Derwent London Plc · LSE:DLN
Derwent London — FY2019 Earnings Presentation
104 slides from Derwent London's earnings presentation, Feb 25, 2020
Slide 1: Annual Results 2019
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Slide 2: Contents
CONTENTS Presenters Contents Paul Williams Introduction and overview 01 Damian Wisniewski Results and financial review 14 Nigel George Valuation and portfolio analysis 25 David Silverman Leasing, asset management and investment 32 Simon Silver Projects 41 Summary 54 Appendices 56 Disclaimer 102 Derw
Slide 3: Introduction and Overview
INTRODUCTION AND OVERVIEW PAUL WILLIAMS Derwent London plc - Annual Results 2019 1
Slide 4: 2019 Highlights
2019 HIGHLIGHTS • Total return +6.6% st t co rofi on p • £34.0m of lettings on 498,500 sq ft: % 60 • 6.9% above Dec 2018 ERV • Three on-site developments 790,000 sq ft: • 72% pre-let • EPRA vacancy rate down to 0.8% • £181.7m of disposals completed • Net zero carbon target brought forward to 2030 •
Slide 5: Capturing Our Reversion
CAPTURING OUR REVERSION ERV PROFILE £m 400 • Portfolio ERV at 31 Dec 2019 £303.0m • 91% is contractual 350 £303.0m • £68.2m of reversion contributing to future reported income 300 27.3 £68.2m • Only £27.3m of ERV still to capture 40.9 250 • £334m capex to complete three on-site developments 65.7 200
Slide 6: Plenty to Come
PLENTY TO COME • 569,000 sq ft of existing floorspace either consented or under appraisal SPACE EITHER CONSENTED OR UNDER APPRAISAL Floorspace (’000 sq ft) • Potential to increase to at least 893,000 sq ft: 1,000 • 50% has planning consent 893 900 Other 800 Bush +57% House 700 Network Building 600 5
Slide 7: Maintaining Our Customer Focus
MAINTAINING OUR CUSTOMER FOCUS • Continuing to raise the bar for our design-led space: • Adding quality buildings to up-and-coming areas • Available on a wide range of lease terms • Amenity rich buildings • Provision of furnished and flexible units • To promote well-being • Evolving the use of techn
Slide 8: Future Proofing Our Business - Progress in 2019
FUTURE PROOFING OUR BUSINESS - PROGRESS IN 2019 • Committed to the Better Buildings Partnership’s climate change initiative • One of the London Mayor’s 11 Business Climate Leaders • Launched new revolving credit facility, the first by a UK REIT to contain a ‘green’ tranche green finance framework De
Slide 9: Net Zero Carbon by 2030
NET ZERO CARBON BY 2030 • Net zero carbon target on the existing portfolio brought forward by 20 years to 2030 • The Group will realign its science-based targets accordingly OUR NET ZERO CARBON STRATEGY 1. Delivering green 2. Achieving a green 3. Future proofing developments investment portfolio ene
Slide 10: Delivering Green Developments
DELIVERING GREEN DEVELOPMENTS • Three on-site developments will be net zero carbon 2. Investment 1. Developments 3. Energy portfolio • Operated using renewable energy: • 80 Charlotte Street - our first ‘all-electric’ building • Offset embodied carbon produced in the development process • Future sche
Slide 11: Achieving a Green Investment Portfolio
ACHIEVING A GREEN INVESTMENT PORTFOLIO 2. Investment 1. Developments 3. Energy portfolio • Current portfolio to be net zero carbon by 2030 • Aim to reduce energy consumption and use renewable sources of energy • Older buildings will need retro-fitting • Increased collaboration with our occupiers MAN
Slide 12: Future Proofing Energy
FUTURE PROOFING ENERGY Energy to come from renewable sources 2. Investment • Managed portfolio electricity 100% renewable 1. Developments portfolio 3. Energy • Gas supplies to come from renewable resources • Safeguard our supply of renewable energy Monitoring our carbon reduction targets since 2013
Slide 13: Business Impacts
BUSINESS IMPACTS Short-term costs balanced by long-term benefits • Improvements will come with a financial cost • Green buildings should attract higher rents and better covenants • Green buildings should have longer economic lives • Our net zero carbon strategy will evolve along with the science, pl
Slide 14: Central London Office Market
