Derwent London Plc · LSE:DLN
Derwent London — Investor Day (November 2016)
100 slides from Derwent London's investor day presentation, Nov 10, 2016
Slide 1: Derwent London Investor Presentation 10 November 2016
DER WENT LONDON INVESTOR PRESENTATION 10 N OV E M B E R 2 016
Slide 2: Timetable
T I M E TA B L E 1 14.15 Arrival at The White Chapel Building 14.30 Introduction John Burns, Chief Executive, Derwent London Market View: Investment and Valuation Nick Knight, CBRE Central London Occupier Market Dan Hanmer, CBRE Derwent London’s opportunities: Appropriate Development Risk Damian Wis
Slide 3: Introduction – John Burns
2 INTRODUCTION JOHN BURNS
Slide 4: Introduction
INTRODUCTION 3
Slide 5: Business update highlights
B U S I N E S S U P D AT E H I G H L I G H T S 4 NEW LETTINGS DELIVERING DEVELOPMENTS ROBUST FINANCES ■■ £28.3m YTD ■■ Developments 2017: ■■ LTV 19.3% in Sep 2016 ■■ +6.9% over Dec 15 ERV ■■ 400,000 sq ft - 66% pre-let ■■ Undrawn resources £269m ■■ H2: +2.8% over Jun 16 ERV ■■ Subsequent disposals £
Slide 6: Outlook
OUTLOOK 5 CHANGE IN MARKET MOMENTUM DERWENT LONDON’S GROWING BUSINESS ■■ Slower economic growth Well positioned: ■■ Impact of new business rates (April 2017) ■■ Product ■■ Limited availability but rising ■■ Pricing ■■ Places ■■ People Significant opportunities: ■■ Adding area ■■ Improving quality ■■
Slide 7: Format of the afternoon
F O R M AT O F T H E A F T E R N O O N 6 ■■ Market View: Investment and Valuation Nick Knight, CBRE Central London Occupier Market Dan Hanmer, CBRE ■■ Derwent London’s opportunities: Appropriate Development Risk Damian Wisniewski, Finance Director Portfolio Qualities Nigel George, Direct
Slide 8: Market Presentation
7 PREPARED FOR MARKET PRESENTATION Nick Knight and Dan Hanmer 10 November 2016
Slide 9: Agenda
AGENDA 8 01. 02. 03. Market Snapshot Investment Valuation Activity Performance since June 04. 05. Outlook for Office Occupier Values Market 2
Slide 10: 1. Market Snapshot
9 1. MARKET SNAPSHOT
Slide 11: Central London Market Snapshot
CENTRAL LONDON MARKET SNAPSHOT 10 The 10-year Active: Chinese, Thai, Wells Fargo at £ v$ Average Singaporean and HK 33 King William Sterling remains at lowest Street rate against the dollar in Take-Up – Below Absent: UK Funds over 30 years $1.22 Availability – Below Vote of Under Offer – Above confi
Slide 12: 2. Investment Activity
11 2. INVESTMENT ACTIVITY
Slide 13: Investment transactions at lowest level since 2011
INVESTMENT TRANSACTIONS AT LOWEST LEVEL 12 SINCE 2011 Central London capital transactions £m 25,000 Q1-3 Q4 20,000 15,000 10,000 5,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: CBRE Research 6
Slide 14: Referendum effect in 2016 numbers
REFERENDUM EFFECT IN 2016 NUMBERS 13 Central London capital transactions £m 6,000 5,000 4,000 3,000 2,000 1,000 0 2015 2016 2015 2016 2015 2016 Q1 Q2 Q3 Source: CBRE Research 7
Slide 15: The City office investment market
THE CITY OFFICE INVESTMENT MARKET 14 20 Moorgate, London, EC2 Moor Place, London EC2 (Available) (October 2016- Exchanged) 120 Holborn (Holborn Island) (September 2016 - Exchanged) 77 Gracechurch Street, London, EC3 (Sold October 2016) Type: Office investment Type: Office investment Tenure: Freehold
