TIDMDLN
RNS Number : 4145M
Derwent London PLC
07 May 2015
7 May 2015
Derwent London plc ("Derwent London"/ "the Group")
FIRST QUARTER BUSINESS UPDATE
INCREASING RENT ROLL AND ADDING FUTURE OPPORTUNITIES
Highlights
-- Lettings: 225,400 sq ft let so far in 2015, securing GBP11.3m
per annum, already 23% more than in the whole of 2014
-- Vacancy: fallen to 1.9% from 4.1% in December, reflecting recent letting activity
-- Developments: 70,500 sq ft completed (100% let or exchanged)
with 933,300 sq ft either under construction or due to start in
2015
-- Investment activity: GBP114m property swap adds major
Farringdon Crossrail opportunity to portfolio
-- GBP175m convertible bonds 2016 redeemed in January 2015 by the issue of 7.88m new shares
-- Long-term corporate credit rating improved to BBB+ (from BBB) by Standard & Poor's
-- LTV ratio of 19.9% with cash and undrawn facilities of GBP342m at 31 March 2015
-- Claudia Arney to join the Board as an independent non-executive Director
John Burns, Chief Executive Officer, commented:
"Our recent letting activity supports the Group's confident view
of the central London occupier market and the decision to proceed
with two significant developments in Fitzrovia. In addition, the
acquisition of 20 Farringdon Road EC1 will provide a substantial
future redevelopment opportunity opposite a major Crossrail
interchange. We continue to expect overall rental growth of c.6-8%
across our portfolio, and we have seen property yields tighten
further in the first quarter of 2015."
Webcast and conference call
There will be a live webcast together with a conference call for
investors and analysts at 09:00 BST today. The audio webcast can be
accessed via www.derwentlondon.com.
To participate in the call, please dial the following number:
+44 (0)20 3059 8125
Please say "Derwent London" when asked for the participant
code.
A recording of the conference call will also be made available
following the conclusion of the call on www.derwentlondon.com.
For further information, please contact:
Derwent London John Burns, Chief Executive Officer
Tel: +44 (0)20 7659 3000 Damian Wisniewski, Finance Director
Quentin Freeman, Head of Investor
Relations
Brunswick Group Simon Sporborg
Tel: +44 (0)20 7404 5959 Nina Coad
Good letting performance maintained (see Appendix 1 for
details)
In the current year to 30 April 2015 we have let 225,400 sq ft
securing GBP11.3m per annum of rental income. This represents an
additional GBP3.3m to the GBP8.0m we reported as either let or
under offer at the time of our results on 26 February, and is 23%
higher than the lettings we achieved in the whole of 2014. The open
market lettings were 3.8% above December 2014 Estimated Rental
Values (ERV) with overall lettings 0.9% above. Of these
transactions, 74,850 sq ft of space was let to The Office Group, a
leading provider of flexible office space, where we are entitled to
a profit share above a minimum level. Including an additional GBP5
per sq ft for our rental overage would take overall lettings to
4.3% above ERV.
At Angel Square EC1 we either re-let or renewed leases over 80%
of the space in two months thereby securing a 54% increase in its
income during the short time since its purchase. This leaves just
under 20% of space remaining to refurbish and let. The newly
refurbished office space at 1-2 Stephen Street W1 was fully let
within six months of completion.
The EPRA vacancy rate (by rental value) has fallen from 4.1% in
December 2014 to 1.9% as a result of our letting activity. One
outcome of this is the limited amount of space we have immediately
available. The completion of our retail scheme at Tottenham Court
Walk W1 this quarter, where two out of eight units are pre-let,
will take our potential vacancy rate to 2.8%.
Developments remain on track and we are adding to our pipeline
(see Appendix 2 for details)
Since the year end, we have finished Turnmill EC1, where the
offices are being fitted out by Publicis. The developments at White
Collar Factory EC1, 40 Chancery Lane WC2, Tottenham Court Walk W1
and 73 Charlotte Street W1 are on track. 40 Chancery Lane is 96%
pre-let, and we are seeing some good early occupier interest in the
other commercial projects.