CENTRAL LONDON OFFICE MARKET Central London take-up and supply • 12.8m sq ft of central London take-up in 2019 • 9.3m sq ft vacant at 2019 year end • 5.3m sq ft available under construction Active ongoing demand • 9.1m sq ft of active demand at year end from a diverse range of occupiers (see right)
Slide 15: 2020 Outlook
2020 OUTLOOK CENTRAL LONDON OFFICE DEMAND CENTRAL LONDON OFFICE INVESTMENT Active demand (million sq ft) Prime office yield (%) 20 8 Current Yield Cyclical High Cyclical Low Long-term average 7 6 15 5 4 10 3 2 5 1 0 Barcelona Madrid Milan West End Dublin Amsterdam Paris Rome Berlin City Frankfurt 0
Slide 16: Results and Financial Review
RESULTS AND FINANCIAL REVIEW DAMIAN WISNIEWSKI Derwent London plc - Annual Results 2019 14
Slide 17: Financial Highlights
FINANCIAL HIGHLIGHTS EPRA net asset value per share1, 2 EPRA total return 3,958p 6.6% 2018: 3,776p 2018: 5.3% +4.8% 2017: 7.7% Underlying earnings per share Net rental income 103.1p £178.0m 2018: 99.1p 2018: £161.1m +4.0% +10.5% Final dividend per share3 Loan-to-value (LTV) ratio 51.45p 16.9% 2018:
Slide 18: EPRA NAV Movement
EPRA NAV MOVEMENT EPRA NAV PER SHARE Pence 4,100 80 Charlotte Street 62 Brunel Building 50 Soho Place 28 103 Other (1) 4,000 (68) 2 Total 139 12 (6) 3,958 139 3,900 3,800 3,776 3,700 3,600 1 Jan Revaluation Profit EPRA Dividends Results Other 31 Dec surplus on earnings paid from disposal JVs 2018 3,
Slide 19: EPRA and Underlying Earnings
EPRA AND UNDERLYING EARNINGS1 £m 200 4.6 2019 2018 Variance 191.7 (13.7) £m £m £m Salaries 13.1 12.4 0.7 180 Bonuses and incentives 12.2 9.4 2.8 Other staff costs 3.9 3.5 0.4 Other overheads 7.8 7.0 0.8 160 (37.0) Total 37.0 32.3 4.7 140 (26.5) 120 (2.0) (2.0) 115.1 100 80 60 Gross Premiums Property
Slide 20: Gross Rental Income
GROSS RENTAL INCOME • Gross rental income increased by £16.6m, £m MOVEMENT IN GROSS RENTAL INCOME or 9.5%, to £191.7m in 2019 200 1.5 2.3 3.0 (0.2) (2.3) 191.7 • 2019 lettings include £6.3m from Brunel Building W2 12.3 180 175.1 £19.1m • Reconciliation of gross rental income to gross property income
Slide 21: Cash Flow
CASH FLOW • Net borrowings (drawn facilities less cash) increased by £37.8m in the year to £930.0m MOVEMENT IN NET BORROWINGS Cash from operations £m £97.1m 200 Acquisitions (£31.6m) (18.6) Capex (£204.0m) 171.5 Capex reimbursement £3.5m 150 (34.3) Disposals £159.3m Net investment (£72.8m) (21.5) 10
Slide 22: Committed Capital Expenditure
COMMITTED CAPITAL EXPENDITURE £m 0 25 50 75 100 125 150 175 200 225 250 2019 Actual 161 30 13 spend 2020 CS SP TFB 40 111 34 28 11 2021 SP Forecast TFB Potential future capex1 spend 48 26 23 14 On-site projects: TFB CS = 80 Charlotte Street SP = Soho Place 2022+ SP TFB = The Featherstone Building 74
Slide 23: Proforma Impact of Major Projects, Disposals and Acquisitions
PROFORMA IMPACT OF MAJOR PROJECTS, DISPOSALS AND ACQUISITIONS • Assumes no further lettings other than those already contracted • Shows impact of estimated remaining capital expenditure on both completed and on-site projects PROFORMA IMPACT OF COMPLETED PROJECTS, PROFORMA IMPACT OF ON-SITE PROJECTS
Slide 24: An Active Year of Refinancing
AN ACTIVE YEAR OF REFINANCING New long-term debt issued • £250m US private placement notes with a weighted average interest rate of 2.89% and maturity of 10.8 years Total facilities • Six new relationship lenders £1,441m £275m 2018: £1,166m Repurchase of convertible bonds • £150m 1.125% 2019 convert
Slide 25: Revolving Credit Facility
REVOLVING CREDIT FACILITY • Includes a £300m ‘green’ tranche linking financing to our projects’ green credentials: • Raising the bar • A measurable benchmark • Part of the refinanced £450m RCF • Green Finance Framework (GFF) published in Oct 2019 • Green loan reporting and GFF independently assured
Slide 26: Debt Summary
DEBT SUMMARY MATURITY PROFILE OF DEBT FACILITIES Dec 2019 Dec 2018 £m Total facilities £1,441m £1,166m 0 50 100 150 200 250 300 350 400 450 500 550 600 2020 Net borrowings (drawn £930m £892m 2021 facilities less cash) 2022 34.5 68.5 Unutilised facilities and cash £511m £274m 2023 2024 62 83 388 2025
Slide 27: Valuation and Portfolio Analysis
VALUATION AND PORTFOLIO ANALYSIS NIGEL GEORGE Derwent London plc - Annual Results 2019 25
