, TV, marketing 4% and advertising £60+ ps f £30-£40 ps f 29% 34% 11% Government and public admin 6% Retail and leisure 12% £40-£50 ps f
Slide 79: Appendix 21 - Major Tenants
APPENDIX 21 - MAJOR TENANTS ‘Topped-up’ income1 % Existing Pre-let 01 Expedia 7.3 - 02 Burberry 5.9 - 03 Publicis Groupe 4.3 - 04 The Boston Consulting Group - 4.2 05 Arup 0.1 3.9 06 Government 3.6 - 07 The Office Group 2.8 - 08 WPP Group 2.4 - 09 Sony Pictures - 1.9 10 FremantleMedia Group 1.9 - 11
Slide 80: Appendix 22 - A Close Relationship with Our Tenants
APPENDIX 22 - A CLOSE RELATIONSHIP WITH OUR TENANTS Top 20 tenants (‘topped-up’ income) 01 Expedia Let 17,100 sq ft at Angel Building EC1 - Expedia now occupy all of the building’s office space 02 Burberry Major regear of the 162,700 sq ft Horseferry House SW1 extending Burberry’s term certain from
Slide 81: Appendix 23 - Central London Office Rent Profile
APPENDIX 23 - DERWENT LONDON CENTRAL LONDON OFFICE RENT PROFILE £ psf 60 Average office rent Average ‘topped-up’ office rent 55 Average office ERV1 50 45 40 35 30 25 20 2014 2015 2016 2017 2018 1 Includes ERV of on-site schemes Derwent London plc Annual Results 2018 79
Slide 82: Appendix 24 - Lease Expiries, Breaks and Vacancy Rates
APPENDIX 24 - LEASE EXPIRIES, BREAKS AND VACANCY RATES • £14.9m of income subject to breaks/expiries in 2018: • EPRA vacancy rate of 1.8%2 at the year end (4.2% in Jun 2018, 1.3% at Dec 2017): • 90% retained or re-let • Group’s 10-year average of 2.5% LEASE EXPIRY AND BREAK ANALYSIS1 EPRA VACANCY RA
Slide 83: Appendix 25 - Lease Expiry Profile and Lease Length
APPENDIX 25 - LEASE EXPIRY PROFILE AND LEASE LENGTH EXPIRIES AND BREAKS AS A PERCENTAGE OF PORTFOLIO INCOME1 West City End Borders Provincial 2019 2020 2021 2022 2023 Total Expiries 4 0 0 4 6 12 4 2 28 Holding over 0 1 0 1 0 0 0 0 1 Rolling breaks 1 0 0 1 1 3 0 0 5 Single breaks 0 2 0 2 6 9 5 5 27 5
Slide 84: Appendix 26 - Central London Office Demand
APPENDIX 26 - CENTRAL LONDON OFFICE DEMAND Market statistics OFFICE TAKE-UP Take-up (million sq ft) • 13.7m sq ft of central London office take-up in 2018: 20 Central London • 7.2% above the annual average 18 16 • 2.2% and 11.1% above 2017 and 2016 respectively 14 Annual average • 27% Business Servi
Slide 85: Appendix 27 - Central London Office Supply
APPENDIX 27 - CENTRAL LONDON OFFICE SUPPLY Market statistics OFFICE DEVELOPMENT PIPELINE • Vacancy rate of 4.6%, up from 4.2% at 31 Dec 2017: Floor area (million sq ft) 12 Vacancy rate (%) 12 Central London Completed Completed average • Remains below the long-term average (LTA) of 5.1% Under constru
Slide 86: Appendix 28 - Central London Office Vacancy
APPENDIX 28 - CENTRAL LONDON OFFICE VACANCY Vacancy rate (%) 16 West End City 14 Central London West End average 12 City average 10 8 6 4 2 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: CBRE Derwent London plc Annual Results 2018 84
Slide 87: Appendix 29 - Central London Office Rental Growth
APPENDIX 29 - CENTRAL LONDON OFFICE RENTAL GROWTH Rental growth (% pa) 40 West End City 30 Central London 20 10 0 (10) (20) (30) (40) 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: CBRE Derwent London plc Annual Results 2018 85
Slide 88: Appendix 30 - Brunel Building W2