The site of The Copyright Building, 25-33 Berners Street W1 is
under demolition and 80 Charlotte Street W1 is expected to commence
towards the end of this year. Later in the year we intend to gain
vacant possession at 55-65 North Wharf Road W2 prior to starting
work in 2016.
A decision on our planning application for the hotel and office
scheme at Wedge House, 40 Blackfriars Road SE1 is expected this
quarter. We have also agreed a Memorandum of Understanding with our
joint venture partner, The Portman Estate, at 19-35 Baker Street
W1. This is an important step in our plans for a c.250,000 sq ft
development in 2018. Derwent London owns a 55% interest.
A major opportunity in Farringdon acquired
Our current year activity has principally been the acquisition
of 20 Farringdon Road EC1 for GBP92.7m in return for the sale of
two properties and a 50% joint venture interest in 9 and 16 Prescot
Street E1 for a total of GBP114.0m. We received the balance net of
costs in cash, as previously reported.
Financial activity sees gearing fall significantly
The major event in the first quarter was the conversion of our
GBP175m 2.75% convertible bonds 2016 and the resultant issue of
7.88m new shares. After net disposal activity and capital
expenditure of GBP26.9m, including GBP1.5m of capitalised interest,
net debt at 31 March 2015 was thereby reduced to GBP842.7m,
GBP170.6m lower than in December 2014.
The interest cost of our debt, which was 92% fixed or hedged at
31 March 2015, rose marginally to 4.24% on an IFRS basis and 3.97%
on a cash basis. However the weighted average debt maturity also
increased from 6.6 to 7.7 years, and the net interest cover rose
significantly from 286% for the full year in 2014 to 343% for the
first quarter 2015. Partly as a result of this, Standard &
Poor's has upgraded our long-term corporate credit rating to BBB+
(from BBB) with a stable outlook. This will help reduce the cost of
future refinancing activities. At 31 March 2015 the level of cash
and undrawn bank facilities was GBP341.8m and the Group's LTV ratio
was 19.9%.
Property values and outlook
The central London office market continued to perform strongly
in Q1 with the IPD Central London Office Quarterly Index reporting
rental value growth of 2.7% and capital growth of 3.5%. The Derwent
London portfolio was not revalued but our valuers, CBRE, have
indicated that the valuation performance of the portfolio is likely
to have at least matched that of the IPD index.
Today is the day of the UK General Election. Time will tell how
the outcome affects the central London office market or the broader
capital markets. However, both occupational and investment demand
for our office properties is strong and we remain confident about
the prospects for both rental growth and yields in 2015; we have
seen the latter tighten further in the first quarter.
Board changes
As previously announced, Claudia Arney will join the Board on 18
May 2015 as an independent non-executive Director, and Robert
Farnes will be stepping down as a non-executive Director at our AGM
on 15 May 2015. Robert joined the Board in 2003 and since then his
counsel and wisdom has been much appreciated.