Slide 28: Valuation
VALUATION Investment portfolio valued at £5.5bn Four developments drove performance • Underlying capital growth 3.9% 2018: 2.2%: • Valued at £1.05bn, uplift of 21.2%: • West End 4.8% 2018: 2.3% • Brunel Building W2 (100% let)2 23.9% • City Borders 2.9% 2018: 2.6% • 80 Charlotte Street W1 (92% pre-le
Slide 29: Property Return
PROPERTY RETURN Total property returns in 2019 CUMULATIVE TOTAL PROPERTY RETURN Index (31 Dec 2007=100) • Derwent London 7.4% 300 Derwent London 185% • MSCI IPD Central London Offices1 4.1% MSCI IPD Central London Offices MSCI IPD UK All Property • MSCI IPD UK All Property1 1.2% 250 139% 200 85% TOT
Slide 30: Movement in Yields
MOVEMENT IN YIELDS EPRA yields TRUE EQUIVALENT YIELD MOVEMENT1 True equivalent yield (%) • Net initial yield 3.4% (Dec 2018: 3.4%): 7.5 • ‘Topped-up’ net initial yield 4.7% 15 (Dec 2018: 4.6%) 7.0 • Locking in the reversion - up 12 basis (83) 6.5 points in 2019 (55) 6.0 (12) • True equivalent yield
Slide 31: Rental Value Growth
RENTAL VALUE GROWTH • Underlying rental growth of 1.4% in 2019: Half-yearly rental value growth (%) RENTAL VALUE GROWTH • City Borders 2.7% 12 • West End 0.4% 9 6 4.8 5.2 6.6 4.1 3.8 4.2 4.1 3 • Good demand for our high quality product 2.6 2.8 2.1 2.8 2.6 3.0 1.0 1.1 0.6 0.5 0.6 0.4 1.0 0 (2.9) (3)
Slide 32: Build-up of Portfolio ERV
BUILD-UP OF PORTFOLIO ERV • Portfolio reversion of £133.9m1: BUILD-UP OF ERV3 £m 350 • £65.7m (49%) contracted, including: 0.5 9.0 2.1 • Brunel Building W2 £12.5m 300 15.7 303.0 40.9 • Angel Building EC1 £10.9m 250 • White Collar Factory EC1 £6.6m 65.7 £56.6m on-site • £68.2m of further reversion: 2
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Slide 34: Leasing, Asset Management & Investment
LEASING, ASSET MANAGEMENT & INVESTMENT DAVID SILVERMAN Derwent London plc - Annual Results 2019 32
Slide 35: Letting Activity 2019
LETTING ACTIVITY 2019 Rental income (£m pa) 45 Non pre-lets Pre-lets 40 Average 35 30 25 20 15 10 5 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 • 498,500 sq ft of lettings at a rent of £34.0m pa: • Second highest on record • Transactions 6.9% ahead of Dec 2018 ERV Brunel Build
Slide 36: Significant Office Lettings in 2019
SIGNIFICANT OFFICE LETTINGS IN 2019 Area: 185,700 sq ft Area: 82,600 sq ft Area: 40,650 sq ft Area: 16,100 sq ft Area: 6,925 sq ft Income: £17.2m pa Income: £6.3m pa Income: £3.4m pa Income: £1.2m pa Income: £0.5m pa Rents: £90 to £100 psf Rents: £75 to £77.50 psf Rents: £82.50 psf Rents: £72 to £83
Slide 37: Asset Management
ASSET MANAGEMENT • 545,000 sq ft of lease renewals and rent reviews £m RENT REVIEWS AND LEASE RENEWALS 2019 completed in the year at around Dec 2018 ERV 30 New rent (+/- ERV) 0.1% ERV • Income up 24.1%, from £21.6m pa to £26.8m (1.6%) Previous rent 0.6% • Vacancy rate of 0.8% at 31 Dec 2019 compared
Slide 38: Key Asset Management Transactions
KEY ASSET MANAGEMENT TRANSACTIONS Lease renewals 1 Oliver’s Yard EC1 Charlotte Building W1 Sage Publications The&Partnership Area: 37,900 sq ft Area: 12,400 sq ft Previous income: £1.35m Previous income: £0.75m New income: £2.63m New income: £0.87m Space upgraded Rent reviews 1 Page Street SW1 19 Ch
Slide 39: Derwent London Disposals
DERWENT LONDON DISPOSALS • Five major disposals completed or exchanged in 2019 with gross proceeds totalling £303.0m: • 5.1% above Dec 2018 book value: Gross Net yield to Area proceeds purchaser Rent Date sq ft1 £m1 % £m1 2019 completions Premier House SW1 Q1 60,700 50.0 - - 9 Prescot Street E1 (50%
Slide 40: Advancing the Pipeline: Bush House WC2
ADVANCING THE PIPELINE: BUSH HOUSE WC2 • 107,900 sq ft office let at £25k pa (£0.23 psf) • Expiry Dec 2028 • Advanced negotiations to provide early possession in 2021 • Potential for major refurbishment • Moved from ‘Future Appraisal’ to ‘Under Appraisal’ Derwent London plc - Annual Results 2019 • A
Slide 41: Adding to the Pipeline: Acquisition of Blue Star House
ADDING TO THE PIPELINE: ACQUISITION OF BLUE STAR HOUSE, BRIXTON SW9 • £38.1m (£710 psf) • 11-storey tower on 0.7 acre site • 53,750 sq ft • Low average office rent £14.50 psf • Vibrant area • Excellent connectivity: • Oxford Circus 11 minutes via Victoria line • Potential for major redevelopment: •