Slide 16: The West End office investment market
THE WEST END OFFICE INVESTMENT MARKET 15 440 Strand, WC2 (September 2016 – U/O) One Southampton St, WC2 (May 2016 - Exchanged) Type: Office investment Tenure: LLH (15% offs/ 20% retail) Area: 180,480 sq ft Type: Office /Retail investment WAULT:75% to Coutts for 20.5yrs Tenure: Freehold Price: c.£200
Slide 17: 3. Valuation Performance Since June
16 3. VALUATION PERFORMANCE SINCE JUNE
Slide 18: Capital and rental value growth
CAPITAL AND RENTAL VALUE GROWTH 17 Central London Offices % change from Jun-16 to Sep-16 Capital Value growth (%) Rental Value growth (%) 1 1 0 0 -1 -1 -2 -2 -3 -3 -4 -4 -5 -5 -6 -6 City Midtown & West All Offices City Midtown & West All Offices End End Source: IPD Monthly Index 11
Slide 19: Equivalent yields and initial yields
EQUIVALENT YIELDS & INITIAL YIELDS IPD 18 Central London Offices % Equivalent Yield Initial Yield Mar-16 Jun-16 Sep-16 Mar-16 Jun-16 Sep-16 7.0% 5.0% 6.0% 4.0% 5.0% 4.0% 3.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 0.0% City Midtown & West All Offices City Midtown & West All Offices End End Source: IPD Monthl
Slide 20: Recent capital values fall has moderated markedly
RECENT CAPITAL VALUES FALL HAS MODERATED 19 MARKEDLY July 16 August 16 Sept 16 (%) (%) (%) All Property -3.40 -0.54 -0.19 Shopping centres -3.53 -0.63 -0.50 Retail Warehouses -4.05 -0.71 -0.62 Offices -4.12 -0.84 -0.19 Industrials -2.17 -0.25 0.25 Central London -4.10 -0.90 -0.23 Source: CBRE Resear
Slide 21: 4. Outlook for Values
20 4. OUTLOOK FOR VALUES
Slide 22: Impact on development: the London example
IMPACT ON DEVELOPMENT: THE LONDON EXAMPLE Central London office quarterly completions, 2016-25, 21 2-year rolling average CBRE House View Pre-referendum CBRE House View 2,000 1,800 1,600 1,400 000s sq ft 1,200 1,000 800 600 400 200 0 Source: CBRE 15
Slide 23: Rents: falling in 2017, but decent recovery thereafter
40 60 80 100 120 140 160 1999Q1 1999Q3 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 CBRE House View 2010Q1 RECOVERY THEREAFTER 2010Q3 2011Q1 2011Q3 16 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q
Slide 24: Capital values: modest falls
CAPITAL VALUES: MODEST FALLS 23 Central London office capital values, 2000-2025, index CBRE House View CBRE Pre-referendum Forecast 225 200 175 150 125 100 75 50 17 Source: CBRE, IPD
Slide 25: Summary
SUMMARY 24 Initial period of inactivity post Referendum, but liquidity returning; Stress in open ended fund space eased; Valuation “certainty clauses” to disappear; Good level of investment demand, particularly overseas and private money; Occupational market resilient to date but weaker fo
Slide 26: 5. Office Occupier Market
25 5. OFFICE OCCUPIER MARKET
Slide 27: 2016 YTD Central London office take-up
0 2 4 6 8 10 12 14 16 18 20 1990 Million sq ft 1991 Q3 2016 1992 1993 1994 1995 1996 12.8m sq ft 1997 10-year average: 1998 1999 2000 2001 2002 20 2003 2004 2005 2006 2007 2008 CENTRAL LONDON OFFICE TAKE-UP 2009 2010 2011 2012 2013 2014 Source: CBRE 26 2015 2016 YTD
Slide 28: Who's taking space?