Appendix 1: Principal lettings in 2015 up to 30 April
Min /fixed
uplift
at
Total first
Area Rent annual review Lease Lease Rent free
sq GBP rent GBP term break equivalent
Property Tenant ft psf GBPm psf Years Year Months
Q1
2 Stephen
Street
W1(1)
Angel Square 15
EC1
-
The Office 34,150 65.00(1) 2.2 71.75 20 2.5, plus
1 Stephen Group 3 if no
Street 3 & break
W1 Expedia 57,600 36.80 2.1 41.60 6 5 in year 3
Tea Building 15
E1 AnaCap 16,150 81.75 1.3 84.25 10 -
5
Davidson Feed 7,990 47.50 0.4 - 5 -
Building 7, plus 5
WC2 Astus UK 4,370 80.00 0.3 82.50 10 5 if no break
Q2
Angel Square
EC1(1)
9
The Office
Davidson Group 40,700 35.00(1) 1.4 38.65 10(2) -
Building 7, plus 7
WC2 First if no break
Utility 6,230 72.50 0.5 75.00 10 5
Morelands 9, plus 3
EC1 Spark44 5,370 55.00 0.3 60.00 9 5 if no break
-------------- --------- ----------- -------- ------------- -------- ----------- --------------
(1) The Group will get a share of The Office Group's profits
above a minimum level
(2.) Landlord's break in year five
Appendix 2: Major projects pipeline
Property
Area Delivery Comment
sq ft(1)
Projects on site
Developments
White Collar Factory, Old 293,000 Q3 2016 Office-led development
Street Yard EC1
The Copyright Building, 25-33 105,000 Q3 2017 Offices and retail
Berners Street W1
40 Chancery Lane WC2 101,800 Q2 2015 Offices and retail
- 96% pre-let
73 Charlotte Street W1 15,500 Q3 2015 Residential and offices
Refurbishments
Tottenham Court Walk W1 38,000 Q2 2015 Retail, Part 1-2 Stephen
Street
----------- ---------- -------------------------
553,300
----------- ---------- -------------------------
Major planning consents due
to start in H2 2015
80 Charlotte Street W1 380,000 H1 2018 Offices, residential
and retail
380,000
----------- ---------- -------------------------
Other major planning consents
1 Oxford Street W1(2) 275,000 Offices, retail and
theatre
55-65 North Wharf Road W2 240,000 Offices
25 Savile Row W1 58,000 Residential and retail
----------- ---------- -------------------------
573,000
----------- ---------- -------------------------
Active planning applications
Wedge House, 40 Blackfriars 110,000 Hotel and offices
Road SE1
----------- ---------- -------------------------
Grand Total 1,616,300
----------- ---------- -------------------------
(1) Proposed areas
(2) Crossrail site under option
Notes to editors
Derwent London plc
Derwent London plc owns a portfolio of commercial real estate
predominantly in central London valued at GBP4.2 billion as at 31
December 2014, making it the largest London-focused real estate
investment trust (REIT).
Our experienced team has a long track record of creating value
throughout the property cycle by regenerating our buildings via
development or refurbishment, effective asset management and
capital recycling.
We typically acquire central London properties off-market with
low capital values and modest rents in improving locations, most of
which are either in the West End or the Tech Belt. We capitalise on
the unique qualities of each of our properties - taking a fresh
approach to the regeneration of every building with a focus on
anticipating tenant requirements and an emphasis on design.
Reflecting and supporting our long-term success, the business
has a strong balance sheet with modest leverage, a robust income
stream and flexible financing.
Landmark schemes in our portfolio of 5.7 million sq ft as at 31
December 2014 include Angel Building EC1, The Buckley Building EC1,
White Collar Factory EC1, 1-2 Stephen Street W1, Horseferry House
SW1 and Tea Building E1.
In December 2014 Derwent London topped the real estate sector
for the fifth year in a row and was placed ninth overall in the
Management Today awards for 'Britain's Most Admired Companies'.
Also in 2014 the Group won the Property Week 'Developer of the
Year' and the RICS London Commercial Award, and was shortlisted for
awards by Architects' Journal, BCO, NLA and OAS. The Group was also
awarded EPRA Gold for corporate and sustainability reporting. In
April 2015, 1-2 Stephen Street W1 won the BCO London and South East
award for Refurbished / Recycled Workplace.
For further information see www.derwentlondon.com or follow us
on Twitter at @derwentlondon.
Forward-looking statements
This document contains certain forward-looking statements about
the future outlook of Derwent London. By their nature, any
statements about future outlook involve risk and uncertainty
because they relate to events and depend on circumstances that may
or may not occur in the future. Actual results, performance or
outcomes may differ materially from any results, performance or
outcomes expressed or implied by such forward-looking
statements.
No representation or warranty is given in relation to any
forward-looking statements made by Derwent London, including as to
their completeness or accuracy. Derwent London does not undertake
to update any forward-looking statements whether as a result of new
information, future events or otherwise. Nothing in this
announcement should be construed as a profit forecast.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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