Slide 42: Blue Star House
Blue Star House 40
Slide 43: Projects
PROJECTS SIMON SILVER Derwent London plc - Annual Results 2019 41
Slide 44: Project Update
PROJECT UPDATE • Brunel Building W2 completed and fully let • Three major projects, totalling 790,000 sq ft, on site: • 80 Charlotte Street W1 • Soho Place W1 • The Featherstone Building EC1 • Two further projects with full planning permission: • 19-35 Baker Street W1 • Holden House W1 • Further opp
Slide 45: H1 2019 Completion: Brunel Building W2
H1 2019 COMPLETION: BRUNEL BUILDING W2 • 243,200 sq ft fully let scheme: • 237,700 sq ft offices • 5,500 sq ft restaurant • Total rent £17.8m gross/£17.3m net • Profit on cost 60% Derwent London plc - Annual Results 2019 • Appendix 37 43
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Slide 47: H1 2020 Completion: 80 Charlotte Street W1
H1 2020 COMPLETION: 80 CHARLOTTE STREET W1 • 380,000 sq ft mixed-use scheme: • Offices: 100% pre-let at £25.1m pa • Retail: 14,000 sq ft available • Residential: 13 out of 22 units sold • Completion H1 2020 • Capex to complete £40m Derwent London plc - Annual Results 2019 • Appendices 38 to 40 45
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Slide 49: H1 2022 Completion: Soho Place W1
H1 2022 COMPLETION: SOHO PLACE W1 • On site at 285,000 sq ft mixed-use scheme: • 209,000 sq ft offices • 36,000 sq ft retail • 40,000 sq ft theatre1 • 79% pre-let • ERV £23.0m • Completion H1 2022 • Capex to complete £233m2 1 Pre-let at a nominal ground rent 2 Includes remaining site acquisition cos
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Slide 51: H1 2022 Completion: The Featherstone Building EC1
H1 2022 COMPLETION: THE FEATHERSTONE BUILDING EC1 • Construction underway at this 125,000 sq ft office and retail scheme • ERV £8.1m with office ERV £70 psf • Completion H1 2022 • Capex to complete £61m Derwent London plc - Annual Results 2019 • Appendix 40 49
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Slide 53: Advancing Our Pipeline: 19-35 Baker Street W1
ADVANCING OUR PIPELINE: 19-35 BAKER STREET W1 • Earliest start date 2021 • 293,000 sq ft scheme: • 206,000 sq ft offices • 52,000 sq ft residential • 35,000 sq ft retail • New public realm Derwent London plc - Annual Results 2019 • Appendix 41 51
Slide 54: Advancing Our Pipeline: Holden House W1
ADVANCING OUR PIPELINE: HOLDEN HOUSE W1 • Earliest start date 2021 • 150,000 sq ft scheme: • 67% floorspace uplift • Retail/offices Derwent London plc - Annual Results 2019 • Appendix 41 52
Slide 55: Advancing and Increasing Our Pipeline
ADVANCING AND INCREASING OUR PIPELINE UNDER APPRAISAL 6-8 Greencoat Place SW1 Earliest start date 2020 Francis House SW1 Earliest start date 2021 Bush House WC2 Earliest start date TBC 32,000 sq ft 40,000 sq ft 108,000 sq ft Existing: 424,000 sq ft Proposed: 520,000+ sq ft Angel Square EC1 Network B
Slide 56: Summary
SUMMARY PAUL WILLIAMS Derwent London plc - Annual Results 2019 54
Slide 57: Summary
SUMMARY • Stronger central London office outlook • Good occupier demand for our product • Significant reversion to add to our income • Advancing our next wave of developments • Targetting net zero carbon portfolio by 2030 • ERV forecast of +1 to +4% with yields tightening • Robust financial position
Slide 58: Appendices
APPENDICES Derwent London plc - Annual Results 2019 56
Slide 59: Appendices
APPENDICES 01. Headline numbers 58 23. Rent and tenant banding 80 02. Group balance sheet 59 24. Breakdown of 2019 lettings 81 03. EPRA net asset value measures 60 25. Major tenants 82 04. Group income statement 61 26. Derwent London central London office rent profile 83 05. IFRS profit and EPRA/und
Slide 60: Appendix 1 - Headline Numbers
APPENDIX 1 - HEADLINE NUMBERS Dec 2019 Dec 2018 % change Net asset value (NAV) £4,476.9m £4,263.4m 5.0 EPRA NAV per share1,2 3,958p 3,776p 4.8 EPRA triple NAV per share 1,2 3,847p 3,696p 4.1 EPRA total return 6.6% 5.3% n/a Gross rental income £191.7m £175.1m 9.5 Net rental income £178.0m £161.1m 10.