WHO’S TAKING SPACE? 27 Central London take-up, 12 months to Q3 2016 Creative Industries 27% Banking & Finance 24% Business Services 21% 21
Slide 29: Active demand remains strong
ACTIVE DEMAND REMAINS STRONG 28 Central London Demand Creative Industries 7% Banking & Finance 13% 28% Business Services Total: 9% Today: 8.3m sq ft Manufacturing, Industrial & Energy (Q2: 7.6m sq ft) Insurance 7% 18% Public Sector 5% 13% Professional Consumer Services & Leisure Source: CBRE Researc
Slide 30: Central London active demand over 50,000 sq ft
CENTRAL LONDON ACTIVE DEMAND OVER 29 50,000 SQ FT Banking and Professional Creative Industries Others Finance Services Source: CBRE Research 23
Slide 31: Supply rises to 13.8m sq ft
10 15 20 25 30 0 5 Q3 2006 Million sq ft Q1 2007 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Secondhand Q3 2010 Central London availability Q1 2011 24 Q3 2011 Q1 2012 New Completed SUPPLY RISES TO 13.8M SQ FT Q3 2012 Q1 2013 New U/C Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 14.5m Q1 2016 Q3 2016 S
Slide 32: Have vacancy rates reached a turning point?
HAVE VACANCY RATES REACHED A TURNING 31 POINT? Central London vacancy rates % 20 Central London City 18 West End 16 Midtown 14 Fitzrovia 12 Paddington 10 8 6 4 2 0 Q3 16 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Slide 33: Completions starting to pick up in 2016
COMPLETIONS STARTING TO PICK UP IN 2016 32 Central London Million sq ft 16 Completed U/C Let/Under Offer U/C Available Proposed Let/ Under Offer Proposed Available 14 12 10 8 6 4 2 0 Source: CBRE Research 26
Slide 34: How might the pipeline react?
HOW MIGHT THE PIPELINE REACT? 33 Central London Million sq ft Brexit Recession Slowdown Recession Slowdown Q3 ‘90 – Q2 ‘92 Q3 ‘00- Q1 ‘02 Q2 ‘08 – Q2 09 16 ? 14 12 10 8 6 4 2 0 Completed Potential Source: CBRE Research 27
Slide 35: Rental growth is moderating
RENTAL GROWTH IS MODERATING 34 Central London prime rent index annual growth % 50 City Midtown West End Central London 40 30 20 10 0 -10 -20 -30 -40 Q3 1995 Q3 1996 Q3 1997 Q3 1998 Q3 1999 Q3 2000 Q3 2001 Q3 2002 Q3 2003 Q3 2004 Q3 2005 Q3 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013
Slide 36: New rates produced some unexpected results
NEW RATES PRODUCED SOME UNEXPECTED 35 RESULTS Rates payable percentage increase, 2016/17 – 2020/21 % King's Cross City core Covent Garden Southbank Soho Midtown (Holborn) Docklands Fitzrovia Victoria Mayfair and St James's Paddington Knightsbridge North Ox West -20% 0% 20% 40% 60% 80% 100% 120% Sour
Slide 37: Central London occupier costs
CENTRAL LONDON OCCUPIER COSTS 36 £ per sq ft Forecast year-end 2016 rent plus rates payable post re-val. Excludes service charge / estate charge Mayfair and St James's (£166.56) Knightsbridge (£147.76) North Ox West (£133.42) Soho (£115.19) Covent Garden (£112.02) King's Cross (£111.07) Fitzrovia (£
Slide 38: What do occupiers want?
WHAT DO OCCUPIERS WANT? 37 LOCATION EXPERIENTIAL ARRIVAL OWN BRAND MAXIMISING VALUE FROM FLOOR FINISHES BASEMENT UP 31
Slide 39: What do occupiers want?