APPENDIX 30 - BRUNEL BUILDING W2 • 243,000 sq ft office scheme, due to complete H1 2019, which is 77% pre-let at £13.9m pa (gross): Rent Area £m pa sq ft 2018 Sony Pictures 4.9 68,200 FA Premier League 2.2 33,400 HELLMAN & FRIEDMAN Hellman & Friedman 1.8 20,500 Coach 1.2 16,500 SONY PICTURES Alpha F
Slide 89: Appendix 31 - Developments Driving Returns
APPENDIX 31 - DEVELOPMENTS DRIVING RETURNS • Pre-lets have accounted for a significant proportion of our Rental income (£m pa) LETTING ACTIVITY 45 Pre-lets lettings in recent years: Non pre-lets 40 • 45% in 2018, 68% in 2017 and 79% in 2016 35 30 • Key pre-lets 2017-2019: 25 • Brunel Building W2 – S
Slide 90: Appendix 32 - 80 Charlotte Street W1
APPENDIX 32 - 80 CHARLOTTE STREET W1 (ISLAND SITE) ARUP THE BOSTON CONSULTING GROUP • 133,600 sq ft pre-let in 2017 • 123,500 sq ft pre-let in Q3 2017 • £9.7m pa with annual increases of 2.25% • £10.6m pa for the first 15 years • Average rent of £85.50 psf • Average rent of £75 psf on main office fl
Slide 91: Appendix 33 - On-site Developments: Profit on Cost
APPENDIX 33 - ON-SITE DEVELOPMENTS: PROFIT ON COST Brunel Building W2 80 Charlotte Street W1 t7 t le le pr e- pr e- Summary £m % % 64 74 End value 990 Less: Total cost1 743 Project surplus 247 Less: Booked to Dec 18 125 Surplus to come 122 Profit on total cost 33% Profit to come on total cost 16% Yi
Slide 92: Appendix 34 - 2019 Development Starts: Profit on Cost
APPENDIX 34 - 2019 DEVELOPMENT STARTS: PROFIT ON COST The Featherstone Building EC1 Soho Place W1 Summary End value 656 Less: Total cost1 558 Project surplus 98 Profit on total cost 18% Yield on cost 5.4% Sensitivity4 - project surplus (£m) and profit on cost (%) Valuation yield Completion H1 2022 H
Slide 93: Appendix 35 - Project Summary: Current Projects
APPENDIX 35 - PROJECT SUMMARY: CURRENT PROJECTS Current Pre Total Current net scheme Proposed 2019 2020 2021+ 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 Brunel Building W2 (0.1) 78 243 16 - - 16 H1 2019
Slide 94: Appendix 36 - Project Summary: Future Projects
APPENDIX 36 - 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 19-35 Baker Street W11 3.2 143 293 2021 Joint venture - The Portman Estate Holden House W1 5.8 90 150 2021 Eastern end of O
Slide 95: Appendix 37 - Project Pipeline
APPENDIX 37 - PROJECT PIPELINE On-site 2019 Consented Under Potential developments + starts + projects 0.31m sq ft + appraisal = pipeline 0.62m sq ft 0.41m sq ft 0.44m sq ft 1.78m sq ft 1.03m sq ft 0.75m sq ft Brunel Building W2 Soho Place W1 19-35 Baker Street W11 54 - 68 Oxford Street, London Hold
Slide 96: Appendix 38 - Portfolio Map
Kentish Town Highbury & Islington APPENDIX 38 - PORTFOLIO MAP Chalk Farm Caledonian Road Camden Road Essex Road London Fields Camden Town Primrose Hill Carnegie St Islington TEC Wharfdale Rd Angel Kings Cross H BEL Albany Regent’s Park T St Pancras Hoxton St International Th Maida Vale am es lin k E
Slide 97: Appendix 39 - Executive Committee and Senior Management
APPENDIX 39 - EXECUTIVE COMMITTEE AND SENIOR MANAGEMENT John Burns* Chief Executive Damian Wisniewski* Finance Director Simon Silver* Property Director Nigel George* Property Director Paul Williams* Property Director David Silverman* Property Director David Lawler* Company Secretary Richard Baldwin*
Slide 98: 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