Slide 61: Appendix 2 - Group Balance Sheet
APPENDIX 2 - GROUP BALANCE SHEET Dec 2019 Dec 2018 £m £m Investment property 5,174.3 5,028.2 Owner-occupied property 45.3 47.0 Investment in joint ventures 1.3 29.1 Other non-current assets 139.8 129.5 5,360.7 5,233.8 Non-current assets held for sale 118.6 - Other current assets and liabilities (55.
Slide 62: Appendix 3 - EPRA Net Asset Value Measures
APPENDIX 3 - EPRA NET ASSET VALUE MEASURES per share diluted £m p Net assets attributable to equity shareholders 3,941 4,421.2 Revaluation of trading properties 2.31 Deferred tax on revaluation surplus 3.3 Fair value of derivative financial instruments 3.7 Less share of non-controlling interest (0.8
Slide 63: Appendix 4 - Group Income Statement
APPENDIX 4 - GROUP INCOME STATEMENT Year ended Year ended Dec 2019 Dec 2018 £m £m Gross property income 192.7 196.0 Write-down of trading property - (0.2) Other income 3.6 2.9 Property outgoings (13.7) (12.8) Net property and other income 182.6 185.9 Administrative expenses (37.0) (32.3) Revaluation
Slide 64: Appendix 5 - IFRS Profit and EPRA/Underlying Earnings
APPENDIX 5 - IFRS PROFIT AND EPRA/UNDERLYING EARNINGS Year ended Year ended Dec 2019 Dec 2018 £m £m IFRS profit for the year attributable to shareholders 283.4 222.3 Revaluation surplus (156.4) (83.4) Joint venture revaluation deficit - 0.1 Profit on disposal (13.8) (5.2) Profit on disposal of share
Slide 65: Appendix 6 - Explanation of EPRA Adjustments
APPENDIX 6 - EXPLANATION OF EPRA ADJUSTMENTS Adjustments 2019 2018 2019 EPRA EPRA A B C IFRS basis basis £m £m £m £m £m £m Net property and other income 182.6 182.6 186.1 Administrative expenses (37.0) (37.0) (32.3) Revaluation surplus 156.4 (156.4) - - Profit on disposal 13.8 (13.8) - - Net finance
Slide 66: Appendix 7 - Cash Flow
APPENDIX 7 - CASH FLOW Year ended Year ended Dec 2019 Dec 2018 £m £m Property income 171.5 181.7 Property expenses (18.6) (19.1) Other income 3.6 2.9 Administrative expenses (34.3) (27.2) Finance costs (21.6) (20.0) Tax paid in respect of operating activities (3.5) (3.1) Net cash from operating acti
Slide 67: Appendix 8 - Reconciliation of Like-for-like Income to IFRS Income
APPENDIX 8 - RECONCILIATION OF LIKE-FOR-LIKE INCOME TO IFRS INCOME Properties owned throughout Development Acquisitions the year property & disposals Total £m £m £m £m 2019 Gross rental income 174.9 10.3 6.5 191.7 Property expenditure (11.0) (2.8) 0.1 (13.7) Net rental income 163.9 7.5 6.6 178.0 Oth
Slide 68: Appendix 9 - Debt Facilities
APPENDIX 9 - DEBT FACILITIES Drawn Undrawn Total Maturity £m £m £m 6.5% secured loan 175.0 - 175.0 March 2026 3.99% secured bonds 83.0 - 83.0 October 2024 1.5% unsecured convertible bonds 175.0 - 175.0 June 2025 2.68% unsecured private placement notes 55.0 - 55.0 January 2026 3.46% unsecured private
Slide 69: Appendix 10 - Net Debt
APPENDIX 10 - NET DEBT Dec 2019 Dec 2018 £m £m Borrowings – current - 148.4 Borrowings – non-current 976.6 766.1 Acquired fair value of secured bonds less amortisation (10.6) (11.8) Equity component of unsecured bonds 7.7 12.6 Unwinding of discount of unsecured bonds (0.7) (11.3) Unamortised issue a
Slide 70: Appendix 11 - Fixed Rates and Hedging
APPENDIX 11 - FIXED RATES AND HEDGING Dec 2019 Dec 2018 Proportion of drawn facilities at fixed rates or hedged 93% 70% Weighted average duration of swaps1 0.2 years 1.2 years Mark-to-market cost of swaps and forward-start swaps £3.7m £3.6m Weighted average duration of fixed rate instruments 8.2 yea
Slide 71: Appendix 12 - Valuation Performance by Village