WHAT DO OCCUPIERS WANT? 38 VERTICAL VISUAL INTEGRATION FLEXIBLE FOOTPRINT TECHNOLOGY WELLNESS / SUSTAINABILITY 32
Slide 40: Disclaimers and Waivers
DISCLAIMERS AND WAIVERS 39 This presentation has been prepared in good faith based on CBRE’s current views of the commercial real-estate market. Although CBRE believes its views reflect market conditions on the date of this presentation, they are subject to significant uncertainties and contingencie
Slide 41: Appropriate Development Risk – Damian Wisniewski
40 APPROPRIATE DEVELOPMENT RISK DAMIAN WISNIEWSKI
Slide 42: Why development is important to Derwent London
W H Y D E V E L O P M E N T I S I M P O R TA N T T O D E R W E N T L O N D O N 41 ■■ Part of our total return model ■■ Recurring earnings dividend ■■ Adding value through the property cycle DRIVERS OF VALUATION SURPLUS Development ERV/Income Yield % 100 15 90 24 £390m over 3 years 33 80 70 33 60 28
Slide 43: Development volumes and area uplift
DE VELOPMENT VOLUMES AND ARE A UPLIF T 42 4% £216m 4% £193m £55m Committed capex (£m) £31m 3% % of total portfolio £155m 3% £18m 3% 2% £113m £116m £108m 3% £20m £24m £36m £79m £161m £162m £24m £137m 1% £45m £89m £89m £80m £12m £54m £33m 2012 2013 2014 2015 2016 2017 2018 2019 Major Other Major - for
Slide 44: Growing earnings within a balanced portfolio
GROWING EARNINGS WITHIN A BALANCED PORTFOLIO 43 EPRA EPS (pence) Dividend (pence) Interest cover (%) 80 50 400 71.3 45 +29% 362 70 +41% 43.4 350 40 39.7 60 300 57.1 35 36.5 286 53.9 33.7 279 263 50 50.4 30 250 40 25 200 20 30 150 15 20 100 10 10 5 50 0 0 2012 2013 2014 2015 0 2012 2013 2014 2015 201
Slide 45: The impact of development on reversion
T H E I M PAC T O F D E V E LO P M E N T O N R E V E R S I O N 44 ■■ Total additional income potential at 30 June 2016 of £150.8m ■■ Good proportion (20%) from contractual cash flow growth ■■ £65.3m or 43% from development lettings (30 June 2016) ■■ Less dependent on movements in ERV than the pure r
Slide 46: Income yields on current projects
INCOME YIELDS ON CURRENT PROJECTS 45 WHITE COLLAR THE COPYRIGHT BRUNEL 80 CHARLOTTE FACTORY EC1 BUILDING W1 BUILDING W2 STREET W1 Completion Q1 2017 H2 2017 H1 2019 H2 2019 Commercial area (sq ft) 967,000 285,000 107,000 240,000 335,000 Residential area (sq ft) 53,000 8,000 - - 45,0002 Total cost (£
Slide 47: De-risking the pipeline
DE-RISKING THE PIPELINE 46 ■■ Fixing costs - 74% fixed Floorspace (million sq ft) 0.40 H2 2016 2017 2018 2019 ■■ Using Tier 1 contractors - Multiplex, 0.35 Skanska, Laing O’Rourke 0.30 ■■ Working closely with chosen 0.25 39% subcontractors COMPLETE 0.20 100% ■■ Building in generous void and rent fre
Slide 48: Paddington - why we have decided not to pause
PA D D I N GTO N - W H Y W E H AV E D E C I D E D N OT TO PA U S E 47 ■■ Great building offering good value ■■ Crossrail location ■■ Others investing in the area ■■ Letting market for big space: low vacancy rate and limited choice ■■ Very valuable planning permission with good returns likely ■■ Fixe
Slide 49: Funding the pipeline
FUNDING THE PIPELINE 48 ■■ Trend shown here: £468m £422m ■■ Recycling and adding debt facilities £392m ■■ Business generates circa £30m of £332m £279m recurring cash flow per annum after £269m dividends ■■ New project commitments will be more cautious but retain optionality £199m £143m ■■ LTV ratio
Slide 50: Portfolio Qualities – Nigel George
49 PORTFOLIO QUALITIES NIGEL GEORGE
Slide 51: Operating in central locations
O P E R AT I N G I N C E N T R A L L O C AT I O N S 50 Primrose Hill Islington Carnegie St Wharfdale Rd Angel Haggerston Kings Cross Park Alba Regent’s Park ny St S t Pancras Hoxton International Th am Euston es lin k Euston Up Old Street Old Street pe rW St Matth ob Clerkenwell urn Pl Warren Street
Slide 52: Crossrail benefits still to come
C R O S S R A I L B E N E F I T S S T I L L TO C O M E - O P E N I N G 2 018 51 Shenfield Reading Hayes Bond Street Farringdon Whitechapel Brentwood Regeneration area Maidenhead Paddington Tottenham Liverpool Street Court Road Canary Abbey Heathrow Wharf Wood Fitzrovia Old Street Clerkenwell Padding
Slide 53: Paddington / Brunel Building
PA D D I N GTO N 52 The making of an office location: ■■ 2 million sq ft West End office hub ■■ Crossrail will transform connectivity ■■ Major rail and underground terminus ■■ Extensive street scape improvements underway Pocket parks, public arts, canal walkways Offers tremendous West End value c
Slide 54: Brunel Building
BRUNEL BUILDING 53 Grade A Office Rents: ■■ Paddington circa £65 psf ■■ Other West End locations: Knightsbridge £85 psf Fitzrovia £85 psf Victoria £80 psf King’s Cross £77.50 psf Southbank £62.50 psf
Slide 55: Fitzrovia / Tottenham Court Road proposal
FITZROVIA 54 An increasingly popular and vibrant area: ■■ A core “W1” location undergoing major regeneration 1 STEPHEN STREET ■■ Attracting new occupiers, including: Office: Estée Lauder and Facebook Office rents: Office rents: Retail: Primark, Zara, Oasis and Planet Organic QUBE £44 - £82 psf
Slide 56: 80 Charlotte Street
80 CHARLOT TE STREE T 55 ■■ A landmark building ■■ 40,000 sq ft floor plates - divisible ■■ Extensive terraces ■■ Circa 3m floor to ceiling heights ■■ Opportunity for multiple entrances ■■ Rent circa £80 psf
Slide 57: Portfolio reversion
10 PORTFOLIO REVERSION* 5 56 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD Net income ■■ Reversion estimated at £150.8m pa: £m INCREASING POTENTIAL INCOME ■■ Now 34% contractual uplifts or pre-let: 300 Rent reviews and lease renewals £140.3m ■■ Pre-lets (including refurbishments) increased
Slide 58: Contractual uplifts / pre-lets - £46.0m
CONTR ACTUAL UPLIF TS / PRE-LE TS - £46.0M 57 Reversion (£m) 16 Development pre-lets ■■ Contractual - £30.8m: Contractual increases 14 13.5 ■■ Rent frees and guaranteed increases on 12 review ■■ Income is spread over the lease length 10 8.9 9.7 7.9 ■■ Development pre-lets - £15.2m: 8 2.1 13.5 4.3 3.