APPENDIX 12 - VALUATION PERFORMANCE BY VILLAGE Valuation Valuation Weighting movement Dec 2019 Dec 2019 20191 £m % % West End Central Fitzrovia2 1,766.6 32 4.0 Victoria 469.2 9 (0.2) Paddington 340.0 6 23.9 Soho/Covent Garden 174.7 3 29.4 Baker Street/Marylebone 156.9 3 (9.8) Mayfair 97.2 2 1.4 3,00
Slide 72: Appendix 13 - Rental Value Growth
APPENDIX 13 - RENTAL VALUE GROWTH RENTAL VALUE GROWTH1 2018 H1 2019 H2 2019 2019 % % % % West End 0.6 0.1 0.3 0.4 City Borders 2.0 0.9 1.8 2.7 Central London 1.2 0.4 1.0 1.4 Provincial (4.3) 0.6 (0.6) 0.0 Underlying 1.1 0.4 1.0 1.4 1 On EPRA portfolio Derwent London plc - Annual Results 2019 70
Slide 73: Appendix 14 - Valuation Yields
APPENDIX 14 - VALUATION YIELDS YIELD PROFILE1 EPRA INITIAL YIELDS Yield (%) Net initial ‘Topped-up’ 8 Pre-EPRA EPRA yield initial yield % % 7 West End 3.2 4.5 City Borders 3.5 4.8 6 Central London 3.3 4.6 5 Provincial 7.4 7.8 EPRA portfolio 3.4 4.7 4 Reversionary yield 3 True equivalent yield Initia
Slide 74: Appendix 15 - Context to Yield Movement
APPENDIX 15 - CONTEXT TO YIELD MOVEMENT • 395bp spread between the Derwent London true VALUATION YIELDS1 equivalent yield and the 10-year Gilt: Yield % or Gap between Derwent London True Equivalent Yield (TEY) and 10-year Gilt • Second highest gap in the last 20 years 9 Derwent London TEY 10-year Gi
Slide 75: Appendix 16 - Evolution of Portfolio ERV
APPENDIX 16 - EVOLUTION OF PORTFOLIO ERV £m 350 Rent reviews and lease renewals Under refurbishment/development Available to occupy 300 Contractual rental uplifts (including pre-lets) Contractual rent 250 200 150 100 50 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Derwent London plc - Annual
Slide 76: Appendix 17 - Portfolio Statistics by Village
APPENDIX 17 - PORTFOLIO STATISTICS BY VILLAGE Net Vacant Floor Vacant contracted Average space Estimated area1 floor area rental rental rental Lease Total rental Valuation Weighting ‘000 ‘000 income income value reversion5 reversion value £m % sq ft sq ft £m pa £ psf £m pa £m pa £m pa £m pa West End
Slide 77: Appendix 18 - Build-up of Portfolio ERV
APPENDIX 18 - BUILD-UP OF PORTFOLIO ERV Rent uplift pa Rent pa £m £m £m Contracted rental income, net of ground rents 169.1 Contractual rental uplifts Brunel Building W2 12.5 Angel Building EC1 10.9 White Collar Factory EC1 6.6 Horseferry House SW1 5.2 1-2 Stephen Street W1 3.3 Tea Building E1 3.0 O
Slide 78: Appendix 19 - Available Space and Projects
APPENDIX 19 - 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) 26-27 Castlereagh Street W1 8 - 8 0.4 - 0.4
Slide 79: Appendix 20 - Reversion Activity 2019
APPENDIX 20 - REVERSION ACTIVITY 2019 REVERSION ACTIVITY £20.0m (9.3%) increase • £234.8m locked in, up £20.0m (9.3%): - 17.4 5.3 3.9 (7.5) 0.9 • Contracted uplifts have moved into net rent £m (£10.3m): 4.3 3.5 0.3 234.8 250 214.8 12.6 • White Collar Factory EC1 (10.3) 65.7 • The White Chapel Buildi
Slide 80: Appendix 21 - Timing of the Reversion
25 20 13.1 34.5 APPENDIX 21 - TIMING OF THE REVERSION 15 10 7.4 7.9 0.2 12.3 • £106.6m of the reversion contracted: • £9.0m 7.1 5 of the reversion 5.0 from reviews 6.9 and expiries 6.9 0.1 • Contracted uplifts £65.7m 0 2020 2021 2022 2023 2024 >2024 • Pre-let developments £40.9m REVIEWS AND EXPIRIES
Slide 81: Appendix 22 - Portfolio Summary
APPENDIX 22 - PORTFOLIO SUMMARY Floor area: 1.01m sq ft 0-3 yrs Rental income: £32.3m 14% Income: 19% WAULT: 6.5 yrs Rent4: £46.50 Future ERV: £50.64 appraisal Potential projects 18% Floor area: 0.40m sq ft Floor area: 1.64m sq ft Rental income: £11.2m Rental income: £54.6m Income: 7% Income: 32% WA
Slide 82: Appendix 23 - Rent and Tenant Banding