Slide 59: Rent review / renewal - £33.5m
RENT RE VIE W / RENE WAL - £33.5M 58 2016 RENT REVIEW TRANSACTIONS Reversion (£m) 10 Expiries 1-2 STEPHEN STREET 8.5 Reviews 7.8 8 4.3 1.9 4.1 5.5 Office 21,100 sq ft 6 Rent £70 psf 4.7 Uplift 61% 3.0 1.8 4 7.0 5.9 2.7 30 GLOUCESTER PLACE 4.4 2 2.1 2.9 2.5 0.6 0 Office 23,600 sq ft -2.7 Rent £50 psf
Slide 60: Projects - £71.3m
P R O J E C T S - £ 71. 3 M 59 £m DELIVERY 45 Available and refurbishments (£21.2m) 41.2 ed ed et et pl WHITE CHAPEL BUILDING pl Developments (£50.1m) m m 20 FARRINGDON ROAD 40 Co Co Pre-let or let in H2 2016 35 30 25 17 17.5 THE COPYRIGHT BUILDING 20 17 WHITE COLLAR FACTORY 20 20 15 2.4 8.9 10 8.2
Slide 61: Portfolio composition at June
P O R T F O L I O C O M P O S I T I O N AT J U N E 2 0 16 60 WAULT NO OF WEIGHTING including pre-lets VALUATION PROPERTIES % 8.8 yrs Rental income: £(0.5)m Over £100m 17 50 Income: - £50m - £100m 18 25 Pre-let income: £17.6m3 Rental income: £108.2m < £50m 52 15 WAULT: 15.3 yrs Income: 77% 87 100 Ren
Slide 62: Diverse tenant profile
DIVERSE TENANT PROFILE 61 PROFILE OF TENANTS’ BUSINESS SECTOR1, 30 JUNE 2016 Other Financial 9% Government and 2% Media, TV, marketing and public admin advertising 4% 28% Charities 4% Retail sales 13% Retail head offices, Professional showrooms and business services 17% 23%2 1 Expressed as a percent
Slide 63: Letting & Asset Management – Paul Williams
63 LETTING & ASSET MANAGEMENT PAUL WILLIAMS
Slide 64: Letting activity YTD
LE T TING ACTIVIT Y Y TD 64 ■■ Highest letting year on record securing £28.3m of rental income: Rental income (£m pa) 30 Pre-lets Non pre-lets 25 White Collar Factory EC1 20 The White Chapel 15 Building E1 10 The Copyright Building W1 5 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD
Slide 65: Letting progress throughout the year
LET TING PROGRESS THROUGHOUT THE YEAR 65 30 Cumulative Income Dec 2015 ERV 25 20 15 10 H1 2016 H2 2016 5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ■■ Average lettings getting larger: ■■ 10,500 sq ft in 2016 YTD ■■ 6,200 sq ft in the last five years ■■ 5,100 sq ft in the last ten years ■■ Good
Slide 66: Rent reviews, lease renewals & regears
RENT RE VIE WS, LE ASE RENE WALS & REGE ARS 66 ■■ A wide range of asset management initiatives were concluded in the first nine months of the year: Previous New Change Income v sq ft rent £m pa rent £m pa % ERV % Rent reviews 165,700 5.28 7.62 44.4 10.1 Lease renewals 17,600 0.73 0.87 18.5 -0.8 Leas
Slide 67: Case study: Tea Building E1
TEA TIME C A S E S T U D Y: T E A B U I L D I N G E1 67 ERV AVERAGE ERV (£ psf): 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 £7 £12 £12 £15 £20 £23 £23 £22 £23 £25 £30 £33 £38 £45 ? £45 £57.50 psf achieved in Q3 2015 62% Green Tea: Value Specification WHITE HORSE PUB –
Slide 68: Case study: Greencoat & Gordon Houses W1
C A S E S T U D Y: G R E E N C O AT & G O R D O N H O U S E S W 1 68 ■■ Two properties of 145,100 sq ft acquired in 1995 ■■ Rents raised from c.£10 psf to c.£59 psf ■■ In 2014 we bought back the long lease on the basement space and have since been reconfiguring it to create 31,000 sq ft of lettable
Slide 69: Dealing with higher business rates
Chalk Farm Caledonian Road D E A L I N G W I T H H I G H E R B U S I N E S S R AT E S 69 Camden Road Essex Road London Fields Camden Town Primrose Hill Islington LONDON PORTFOLIO AVERAGE Carnegie St Rates: Up from £16.60 to £21.40 psf (+29%) Wharfdale Rd Angel TOC: Up from £49 to £54 psf (+10%) King
Slide 70: Investment Activity – David Silverman
70 INVESTMENT ACTIVITY DAVID SILVERMAN
Slide 71: Investment strategy
I N V E S T M E N T S T R AT E G Y 71 ACQUISITIONS THE WHITE CHAPEL BUILDING E1 OPPORTUNITIES LOWER RETURNS 1. High capital values 2. Limited value - add opportunities 3. Non-core / too small INVESTMENT PORTFOLIO HIGHER RETURNS 1. Low rents and capital values 2. Located in improving areas 3. Refurbi
Slide 72: Investment activity since 2007
INVESTMENT ACTIVIT Y SINCE 20 07 72 400 Disposals £m Capital expenditure 300 Acquisitions Net investment Acquisitions less Disposals Total acquisitions 868 200 100 Total disposals (1,245) £ million £0 Cash raised 377 -100 -200 Capital expenditure 833 -300 2008 2009 2010 2011 2012 2013 2014 2015 2016
Slide 73: Acquisitions - getting the basics right
ACQUISITIONS - GE T TING THE BASICS RIGHT 73 GOOD PRICES MAKING CLUSTERS Capital value Rent £ psf £ psf 2010 1-2 Stephen Street 581 34 2011 1 Page Street 380 N/A Network Building 554 43 2012 25-29 Berners Street 460 18 Francis House 537 37 9-16 Prescot Street 209 11 2013 Mark Square House 479 24 19
Slide 74: A typical Derwent purchase
A T YPICAL DERWENT PURCHASE 74 POTENTIAL ACTIONS HIGHER VALUE + = THE COPYRIGHT BUILDING W1 ■■ Good bones ■■ Increase their area: utilise ■■ Good volume atriums / courtyards / car park ■■ High levels of natural light ■■ Roof top extensions ■■ Generous floor to ceiling ■■ Terraces heights ■■ Converti
Slide 75: Derwent London is not a passive investor
D E R W E N T LO N D O N I S N OT A PA S S I V E I N V E S TO R 75 Since 2010 Derwent London has acquired over 1.5 million sq ft: MONMOUTH HOUSE EC1 90% has been worked post acquisition 10% Still under t appraisal en ns co on 22 KINGSWAY WC2 W 13% Sold 2% TOTTENHAM COURT WALK W1 61% Refurbished 14%
Slide 76: Selling strategy
S E L L I N G S T R AT E G Y 76 GOOD PRICES Capital value ■■ Since 2010 Derwent London has sold 770,000 sq ft of central £ psf London office space 2011 Covent Garden 945 ■■ Average disposal price £1,080 psf 170 Tottenham Court Road 775 2012 Riverwalk House 775 2013 1-5 Grosvenor Place 1,555 60-62 Co
Slide 77: Sales - activity since Brexit
SALES - ACTIVIT Y SINCE BRE XIT 77 ■■ £130m of sales since June 2016, 96% of sales YTD ■■ In line with book value 016 2 4 Q 016 2 3 Q 016 2 4 Q 75 Wells Street W1 Balmoral Grove N7 Tower House WC2 34,800 sq ft 67,000 sq ft 53,700 sq ft £40.3m / £1,160 psf £23.9m - residential consent £65.9m / £1,230
Slide 78: Adding Value to Our Acquisitions – Simon Silver
78 ADDING VALUE TO OUR ACQUISITIONS SIMON SILVER
Slide 79: Rapid turnaround of our recent acquisitions
R APID TURNAROUND OF OUR RECENT ACQUISITIONS 79 ■■ Three major Tech Belt acquisitions in the last two years ANGEL SQUARE EC1 ■■ 585,000 sq ft of property at £322.6m (£550 psf) ■■ Repositioning the properties through light touch refurbishment: ■■ High quality office space at an affordable price in de