APPENDIX 23 - RENT AND TENANT BANDING CENTRAL LONDON ‘TOPPED-UP’ PROFILE OF TENANTS’ OFFICE RENT BANDING1 BUSINESS SECTOR2 £0-£30 ps f Other 6% Fintech 5% £30-£40 ps f 3% Financial 6% £70+ ps f 4% Media, TV, marketing 24% Flexible office and advertising providers 29% 6% £40-£50 ps f Technology 18% 6
Slide 83: Appendix 24 - Breakdown of 2019 Lettings
APPENDIX 24 - BREAKDOWN OF 2019 LETTINGS • Of the £34.0m pa of lettings in 2019, 80% derived from • 64% of our central London office lettings from either major developments (on site and recently completed): Fintech or Financial : Other 2% Other Flexible office providers 1% 11% 90 Whitfield Street W1
Slide 84: Appendix 25 - Major Tenants
APPENDIX 25 - MAJOR TENANTS ‘Topped-up’ income1 % Existing Pre-let 01 Expedia 6.5 - 02 Burberry 5.3 - 03 The Boston Consulting Group - 5.0 04 G-Research - 3.9 05 Publicis Groupe 3.8 - 06 Arup 0.1 3.4 07 Government 3.5 - 08 Apollo - 2.7 09 The Office Group 2.6 - 10 Sony Pictures 1.7 - 11 FremantleMed
Slide 85: Appendix 26 - Central London Office Rent Profile
APPENDIX 26 - DERWENT LONDON CENTRAL LONDON OFFICE RENT PROFILE £ psf 65 Average office rent Average ‘topped-up’ office rent 60 Average office ERV1 55 50 45 40 35 30 25 20 2015 2016 2017 2018 2019 1 Includes ERV of on-site schemes Derwent London plc - Annual Results 2019 83
Slide 86: Appendix 27 - Lease Expiries, Breaks and Vacancy Rates
APPENDIX 27 - LEASE EXPIRIES, BREAKS AND VACANCY RATES • £13.5m of income subject to breaks/expiries in 2019: • EPRA vacancy rate2 declined from 1.8% to 0.8% in 2019 (1.6% in Jun 2019): • £3.1m from assets disposed • Group’s 10-year average of 2.3% • 90% of remainder retained or re-let LEASE EXPIRY
Slide 87: Appendix 28 - Lease Expiry Profile and Lease Length
APPENDIX 28 - LEASE EXPIRY PROFILE AND LEASE LENGTH EXPIRIES AND BREAKS AS A PERCENTAGE OF PORTFOLIO INCOME1 West City End Borders Provincial 2020 2021 2022 2023 2024 Total Expiries 4 1 1 6 12 3 3 2 26 Rolling breaks 2 - - 2 4 - - - 6 Single breaks 1 1 - 2 10 6 5 5 28 7 2 1 10 26 9 8 7 60 PROFILE OF
Slide 88: Appendix 29 - Central London Office Demand
APPENDIX 29 - CENTRAL LONDON OFFICE DEMAND Market statistics Take-up (million sq ft) OFFICE TAKE-UP 20 • Central London office take-up of 12.8m sq ft in 2019: Central London 18 • In line with the annual average 16 • 7% below 2018 and 3% below 2017 14 Annual average 12 • 39% business & professional s
Slide 89: Appendix 30 - Central London Office Vacancy Rates
APPENDIX 30 - CENTRAL LONDON OFFICE VACANCY RATES Vacancy rate (%) 16 West End City 14 Central London 12 West End average City average 10 8 6 4 2 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Source: CBRE Derwent London plc - Annual Results 2019 87
Slide 90: Appendix 31 - Central London Office Supply
APPENDIX 31 - CENTRAL LONDON OFFICE SUPPLY Existing supply OFFICE DEVELOPMENT PIPELINE • Central London vacancy rate finished the year at 4.0%: Floor area (million sq ft) Vacancy rate (%) 12 Central London 12 Completed Completed average • Down from 4.4% a year earlier and 4.2% at the half year Under
Slide 91: Appendix 32 - Central London Office Rental Growth
APPENDIX 32 - CENTRAL LONDON OFFICE RENTAL GROWTH • CBRE estimated that prime office rents increased CENTRAL LONDON OFFICE RENTAL GROWTH 3.6% in 2019: Rental growth (% pa) 40 West End • West End: 4.2% City 30 Central London • City: 3.6% 20 10 • Since the EU referendum three and a half years ago, CBR
Slide 92: Appendix 33 - Central London Office Investment Market
APPENDIX 33 - CENTRAL LONDON OFFICE INVESTMENT MARKET 2019 activity CENTRAL LONDON OFFICE INVESTMENT Investment transactions (£bn) 9 Quarter total 4 quarter average • CBRE reported £11.3bn of central London transactions: 8 • 8% below the annual average 7 • 36% lower than 2018 6 5 • UK investors more