Slide 80: The three ugly sisters - Angel Square
T H E T H R E E U G LY S I S T E R S - A N G E L S Q U A R E 80 T O B E U P D AT E D
Slide 81: Angel Square EC1
ANGEL SQUARE EC1 81 ON ACQUISITION ■■Acquired in Q4 2014 for £78.6m (£620 psf): ■■ 126,900 sq ft of offices ■■ Rent of £2.4m pa (very low average rent of £21.68 psf) ■■ Majority of leases expired in March 2015 POST ACQUISITION ■■£6m light touch refurbishment undertaken shortly after acquisition: ■■
Slide 82: Angel Square EC1
ANGEL SQUARE EC1 82 d ire qu Ac
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Slide 84: Farringdon Road EC1
20 FA R R I N G D O N R OA D E C1 84 d ire cqu A
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Slide 86: 20 Farringdon Road EC1
20 FA R R I N G D O N R OA D E C1 86 ON ACQUISITION ■■ Acquired 175-year long leasehold interest for £92.7m (£545 psf) ■■ Rent of £3.2m (net of 10% ground rent) ■■ Average rent of £27 psf ■■ Adjacent to Farringdon Crossrail interchange POST ACQUISITION ■■ £11m refurbishment undertaken on 88,000 sq f
Slide 87: Farringdon Road EC1
20 FA R R I N G D O N R OA D E C1 87 d ire qu Ac
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Slide 91: The White Chapel Building E1
T H E W H I T E C H A P E L B U I L D I N G E1 91 ON ACQUISITION ■■285,500 sq ft office acquired with vacant possession for £151.3m (£530 psf) POST ACQUISITION ■■Rebranded from Aldgate Union ■■Phase 1 (185,000 sq ft) - light touch refurbishment ■■ 139,250 sq ft pre-let to five tenants at £6.9m pa (£
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Slide 94: The White Chapel Building - Phase 2
THE WHITE CHAPEL BUILDING - PHASE 2 94 ■■Integration of ground and lower ground floors following additional acquisition ■■Planning permission granted for a new entrance and pavilion ■■85,000 sq ft offices ■■Potential income of £2m+
Slide 95: Acquisition summary
ACQUISITION SUMMARY 95 £5.6m £17.7m £2.9m £22.8m* Rent on Rent + To let June 16 acquisition achieved Jun 16 ERV ERV £322.6m £35m* £357.6m + = Acquisition Capex Total price * Excludes Phase 2 of The White Chapel Building E1 and includes reversion on the let space
Slide 96: Conclusions – John Burns
96 CONCLUSIONS DERWENT LONDON JOHN BURNS
Slide 97: Conclusions
CONCLUSIONS 97 ■■ Good demand for our mid-market rental product has led to significant new lettings above ERV ■■ Disposal activity has been in line with book value ■■ Absolute debt levels remain low ■■ Appropriate development exposure focused on 2019 deliveries ■■ Portfolio is well placed to grow in
Slide 98: Derwent London attendees
D E R W E N T L O N D O N AT T E N D E E S 98 J O H N B UR N S * Chief Executive Officer SI MO N SI LV E R * Property Director DA M IA N W IS NI E WS K I * Finance Director NI G E L G E O R G E * Property Director PAUL W IL L IA M S * Property Director DAV I D SI LV E R MAN* Property Director R IC H
Slide 99: Disclaimer
DISCLAIMER 99 This presentation has been prepared by Derwent London plc (the “Company”). No representation or warranty (express or implied) of any nature is given nor is any responsibility or liability of any kind accepted by the Company or any of its directors, officers, employees, advisers, repres
Slide 100: Derwent London
100 DERWENT LONDON