Slide 93: Appendix 34 - Net Investment
APPENDIX 34 - NET INVESTMENT £m £m 500 500 400 400 300 300 200 200 100 100 0 0 (100) (100) (200) (200) Acquisitions (300) (300) Capital expenditure Disposals (400) (400) Net investment (500) 2015 2016 2017 2018 2019 (500) Derwent London plc - Annual Results 2019 91
Slide 94: Appendix 35 - Acquisition: Blue Star House, Brixton SW9
APPENDIX 35 - ACQUISITION: BLUE STAR HOUSE, BRIXTON SW9 • 53,750 sq ft 11-storey building: • 41,600 sq ft offices (8,260 sq ft vacant) • 3,800 sq ft restaurant • 8,350 sq ft fitness centre • 0.7 acre site including surface car park • Immediately opposite Brixton O2 Academy • Acquired for £38.1m befo
Slide 95: Appendix 36 - Soho Place W1
APPENDIX 36 - SOHO PLACE W1 • 285,000 sq ft office, retail and theatre scheme split between two buildings: • 102,600 sq ft pre-let to G-Research at £9.7m pa (£94.70 psf average) for 15 years (no breaks) • 83,100 sq ft pre-let to Apollo for 15 years (no breaks) with an option on the 5,200 sq ft first
Slide 96: Appendix 37 - Brunel Building W2
APPENDIX 37 - BRUNEL BUILDING W2 • 243,200 sq ft fully let project completed in H1 2019: • Total rent £17.8m pa (gross) or £17.3m pa (net) • Offices: • 237,700 sq ft HELLMAN & FRIEDMAN • Fully let prior to completion Gross rent Area SONY PICTURES £m pa sq ft 2018 Sony Pictures 4.9 68,200 PAYMENTSENS
Slide 97: Appendix 38 - 80 Charlotte Street W1: Major Occupiers
APPENDIX 38 - 80 CHARLOTTE STREET W1 (ISLAND SITE): MAJOR OCCUPIERS ARUP THE BOSTON CONSULTING GROUP • 133,600 sq ft pre-let in 2017 • 123,500 sq ft pre-let in Q3 2017 plus 40,650 sq ft in Q3 2019 (option space) • £9.7m pa with annual increases of 2.25% for the first 15 years • £13.9m pa • Average r
Slide 98: Appendix 39 - On-site Developments: Profit on Cost
APPENDIX 39 - ON-SITE DEVELOPMENTS: PROFIT ON COST e- le t e- le t Summary pr pr % % End value 1,308 92 79 Less: Total cost1 1,065 Project surplus 243 Less: Booked to Dec 19 139 Surplus to come 104 Profit on total cost 23% Profit to come on total cost 10% Yield on cost 5.7% Completion H1 2020 H1 202
Slide 99: Appendix 40 - Project Summary: Current Projects
APPENDIX 40 - PROJECT SUMMARY: CURRENT PROJECTS Current Pre Total Current net scheme Proposed 2020 2021 2022+ 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 80 Charlotte Street W1 - 234 380 40 - - 40 H1 202
Slide 100: Appendix 41 - Project Summary: Future Projects
APPENDIX 41 - 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 4.5 143 293 2021 Currently Derwent 55%, The Portman Estate 45% Holden House W1 6.6 90 150 2021 Easte
Slide 101: Appendix 42 - Project Pipeline
APPENDIX 42 - PROJECT PIPELINE On-site Consented Under Potential developments + projects 0.44m sq ft + appraisal = pipeline 0.79m sq ft 0.45m sq ft 1.68m sq ft 0.79m sq ft 0.89m sq ft 80 Charlotte Street W1 Soho Place W1 19-35 Baker Street W11 Holden House W1 Angel Square EC1 ed te d al e e nt is si
Slide 102: Appendix 43 - Portfolio Map
Chalk Farm Caledonian Road APPENDIX 43 - PORTFOLIO MAP Camden Road Essex Road Camden Town Primrose Hill Carnegie St Islington Wharfdale Rd Angel TEC H Kings Cross BEL Alban Regent’s Park T y St S t Pancras Hoxton International Th Maida Vale am es lin k Euston Up pe rW Old Street ob Clerkenwell urn S
Slide 103: Appendix 44 - Executive Committee and Senior Management
APPENDIX 44 - EXECUTIVE COMMITTEE AND SENIOR MANAGEMENT Executive Committee Senior Management Paul Williams Chief Executive Vasiliki Arvaniti Head of Asset Management Damian Wisniewski Chief Financial Officer Clive Johnson Head of Health & Safety Simon Silver Property Director Katy Levine Head of Hu
Slide 104: 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